UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
 (Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                   For the fiscal year ended December 31, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934
               For the transition period from _______ to ________

                        Commission File Number - 0-20632

                                FIRST BANKS, INC.
             (Exact name of registrant as specified in its charter)

                MISSOURI                                43-1175538
   (State or other jurisdiction          (I.R.S. Employer Identification Number)
 of incorporation or organization)

                   135 North Meramec, Clayton, Missouri 63105
               (Address of principal executive offices) (Zip code)

                                 (314) 854-4600
              (Registrant's telephone number, including area code)
                      ------------------------------------

           Securities registered pursuant to Section 12(b) of the Act:

                                            Name of each exchange
               Title of each class           on which registered
               -------------------           -------------------
                       None                          N/A

           Securities registered pursuant to Section 12(g) of the Act:

                   9.25% Cumulative Trust Preferred Securities
             (issued by First Preferred Capital Trust and guaranteed
                       by its parent, First Banks, Inc.)
                                (Title of class)

                   8.50% Cumulative Trust Preferred Securities
            (issued by First America Capital Trust and guaranteed by
                         its parent, First Banks, Inc.)
                                (Title of class)

                  10.24% Cumulative Trust Preferred Securities
           (issued by First Preferred Capital Trust II and guaranteed
                       by its parent, First Banks, Inc.)
                                (Title of class)

                   9.00% Cumulative Trust Preferred Securities
           (issued by First Preferred Capital Trust III and guaranteed
                       by its parent, First Banks, Inc.)
                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                      Yes      X            No
                           ---------              --------
         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendments to this Form 10-K. [ X ]

         None of the voting stock of the Company is held by  nonaffiliates.  All
of the  voting  stock of the  Company  is owned by  various  trusts,  which were
created by and for the benefit of Mr. James F. Dierberg,  the Company's Chairman
of the Board of  Directors  and Chief  Executive  Officer,  and  members  of his
immediate family.

         At March 25, 2003, there were 23,661 shares of the registrant's  common
stock outstanding.

<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This  annual  report  on Form  10-K  contains  certain  forward-looking
statements  with respect to our financial  condition,  results of operations and
business.  These  forward-looking  statements  are subject to certain  risks and
uncertainties,  not all of which can be predicted or  anticipated.  Factors that
may cause our actual results to differ materially from those contemplated by the
forward-looking   statements   herein  include  market  conditions  as  well  as
conditions  affecting  the  banking  industry  generally  and  factors  having a
specific  impact on us,  including but not limited to:  fluctuations in interest
rates and the economy,  including the negative  impact on the economy  resulting
from the events of September 11, 2001 in New York City and Washington,  D.C. and
the national  response to those events as well as the threat of future terrorist
activities, potential wars and/or military actions related thereto, and domestic
responses  to  terrorism  or  threats  of  terrorism;  the  impact  of laws  and
regulations  applicable  to us and  changes  therein;  the impact of  accounting
pronouncements  applicable to us and changes therein;  competitive conditions in
the  markets in which we conduct  our  operations,  including  competition  from
banking and non-banking  companies with substantially greater resources than us,
some of which may offer and develop products and services not offered by us; our
ability to control  the  composition  of our loan  portfolio  without  adversely
affecting interest income; the credit risk associated with consumers who may not
repay loans;  the geographic  dispersion of our offices;  the impact our hedging
activities may have on our operating results;  the highly regulated  environment
in which we operate;  and our ability to respond to changes in technology.  With
regard to our efforts to grow  through  acquisitions,  factors that could affect
the accuracy or  completeness of  forward-looking  statements  contained  herein
include the competition of larger acquirers with greater resources; fluctuations
in the prices at which acquisition targets may be available for sale; the impact
of making  acquisitions  without  using our common  stock;  and  possible  asset
quality issues,  unknown  liabilities or integration  issues with the businesses
that we have  acquired.  We do not  have a duty to and  will  not  update  these
forward-looking  statements.  Readers of this report should  therefore not place
undue reliance on forward-looking statements.

<TABLE>
<CAPTION>
                                         FIRST BANKS, INC.
                                   2002 FORM 10-K ANNUAL REPORT
                                         TABLE OF CONTENTS
                                                                                             Page
                                                                                             ----
                                              Part I
<S>    <C>                                                                                     <C>
  Item 1.  Business......................................................................      1
  Item 2.  Properties....................................................................     16
  Item 3.  Legal Proceedings.............................................................     16
  Item 4.  Submission of Matters to a Vote of Security Holders...........................     16

                                              Part II

  Item 5.  Market for the Registrant's Common Equity and Related Stockholder Matters.....     17
  Item 6.  Selected Financial Data.......................................................     18
  Item 7.  Management's Discussion and Analysis of Financial Condition
                and Results of Operations................................................     19
  Item 7A. Quantitative and Qualitative Disclosures About Market Risk....................     48
  Item 8.  Financial Statements and Supplementary Data...................................     48
  Item 9.  Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure.................................................     48

                                              Part III

  Item 10. Directors and Executive Officers of the Registrant............................     49
  Item 11. Executive Compensation........................................................     51
  Item 12. Security Ownership of Certain Beneficial Owners and Management................     53
  Item 13. Certain Relationships and Related Transactions................................     54

                                              Part IV

  Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...............     55

  Signatures.............................................................................     99

  Certifications.........................................................................    103

</TABLE>

<PAGE>


                                     PART I

Item 1.  Business

General.  We are a registered bank holding company  incorporated in Missouri and
headquartered in St. Louis County, Missouri. Through our subsidiaries,  we offer
a broad array of financial services to consumer and commercial customers.  Since
1994, our  organization  has grown  significantly,  primarily as a result of our
acquisition  strategy,  as well as through  internal  growth.  We currently have
banking operations in California,  Illinois, Missouri and Texas. At December 31,
2002,  we had total  assets  of $7.34  billion,  total  loans,  net of  unearned
discount,  of  $5.43  billion,   total  deposits  of  $6.17  billion  and  total
stockholders' equity of $519.0 million.

         Through our subsidiary  banks, we offer a broad range of commercial and
personal deposit  products,  including  demand,  savings,  money market and time
deposit  accounts.  In addition,  we market  combined basic services for various
customer groups,  including packaged accounts for more affluent  customers,  and
sweep accounts,  lock-box  deposits and cash management  products for commercial
customers.  We also offer both consumer and commercial  loans.  Consumer lending
includes   residential  real  estate,  home  equity  and  installment   lending.
Commercial lending includes  commercial,  financial and agricultural loans, real
estate  construction  and  development  loans,  commercial  real  estate  loans,
asset-based  loans,  commercial  leasing and trade  financing.  Other  financial
services   include   mortgage   banking,   debit  cards,   brokerage   services,
credit-related insurance, internet banking, automated teller machines, telephone
banking,  safe deposit boxes,  escrow and  bankruptcy  deposit  services,  stock
option services,  and trust,  private banking and institutional money management
services.

         We operate  through two subsidiary  banks and a subsidiary bank holding
company, all of which are wholly owned, as follows:

         The San Francisco  Company,  or SFC,  headquartered  in San  Francisco,
California, and its wholly owned subsidiaries:
              First  Bank,  headquartered  in  St. Louis  County, Missouri;  and
              First  Bank  &  Trust, or  FB&T,  headquartered  in San Francisco,
              California.

         The following table summarizes  selected data about our subsidiaries at
December 31, 2002:

<TABLE>
<CAPTION>
                                                                                        Loans, Net of
                                                           Number of      Total           Unearned          Total
                             Name                          Locations     Assets           Discount        Deposits
                             ----                          ---------     ------           --------        --------
                                                                             (dollars expressed in thousands)

<S>                                                           <C>     <C>                <C>              <C>
         First Bank..................................         94      $ 4,187,958        3,128,677        3,551,533
         FB&T .......................................         57        3,169,197        2,303,912        2,638,395
</TABLE>

         We anticipate merging our bank subsidiaries on March 31, 2003, to allow
certain  administrative  and  operational  economies not available while the two
banks maintain separate charters.

         Primary  responsibility for managing our subsidiary banking units rests
with  the  officers  and  directors  of each  unit,  but we  centralize  overall
corporate  policies,   procedures  and  administrative   functions  and  provide
centralized  operational  support functions for our subsidiaries.  This practice
allows  us  to  achieve  various  operating   efficiencies  while  allowing  our
subsidiary banking units to focus on customer service.

         In February 1997, our initial  financing  subsidiary,  First  Preferred
Capital Trust, issued $86.25 million of 9.25% trust preferred  securities,  and,
in July 1998,  our second  financing  subsidiary,  First America  Capital Trust,
issued $46.0 million of 8.50% trust preferred  securities.  In October 2000, our
third  financing  subsidiary,  First  Preferred  Capital  Trust II, issued $57.5
million of 10.24% trust preferred securities,  and, in November 2001, our fourth
financing subsidiary, First Preferred Capital Trust III, issued $55.2 million of
9.00% trust preferred  securities.  On April 10, 2002, First Bank Capital Trust,

<PAGE>

our fifth financing subsidiary, issued $25.0 million of variable rate cumulative
trust preferred securities.  Each of these financing  subsidiaries operates as a
Delaware  business  trust.  The  trust  preferred  securities  issued  by  First
Preferred  Capital Trust,  First Preferred  Capital Trust II and First Preferred
Capital  Trust III are  publicly  held and traded on the Nasdaq  Stock  Market's
National  Market system.  The trust  preferred  securities  issued by First Bank
Capital  Trust were  issued in a private  placement  and rank equal to the trust
preferred securities issued by our other three financing subsidiaries and junior
to the trust preferred  securities  issued by First Preferred Capital Trust III.
The  trust  preferred  securities  issued  by First  America  Capital  Trust are
publicly held and traded on the New York Stock  Exchange.  These trust preferred
securities have no voting rights except in certain limited  circumstances.  With
the  exception  of the First Bank Capital  Trust  preferred  securities,  we pay
distributions on these trust preferred  securities quarterly in arrears on March
31st, June 30th,  September 30th, and December 31st of each year.  Distributions
on the First Bank Capital Trust preferred  securities are payable  semi-annually
in arrears  on April  22nd and  October  22nd of each  year.  The  distributions
payable on all issues of trust  preferred  securities  are  included in interest
expense in the consolidated statements of income.

         Various trusts,  which were created by and are  administered by and for
the  benefit  of Mr.  James F.  Dierberg,  our  Chairman  of the Board and Chief
Executive  Officer,  and members of his immediate family,  own all of our voting
stock.  Mr.  Dierberg  and his family,  therefore,  control our  management  and
policies.

         At December 31, 2002, we, Mr. Dierberg and an affiliate of Mr. Dierberg
owned 7.47%, 0.08% and 1.75%, respectively,  of the outstanding shares of common
stock of Allegiant Bancorp, Inc., or Allegiant, located in St. Louis, Missouri.

Strategy.  In the  development  of  our  banking  franchise,  we  acquire  other
financial  institutions  as  one  means  of  achieving  our  growth  objectives.
Acquisitions may serve to enhance our presence in a given market,  to expand the
extent of our market area or to enable us to enter new or noncontiguous markets.
Due to the nature of our  ownership,  we have  elected  to only  engage in those
acquisitions  that can be accomplished for cash.  However,  by using cash in our
acquisitions,  the characteristics of the acquisition arena may, at times, place
us at a competitive  disadvantage  relative to other  acquirers  offering  stock
transactions.  This results from the market  attractiveness  of other  financial
institutions'  stock and the  advantages  of tax-free  exchanges  to the selling
shareholders. Our acquisition activities are generally somewhat sporadic because
we may consummate  multiple  transactions in a particular period,  followed by a
substantially less active acquisition period. Furthermore, the intangible assets
recorded in conjunction with these acquisitions create an immediate reduction in
regulatory capital. This reduction,  as required by regulatory policy,  provides
further financial disincentives to paying large premiums in cash acquisitions.

         Recognizing   these   facts,   we  follow   certain   patterns  in  our
acquisitions.   First,  we  typically  acquire  several  smaller   institutions,
sometimes over an extended  period of time,  rather than a single larger one. We
attribute  this  approach  to the  constraints  imposed  by the  amount of funds
required for a larger  transaction,  as well as the  opportunity to minimize the
aggregate premium required through smaller individual transactions. Secondly, in
some acquisitions, we may acquire institutions having significant asset-quality,
ownership,  regulatory or other problems.  We seek to address the risks of these
issues by adjusting the acquisition pricing, accompanied by appropriate remedial
attention after consummation of the transaction.  In these  institutions,  these
issues may diminish  their  attractiveness  to other  potential  acquirers,  and
therefore may reduce the amount of acquisition premium required. Finally, we may
pursue our acquisition  strategy in other  geographic  areas, or pursue internal
growth more  aggressively  because  cash  transactions  may not be  economically
viable in extremely competitive acquisition markets.

         During  the  five  years  ended   December  31,   2002,   we  primarily
concentrated our acquisitions in California, completing 13 acquisitions of banks
and four  purchases of branch  offices,  which  provided us with an aggregate of
$2.21  billion in total  assets and 48 banking  locations as of the dates of the
acquisitions.  More recent  acquisitions  have occurred in our other  geographic
markets.  In 2001, we completed  our  acquisition  of a bank holding  company in
Swansea,  Illinois,  and in 2002, we completed our acquisition of a bank holding
company in Des Plaines,  Illinois, as well as the purchase of two branch offices
in Denton and Garland, Texas. We are also planning to further expand our Midwest
banking  franchise with an acquisition in the Ste.  Genevieve,  Missouri market,
which is expected to be  completed on March 31, 2003.  These  acquisitions  have
allowed us to significantly expand our presence throughout our geographic areas,
improve operational efficiencies,  convey a more consistent image and quality of
service  and more  cohesively  market and  deliver our  products  and  services.
Management continues to meld the acquired entities into our operations,  systems
and culture.
<PAGE>

         Following our acquisitions,  various tasks are necessary to effectively
integrate the acquired entities into our business systems and culture. While the
activities required are specifically dependent upon the individual circumstances
surrounding each acquisition, the majority of our efforts have been concentrated
in various areas including, but not limited to:

          >>   improving asset quality;

          >>   reducing  unnecessary,   duplicative  and/or  excessive  expenses
               including  personnel,  information  technology  and certain other
               operational and administrative expenses;

          >>   maintaining,  repairing  and,  in some cases,  refurbishing  bank
               premises necessitated by the deferral of such projects by some of
               the acquired entities;

          >>   renegotiating  long-term  leases which provide space in excess of
               that necessary for banking  activities  and/or rates in excess of
               current  market  rates,  or  subleasing  excess  space  to  third
               parties;

          >>   relocating  branch  offices which are not adequate,  conducive or
               convenient for banking operations; and

          >>   managing actual or potential litigation that existed with respect
               to  acquired   entities  to   minimize   the  overall   costs  of
               negotiation, settlement or litigation.

         The  post-acquisition  process also  includes the combining of separate
and  distinct  entities  together  to form a cohesive  organization  with common
objectives  and focus.  We invest  significant  resources to  reorganize  staff,
recruit personnel where needed,  and establish the direction and focus necessary
for the combined entity to take advantage of the opportunities  available to it.
This investment  contributed to the increases in noninterest  expense during the
five years ended  December 31, 2002, and resulted in the creation of new banking
entities, which conveyed a more consistent image and quality of service. The new
banking  entities  provide a broad array of banking  products to their customers
and compete  effectively  in their  marketplaces,  even in the presence of other
financial  institutions  with  much  greater  resources.  While  some  of  these
modifications  did not  contribute to reductions of  noninterest  expense,  they
contributed  to the commercial and retail  business  development  efforts of the
banks, and ultimately to their prospects for improving future profitability.

         In conjunction with our acquisition  strategy,  we have also focused on
building  and  reorganizing  the  infrastructure  necessary  to  accomplish  our
objectives for internal growth. This process has required significant  increases
in the resources  dedicated to  commercial  and consumer  business  development,
financial  service  product line and delivery  systems,  branch  development and
training, advertising and marketing programs, and administrative and operational
support. In addition,  during 1999, we began an internal  restructuring  process
designed to better position us for future growth and  opportunities  expected to
become  available  as  consolidation  and changes  continue  in the  delivery of
financial  services.  The  magnitude of this project was  extensive  and covered
almost every area of our  organization.  We continue to focus on  modifying  and
effectively  repositioning  our internal and external  resources to better serve
the markets in which we operate.  Although  these efforts have  primarily led to
increased capital expenditures and noninterest expenses, we anticipate they will
lead to additional  internal  growth,  more  efficient  operations  and improved
profitability over the long term.

Lending Activities.  Our enhanced business development resources assisted in the
realignment of certain acquired loan  portfolios,  which were skewed toward loan
types that  reflected  the abilities and  experiences  of the  management of the
acquired entities. In order to achieve a more diversified portfolio,  to address
asset-quality issues in the portfolios and to achieve a higher interest yield on
our loan  portfolio,  we reduced a  substantial  portion of the loans which were
acquired  during this time through  payments,  refinancing  with other financial
institutions,  charge-offs,  and,  in certain  instances,  sales of loans.  As a
result, our portfolio of one-to-four family residential real estate loans, after
reaching a high of $1.20  billion at December 31, 1995,  has decreased to $694.6
million  at  December  31,  2002.  Similarly,  our  portfolio  of  consumer  and
installment loans, net of unearned discount, decreased significantly from $279.3
million at December 31, 1997 to $79.1 million at December 31, 2002. The decrease
reflects the  reduction in new  consumer  and  installment  loan volumes and the
repayment of principal on our existing  consumer and installment loan portfolio,
all of which are consistent with our objectives of expanding  commercial lending
and reducing the amount of less profitable loan types. The decline also reflects
the sale of our student loan and credit card  portfolios in 2001,  which totaled
approximately  $16.9  million and $13.5  million,  respectively,  at the time of
sale.  We recorded  gains of $1.9 million and $229,000 on the sale of the credit
card portfolio and the student loan portfolio,  respectively, and we do not have
any continuing involvement in the transferred assets.
<PAGE>

         As these components of our loan portfolio  decreased,  we replaced them
with  higher  yielding  loans that were  internally  generated  by our  business
development   function.   With  our  acquisitions,   we  expanded  our  business
development  function into the new market areas in which we were then operating.
Consequently,  in spite of relatively large  reductions in acquired  portfolios,
our aggregate loan  portfolio,  net of unearned  discount,  increased from $3.00
billion at December 31, 1997 to $5.43 billion at December 31, 2002.

         Our  business  development  efforts are focused on the  origination  of
loans in three general types: (a) commercial,  financial and agricultural loans,
which  totaled $1.44 billion at December 31, 2002;  (b)  commercial  real estate
mortgage  loans,  which  totaled  $1.64  billion at December 31,  2002;  and (c)
construction  and land  development  loans,  which  totaled  $989.7  million  at
December 31, 2002.

         The primary component of commercial,  financial and agricultural  loans
is  commercial  loans  which are made  based on the  borrowers'  general  credit
strength and ability to generate cash flows for repayment  from income  sources.
Most of these loans are made on a secured basis, most often involving the use of
company  equipment,  inventory  and/or  accounts  receivable as collateral.  For
reporting purposes,  this category of loans includes only those commercial loans
that do not  include  real  estate  as  collateral.  Regardless  of  collateral,
substantial  emphasis is placed on the borrowers'  ability to generate cash flow
sufficient  to operate  the  business  and provide  coverage  of debt  servicing
requirements.  Commercial loans are frequently renewable annually, although some
terms may be as long as three years.  These loans typically require the borrower
to maintain certain operating  covenants  appropriate for the specific business,
such as  profitability,  debt service  coverage  and current  asset and leverage
ratios,  which are  generally  reported and  monitored on a quarterly  basis and
subject to more detailed annual reviews.  Commercial loans are made to customers
primarily  located in the  geographic  trade  areas of our  subsidiary  banks in
Missouri,  Illinois, Texas and California, and who are engaged in manufacturing,
retailing,  wholesaling  and other  service  businesses.  This  portfolio is not
concentrated  in large  specific  industry  segments that are  characterized  by
sufficient homogeneity that would result in significant concentrations of credit
exposure.  Rather,  it is a highly  diversified  portfolio that encompasses many
industry segments. The largest general concentration in this portfolio, which is
not homogeneous in nature,  is  agricultural  which totals  approximately  $37.3
million,  representing  approximately  3%  of  the  commercial,   financial  and
agricultural  portfolio.  This portfolio,  however,  is diverse in geography and
collateral,  secured by a mixture of agricultural equipment,  livestock and crop
production.  The  largest  homogeneous  industry  segment  included  within this
portfolio  is the  fast-food  restaurant  segment,  in which we had total  loans
outstanding of  approximately  $50.0 million,  representing  approximately 3% of
this portfolio at December 31, 2002.  Diversity in this segment of the portfolio
is represented by both geography and a mixture of loans to both  franchisees and
franchisors,  with  approximately  80%  of  the  portfolio  involving  loans  to
franchisees  and 20% to  franchisors.  Within  both real  estate and  commercial
lending  portfolios,  we strive  for the  highest  degree of  diversity  that is
practicable.  We also emphasize the  development of other service  relationships
with our commercial borrowers, particularly deposit accounts.

         Commercial  real  estate  loans  include  loans for which the  intended
source of  repayment  is the  rental  and  other  income  from the real  estate,
including  both  commercial  real estate  developed for lease and owner occupied
commercial  real estate.  The  underwriting  of owner occupied  commercial  real
estate loans generally  follows the procedures for commercial  lending described
above,  except  that the  collateral  is real  estate,  and the loan term may be
longer.  The primary emphasis in underwriting loans for which the primary source
of repayment is the  performance  of the  collateral is the projected  cash flow
from the real  estate  and its  adequacy  to cover  the  operating  costs of the
project and the debt service  requirements.  Secondary emphasis is placed on the
appraised value of the real estate,  although the appraised liquidation value of
the  collateral  must be adequate to repay the debt and related  interest in the
event  the cash flow  becomes  insufficient  to  service  the  debt.  Generally,
underwriting terms require the loan principal not to exceed 75% of the appraised
value of the  collateral  and the  loan  maturity  not to  exceed  seven  years.
Commercial  real  estate  loans are made for  commercial  office  space,  retail
properties,  hospitality,  industrial and warehouse  facilities and recreational
properties.  We rarely finance  commercial real estate or rental properties that
do not have lease commitments from substantial tenants.
<PAGE>

         Construction  and  land  development  loans  include   commitments  for
construction  of both  residential  and commercial  properties.  Commercial real
estate projects require  commitments for permanent  financing from other lenders
upon  completion  of the  project  or,  more  typically,  include  a  short-term
amortizing   component  of  the  financing  from  the  bank.   Commitments   for
construction  of  multi-tenant  commercial  and retail  projects  require  lease
commitments  from a substantial  primary tenant or tenants prior to commencement
of  construction.  We finance some projects for  borrowers  whose home office is
within our trade area for which the particular project may be outside our normal
trade area. We do not, however,  engage in developing commercial and residential
construction lending business outside of our trade area. Residential real estate
construction  and  development  loans  are  made  based  on  the  cost  of  land
acquisition  and  development,  as well as the  construction  of the residential
units.  Although we finance  the cost of display  units and units held for sale,
approximately  40% of the loans for individual  residential  units have purchase
commitments prior to funding.

         In  addition to  underwriting  based on  estimates  and  projection  of
financial  strength,  collateral  values and future  cash  flows,  most loans to
borrowing entities other than individuals require the personal guarantees of the
principals of the borrowing entity.

         Our  commercial  leasing  portfolio  totaled  $126.7 million and $149.0
million at December 31, 2002 and 2001, respectively.  This portfolio consists of
leases  originated  by  our  former  subsidiary,   First  Capital  Group,  Inc.,
Albuquerque,   New  Mexico,  primarily  through  third  parties,  on  commercial
equipment  including  aircraft parts and equipment.  During 2002, we changed the
nature of this business,  resulting in the  discontinuation of the operations of
First  Capital  Group,  Inc.  and the transfer of all  responsibilities  for the
existing portfolio to a new leasing staff in St. Louis, Missouri.

         At December 31, 2001, within the commercial  leasing  portfolio,  there
were  approximately  $60.1  million  of  leases of parts  and  equipment  to the
commercial  airline  industry  and  related  aircraft  service  providers.  This
equipment  consisted  primarily of engines,  landing gear and replacement parts,
most of which is used in  maintenance  operations by  commercial  airlines or by
third party vendors performing maintenance for the airlines. In addition,  there
were several leases for smaller  aircraft used by charter  services.  Earlier in
2001, it became apparent that the airline  industry in general was  experiencing
problems with overcapacity, and as a result, had begun reducing its requirements
for new and replacement aircraft. This was evidenced by airlines taking portions
of their fleets,  particularly older less efficient aircraft, out of service and
reducing orders for new equipment.  This affected maintenance operations because
as the usage of  aircraft  decreased,  the  maintenance  requirements  were also
reduced.  Consequently,  by late 2001, we  discontinued  new leases of equipment
related to the airline industry.

         While some of the leases in our  portfolio  had  evidenced  problems by
early  2001,  overcapacity  problems  and  resulting  financial  distress in the
commercial  airline industry became more critical after the terrorist attacks of
September 11, 2001. Following these events, we re-evaluated our aviation related
lease portfolio to examine our overall exposure to the industry,  the effects of
recent  trends on  valuations  of equipment  and the  financial  strength of our
lessees.  As a result of our review,  for the year ended  December 31, 2001,  we
incurred $4.5 million of  charge-offs  in connection  with the aircraft  leasing
portfolio  and had $2.6  million of  nonperforming  aviation  related  leases at
December 31, 2001. The evaluation process has evolved into an ongoing monitoring
of this portfolio  through  continuous  communication  with lessees to establish
information concerning their use of equipment under lease, monitoring the use of
that  equipment,  and  tracking of changes in  equipment  and  related  residual
valuations.  When  problems  are  detected,  we  obtain  new  valuations  of the
equipment,  and recognize any impairment in valuation by adjustments to reserves
or  income  as  appropriate  depending  upon  the  type  of  lease.  Sources  of
information for valuing our leased assets include the Aircraft  Bluebook,  other
public  information from a variety of sources,  consultation  with other lessors
and brokers of aviation  equipment  and specific  engagement  of an  independent
asset  management  company for  equipment  valuation  as well as  management  of
repossessed  assets.  Specifically  with  respect  to  residual  values,  and to
establish  formality in our  process,  we have also  arranged  for  appraisal of
leased  assets  that  involve  residual  risk  by an  International  Society  of
Transport   Aircraft  Trading  certified   appraiser  of  aviation  assets.  The
information  received  from  these  various  specialized  sources  assists us in
valuing our lease portfolio and  recognizing any impairment on these assets.  By
December 31, 2002, the portfolio of leases on commercial  aircraft and parts and
equipment had been reduced to $46.5 million,  with $8.6 million of nonperforming
aviation  related  leases,  and $619,000 of charge-offs  in connection  with the
aircraft leasing portfolio for the year ended December 31, 2002.
<PAGE>

         Our expanded level of commercial lending carries with it greater credit
risk,  which we manage through uniform loan policies,  procedures,  underwriting
and credit administration.  As a consequence of such greater risk, the growth of
the loan  portfolio  must also be  accompanied  by adequate  allowances for loan
losses.  We associate the increased level of commercial  lending  activities and
our  acquisitions  with the  increases  of $7.9  million  and $14.1  million  in
nonperforming   loans  for  the  years  ended   December   31,  2002  and  2001,
respectively.  In addition,  the loan  portfolios of  Millennium  Bank and Union
Financial  Group,   Ltd.,  or  Union,  which  we  acquired  in  2000  and  2001,
respectively,  exhibited significant distress,  which further contributed to the
overall increase in nonperforming loans.

         Millennium  Bank,  which we acquired on December 29,  2000,  operated a
factoring business for doctors,  hospitals and other health care  professionals.
This  business  had  been  started  by  Millennium  Bank  the  year  before  our
acquisition,  and had approximately  $11.0 million of receivables at the time of
our  acquisition.  Due to the  relatively  short  life  of this  operation,  the
portfolio  did not  exhibit  signs of problems  at that time.  Consequently,  we
allowed the business to continue after the  acquisition to determine  whether it
would be an appropriate line of business in the future.  However,  in late 2001,
the factoring receivables began to exhibit signs of problems, and in early 2002,
we determined  one of the larger  borrowers was  incorrectly  accounting for its
receivables,  causing the factored balance to be substantially overfunded. After
this, other asset quality issues arose,  causing us to discontinue this business
in June 2002. During 2002, we charged-off  approximately $2.6 million, or 24.8%,
of  the  health  care  factoring  portfolio.   At  December  31,  2002,  we  had
approximately  $10.2  million  of  factoring  business  receivables,  which  are
expected  to  decline  over  time  given  the  discontinuation  of this  line of
business.  Since no value was assigned to goodwill or other intangible assets of
this line of business in the  acquisition,  and the  problems  appeared to arise
subsequent  to the  acquisition,  we  determined  that  this did not  create  an
impairment of the goodwill that we recorded in connection with the acquisition.

         In evaluating the loan portfolios of Union's two subsidiary banks prior
to its  acquisition,  it was clear that  substantial  problems  existed in those
portfolios.  Generally,  credit documentation was poor,  underwriting  standards
were lax and loan terms  were  aggressive.  As we  conducted  our due  diligence
review,  we applied the same asset  quality  standards,  risk rating  system and
allowance  methodology  that we apply to our own loan  portfolio.  Based on this
review, and to address concerns we had regarding Union's loan portfolios and the
level  of its  allowance  for  loan and  lease  losses,  an  escrow  account  of
approximately  $1.6 million was established by withholding  that amount from the
purchase  price.  This escrow  account was available to absorb losses during the
two-year  period  following the  acquisition  from the Union Bank loan portfolio
that were in excess of Union Bank's  allowance  for loan and lease losses at the
time of the due diligence review. Union's consolidated allowance for loan losses
was $8.6 million  relative to an aggregate  loan  portfolio of $262.3 million at
December 31, 2001, the date of acquisition.

         While we  believed  there  were  substantial  problems  with the  Union
portfolios,  few of  these  had  been  identified  or  addressed  by Union as of
December  31,  2001.  Consequently,  when we  assimilated  these  loans into our
systems and  procedures,  the  problems in the  portfolio  surfaced,  causing an
increase in the amount of problem  assets,  as well as contributing to the level
of loans  charged-off  during 2002. For the year ended  December 31, 2002,  loan
charge-offs  from the Union  portfolios  were $5.2 million,  including an amount
within the Union Bank  portfolio that was in excess of the allowance at the date
of our due  diligence  review  and  the  entire  $1.6  million  escrow  account.
Furthermore,  at December 31, 2002,  nonperforming loans in the Union portfolios
were $6.9 million.  Because these  problems had been  anticipated in negotiating
the acquisition  price,  they did not affect the amount of goodwill  recorded in
connection with this acquisition.
<PAGE>

         For the years ended December 31, 2002 and 2001, our nonperforming loans
increased  $7.9  million  and  $14.1  million,  respectively.  The  increase  in
nonperforming  loans in 2001  and  2002 is  primarily  attributable  to  general
economic  conditions,  additional  problems  identified  in  the  acquired  loan
portfolios,  continuing  deterioration in the portfolio of leases to the airline
industry  and  the  addition  of  a  $16.1  million  borrowing  relationship  to
nonaccrual  real estate  construction  and  development  loans during the second
quarter of 2002. This  relationship  relates to a residential  and  recreational
development project that had significant financial  difficulties and experienced
inadequate project financing,  project delays and weak project management.  This
relationship  had  previously  been on  nonaccrual  status and was removed  from
nonaccrual status during the third quarter of 2001 due to financing being recast
with  a  new  borrower,   who  appeared  able  to  meet  ongoing   developmental
expectations.  Subsequent to that time,  the new borrower  encountered  internal
management  problems,  which negatively impacted and further delayed development
of the project. We believe these increases,  while partially attributable to the
overall  risk  in  our  loan  portfolio,   are  reflective  of  cyclical  trends
experienced within the banking industry as a result of the economic slow down.

         During 2001 and 2002,  the nation  generally  experienced  a relatively
mild,  but  prolonged  economic  slow down that has affected much of the banking
industry,  including  us.  This was  exacerbated  by the  terrorist  attacks  in
September  2001 and the effects the attacks and related  governmental  responses
had on economic  activity.  The effects of the downturn  have been  inconsistent
between various  geographic areas of the country,  as well as different segments
of the economy.  To us, the effects of the downturn can be observed in generally
lower interest rates,  which have a negative impact on our net interest  income,
and on the  performance  of our loan  portfolio,  which is  reflected  in higher
delinquencies, nonperforming assets, charge-offs and provisions for loan losses,
as well as reduced  loan demand  from  customers.  The impact of lower  interest
rates  has been  significantly  reduced  through  the use of  various  financial
derivative  instruments  to  provide  hedges of this  interest  rate  risk.  See
"--Interest Rate Risk  Management."  However,  during 2001 and 2002, we incurred
increasing  asset quality issues that were at least  partially  attributable  to
economic conditions.

         Within our market areas,  the impact of the economy has become  evident
at different times. In our midwestern  markets,  a perceptible  increase in loan
delinquencies began in late 2000 and continued  throughout 2001. The increase in
delinquencies  was primarily  focused in commercial,  financial and agricultural
loans,  lease  financing  loans and, to a lesser extent,  commercial real estate
loans,  and  initially  involved  borrowers  that had already  encountered  some
operating  problems that  continued to deteriorate as the economy became weaker.
Included  in this were  loans on hotels  and  leases to the  commercial  airline
industry.  In both instances,  the industry had been suffering from overcapacity
prior to 2001,  which then became much worse with the economic  downturn and the
events of September 11, 2001. As the recession  continued,  the effects expanded
to companies  that had been  stronger,  but succumbed to the ongoing  effects of
slowed economic activity.  First Bank, our midwestern  subsidiary bank, incurred
net loan  charge-offs of $16.3 million for the year ended December 31, 2001, and
had  nonperforming  loans and leases of $47.7  million at December 31, 2001.  In
comparison,  for the year ended  December 31,  2002,  net loan  charge-offs  had
increased to $22.1  million,  while  nonperforming  loans had increased to $50.5
million at December 31,  2002.  The increase in  nonperforming  loans  primarily
reflects the single real estate  construction  and  development  relationship of
$16.1 million that became  nonperforming  during the second  quarter of 2002, as
previously discussed.
<PAGE>
         Generally,  the effects on us of the  economic  downturn in  California
have been limited to the San  Francisco  Bay area,  including  the area known as
"Silicon  Valley."  Although we have a substantial  banking  presence in the San
Francisco  Bay area,  we have  relatively  little  direct  exposure  to the high
technology  companies.  Consequently,  the decline in that industry beginning in
2000 had little  direct effect on our  California  operations.  However,  as the
magnitude of the problems in the high technology sector  increased,  the effects
spread to companies  that were  suppliers and  servicers of the high  technology
sector,  and to  commercial  real  estate  in the area.  As a result,  our asset
quality issues in California have been concentrated within the San Francisco Bay
area,   and   generally   do   not   involve   Southern    California   or   the
Sacramento-Roseville area in Northern California. Furthermore, these issues have
primarily  arisen  during  2002.  Consequently,  while  our  California  banking
operation  incurred  net loan  charge-offs  of $5.4  million  in  2001,  and had
nonperforming loans of $14.1 million at December 31, 2001, during the year ended
December  31,  2002,  these  increased  to  $27.6  million  and  $17.2  million,
respectively, most of which related to the San Francisco Bay area.

         Our Texas banking  operation  represents a somewhat  smaller portion of
our overall lending function. However, the Texas economy has generally continued
to  be  fairly  strong,  resulting  in  relatively  few  asset  quality  issues.
Consequently,  we had loan  charge-offs  of $5.6 million and loan  recoveries of
$751,000 for the year ended  December 31, 2002,  which  included a charge-off of
$5.3  million  on a single  loan to a  company  engaged  in  leasing  equipment,
primarily to  manufacturers.  This  company  encountered  significant  operating
problems from rapid expansion,  principally through acquisition,  accompanied by
the economic  downturn,  which particularly  affected the manufacturing  sector.
Total  nonperforming  loans were $5.5  million and $3.5  million at December 31,
2002 and 2001, respectively,  including the remaining balance on the loan to the
leasing company referred to above of $1.5 million.

         In addition to restructuring  our loan portfolio,  we also have changed
the  composition  of our deposit base.  The majority of our deposit  development
programs are now directed toward increased transaction accounts,  such as demand
and savings accounts,  rather than time deposits, and have emphasized attracting
more than one account  relationship with customers.  This growth is accomplished
by  cross-selling  various  products and services,  packaging  account types and
offering  incentives  to  deposit  customers  on other  deposit  or  non-deposit
services.  In addition,  commercial  borrowers are  encouraged to maintain their
operating  deposit  accounts with us. At December 31, 1997,  total time deposits
were $1.90  billion,  or 51.7% of total  deposits.  Although  time deposits have
increased to $2.19 billion at December 31, 2002, they  represented only 35.5% of
total  deposits,  reflecting our continued focus on  transactional  accounts and
full service deposit relationships with our customers.

         Despite the significant expenses we incurred in the amalgamation of the
acquired entities into our corporate  culture and systems,  and in the expansion
of our  organizational  capabilities,  the earnings of the acquired entities and
the  increased  net  interest  income  resulting  from  the  transition  in  the
composition of our loan and deposit portfolios have contributed to improving net
income.  For the years ended  December  31, 2002 and 2001,  net income was $45.2
million and $64.5  million,  respectively,  compared with $56.1  million,  $44.2
million and $33.5 million in 2000, 1999 and 1998, respectively. The factors that
led to the decline in our earnings for 2002  include the current  interest  rate
environment,  asset quality  issues  requiring  additional  provisions  for loan
losses,  and increased  operating  expenses.  The increased  provisions for loan
losses reflect the current economic environment and significantly increased loan
charge-off,  delinquency  and  nonperforming  trends as further  discussed under
"--Comparison  of  Results  of  Operations  for  2002  and  2001."  Although  we
anticipate   certain   short-term  adverse  effects  on  our  operating  results
associated  with  acquisitions,   we  believe  the  long-term  benefits  of  our
acquisition  program will exceed the  short-term  issues  encountered  with some
acquisitions.  As such, in addition to  concentrating on internal growth through
continued  efforts to further develop our corporate  infrastructure  and product
and  service   offerings,   we  expect  to  continue  to  identify   and  pursue
opportunities for growth through acquisitions.
<PAGE>

Acquisitions.  In  the  development  of  our  banking  franchise,  we  emphasize
acquiring  other  financial  institutions  as one means of achieving  our growth
objectives. Acquisitions may serve to enhance our presence in a given market, to
expand  the  extent  of  our  market  area  or to  enable  us to  enter  new  or
noncontiguous  market areas.  After we consummate an  acquisition,  we expect to
enhance the franchise of the acquired entity by supplementing  the marketing and
business  development  efforts  to broaden  the  customer  bases,  strengthening
particular  segments  of the  business or filling  voids in the  overall  market
coverage.  We have primarily utilized cash, borrowings and the issuance of trust
preferred  securities  to meet  our  growth  objectives  under  our  acquisition
program.

         During the three years ended  December  31,  2002,  we  completed  nine
acquisitions  of banks,  two branch  office  purchases  and the  acquisition  of
certain assets and assumption of certain  liabilities of a leasing  company.  As
demonstrated in the following  table,  our  acquisitions  during the three years
ended  December 31, 2002 have  primarily  served to increase our presence in the
California markets that we originally entered during 1995 and to further augment
our  existing  markets  and our  Midwest  banking  franchise.  Additionally,  we
currently  have one pending  acquisition  that will  further  expand our Midwest
banking franchise. These transactions are summarized as follows:


<PAGE>

<TABLE>
<CAPTION>


                                                                                                                  Number
                                                                   Loans, Net of                                    of
                                                          Total      Unearned    Investment                       Banking
         Entity                        Closing Date    Assets (1)  Discount (1)  Securities (1)  Deposits (1)  Locations (1)
         ------                        ------------    ----------  ------------- --------------   -----------  -------------
                                                         (dollars expressed in thousands)

    Pending Acquisition
    -------------------

      Bank of Ste. Genevieve
<S>                                     <C>            <C>             <C>          <C>           <C>           <C>
      Ste. Genevieve, Missouri             --          $ 108,800       57,500       40,600        88,300           2
                                                       =========     ========      =======      ========        ====

    2002
    ----

      Union Planters Bank, N.A.
      Denton and Garland, Texas
      branch offices                  June 22, 2002    $  63,700          600           --        64,900           2

      Plains Financial Corporation
      Des Plaines, Illinois         January 15, 2002     256,300      150,400       81,000       213,400           4
                                                       ---------     --------      -------      --------        ----
                                                       $ 320,000      151,000       81,000       278,300           6
                                                       =========     ========      =======      ========        ====

    2001
    ----

      Union Financial Group, Ltd.
      Swansea, Illinois             December 31, 2001  $ 360,000      263,500        1,150       283,300           9

      BYL Bancorp
      Orange, California            October 31, 2001     281,500      175,000       12,600       251,800           7

      Charter Pacific Bank
      Agoura Hills, California      October 16, 2001     101,500       70,200        7,500        89,000           2
                                                       ---------     --------      -------      --------        ----
                                                       $ 743,000      508,700       21,250       624,100          18
                                                       =========     ========      =======      ========        ====

    2000
    ----

      The San Francisco Company
      San Francisco, California     December 31, 2000  $ 183,800      115,700       38,300       137,700           1

      Millennium Bank
      San Francisco, California     December 29, 2000    117,000       81,700       21,100       104,200           2

      Commercial Bank of San Francisco
      San Francisco, California     October 31, 2000     155,600       97,700       45,500       109,400           1

      Bank of Ventura
      Ventura, California            August 31, 2000      63,800       39,400       15,500        57,300           1

      First Capital Group, Inc.
      Albuquerque, New Mexico       February 29, 2000     64,600       64,600           --            --           1

      Lippo Bank
      San Francisco, California     February 29, 2000     85,300       40,900       37,400        76,400           3
                                                       ---------     --------      -------      --------       -----
                                                       $ 670,100      440,000      157,800       485,000           9
                                                       =========     ========      =======      ========       =====
</TABLE>

--------------------------
(1)  For our pending acquisition that is expected  to  close  on March 31, 2003,
     amounts are as of December 31, 2002. For  closed  acquisitions, amounts are
     as of the respective closing dates.

         We funded the completed  acquisitions  from  available  cash  reserves,
proceeds  from  the  sales  and  maturities  of  available-for-sale   investment
securities,  borrowings  under  our  revolving  credit  line  with  a  group  of
unaffiliated banks and proceeds from the issuance of trust preferred securities.



<PAGE>


         Pending Acquisition

         On September  17, 2002,  First Banks and  Allegiant  Bancorp,  Inc., or
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.  Bank of Ste.  Genevieve  operates two  locations in Ste.  Genevieve,
Missouri,  and  reported  total assets of $108.8  million and total  deposits of
$88.3  million at December 31,  2002.  Under the terms of the  agreement,  First
Banks will acquire Bank of Ste. Genevieve in exchange for approximately  974,150
shares of Allegiant  common stock that are  currently  held by First Banks.  The
value of $18.375 per share  assigned to each share of Allegiant  common stock to
be exchanged in the  transaction  was  determined  by the parties based upon the
existing market price of the shares and detailed  negotiations.  The transaction
is expected to be completed on March 31, 2003.  First Banks will continue to own
approximately  232,000 shares of Allegiant common stock subsequent to completion
of the transaction.

         Closed Acquisitions and Other Corporate Transactions

         On January 15, 2002, we completed our  acquisition of Plains  Financial
Corporation,  or Plains, and its wholly owned banking subsidiary,  PlainsBank of
Illinois,  National  Association,  Des Plaines,  Illinois, in exchange for $36.5
million in cash.  Plains  operated a total of three  banking  facilities  in Des
Plaines,  Illinois, and one banking facility in Elk Grove Village,  Illinois. At
the time of the transaction,  Plains had $256.3 million in total assets,  $150.4
million  in  loans,  net of  unearned  discount,  $81.0  million  in  investment
securities and $213.4 million in deposits.  This  transaction  was accounted for
using the  purchase  method of  accounting.  Goodwill  was  approximately  $12.6
million and will not be amortized,  but instead will be periodically  tested for
impairment in accordance with Statement of Financial  Accounting  Standards,  or
SFAS,  No.  142,  Goodwill  and  Other  Intangible   Assets.  The  core  deposit
intangibles were  approximately  $2.9 million and are being amortized over seven
years utilizing the straight-line  method. Plains was merged with and into Union
and PlainsBank of Illinois was merged with and into First Bank.

         On June 22, 2002,  FB&T  completed  its  assumption of the deposits and
certain  liabilities  and the  purchase  of certain  assets of the  Garland  and
Denton, Texas branch offices of Union Planters Bank, National Association, or UP
branches.  The  transaction  resulted  in the  acquisition  of $15.3  million in
deposits and one branch  office in Garland and $49.6 million in deposits and one
branch office and a detached  drive-thru  facility,  in Denton. The core deposit
intangibles associated with the branch purchases were $1.4 million and are being
amortized over seven years utilizing the straight-line method.

         On December  31,  2002,  we  completed  our  acquisition  of all of the
outstanding  capital stock of First Banks America,  Inc., or FBA, San Francisco,
California,  that we did not  already  own for a price of $40.54 per  share,  or
approximately $32.4 million. At December 31, 2002, prior to consummation of this
transaction,  there were 798,753 shares,  or  approximately  6.22% of our former
majority-owned subsidiary's outstanding stock, held publicly. We owned the other
93.78%. In conjunction with this transaction, FBA was merged with and into First
Banks.  This  transaction  was  accounted  for  using  the  purchase  method  of
accounting.  Goodwill was approximately $12.4 million and will not be amortized,
but instead will be  periodically  tested for impairment in accordance with SFAS
No. 142.


<PAGE>

         Acquisition and Integration Costs

         We accrue  certain costs  associated  with our  acquisitions  as of the
respective  consummation  dates.  Essentially  all of these accrued costs relate
either to adjustments to the staffing levels of the acquired  entities or to the
anticipated  termination of information  technology or item processing contracts
of the acquired entities prior to their stated contractual expiration dates. The
most significant costs that we incur relate to salary  continuation  agreements,
or other similar agreements, of executive management and certain other employees
of the  acquired  entities  that were in place prior to the  acquisition  dates.
These  agreements  provide for payments  over  periods  ranging from one to nine
years and are  triggered  as a result of the change in  control of the  acquired
entity.   Other  severance   benefits  for  employees  that  are  terminated  in
conjunction  with the  integration  of the acquired  entities  into our existing
operations are normally paid to the recipients  within 90 days of the respective
consummation  date.  The  balance  of our  accrued  severance  of  $2.4  million
identified in the following table is comprised of contractual  obligations under
salary  continuation  agreements  to 13  individuals  and have  remaining  terms
ranging from eight months to approximately  14 years.  Payments made under these
agreements are paid from accrued  liabilities and consequently,  do not have any
impact on our statements of income.

         A summary of acquisition  and  integration  costs  attributable  to the
acquisitions  included  in the  foregoing  table,  which were  accrued as of the
consummation  dates  of the  respective  acquisition,  is  listed  below.  These
acquisition and integration costs are reflected in accrued and other liabilities
in our consolidated financial statements.
<TABLE>
<CAPTION>

                                                                             Information
                                                         Severance         Technology Fees       Total
                                                         ---------         ---------------       -----

<S>                                                    <C>                 <C>                 <C>
Balance at December 31, 1998.........................  $ 1,100,000                   --        1,100,000
Year Ended December 31, 1999:
   Amounts accrued at acquisition date...............    1,633,768                   --        1,633,768
   Payments..........................................     (124,742)                  --         (124,742)
                                                       -----------         ------------      -----------
Balance at December 31, 1999.........................  $ 2,609,026                   --        2,609,026
Year Ended December 31, 2000:
   Amounts accrued at acquisition date...............    3,331,600                   --        3,331,600
   Reversal to goodwill..............................     (278,974)                  --         (278,974)
   Payments..........................................   (2,492,319)                  --       (2,492,319)
                                                       -----------         ------------      -----------
Balance at December 31, 2000.........................  $ 3,169,333                   --        3,169,333
Year Ended December 31, 2001:
   Amounts accrued at acquisition date...............    3,884,800              515,638        4,400,438
   Payments..........................................   (3,119,602)            (363,138)      (3,482,740)
                                                       -----------         ------------      -----------
Balance at December 31, 2001.........................  $ 3,934,531              152,500        4,087,031
Year Ended December 31, 2002:
   Amounts accrued at acquisition date...............      238,712              250,000          488,712
   Payments..........................................   (1,821,878)            (375,032)      (2,196,910)
                                                       -----------         ------------      -----------
Balance at Decmber 31, 2002..........................  $ 2,351,365               27,468        2,378,833
                                                       ===========         ============      ===========

         As further  discussed and quantified under  "--Comparison of Results of
Operations  for the Nine Months Ended  September  30,  2002,"  "--Comparison  of
Results  of  Operations  for 2001 and  2000,"  and  "--Comparison  of Results of
Operations  for  2000  and  1999,"  we also  incur  costs  associated  with  our
acquisitions  that are expensed in our statements of income.  These costs relate
exclusively to additional costs incurred in conjunction with the data processing
conversions of the respective entities.

</TABLE>
<PAGE>

Market  Area.  As of  December  31,  2002,  our  subsidiary  banks' 151  banking
facilities were located in California, eastern Missouri, Illinois and Texas. Our
primary market area is the St. Louis, Missouri metropolitan area. Our second and
third largest market areas are southern and northern  California and central and
southern Illinois,  respectively. We also have locations in the Houston, Dallas,
Irving,  McKinney and Denton,  Texas metropolitan  areas, rural eastern Missouri
and the greater Chicago, Illinois metropolitan area.
<TABLE>
<CAPTION>

         The  following  table  lists the market  areas in which our  subsidiary
banks operate,  total  deposits,  deposits as a percentage of total deposits and
the number of locations as of December 31, 2002:

                                                                              Total         Deposits       Number
                                                                            Deposits     as a Percentage     of
                               Geographic Area                            (in millions) of Total Deposits Locations
                               ---------------                            ------------- ----------------- ---------

<S>                                                                        <C>                <C>             <C>
St. Louis, Missouri metropolitan area (1)...............................   $ 1,534.3          24.9%           29
Regional Missouri (1)...................................................       414.0           6.7            14
Central and southern Illinois (1).......................................     1,055.3          17.1            33
Northern Illinois (1)...................................................       530.8           8.6            18
Texas (2)...............................................................       328.2           5.3             8
Southern California (2).................................................     1,334.1          21.6            32
Northern California (2).................................................       976.1          15.8            17
                                                                           ---------         -----          ----
     Total deposits.....................................................   $ 6,172.8         100.0%          151
                                                                           =========         =====          ====
</TABLE>
------------------------
(1)  First  Bank  operates  in  the  St. Louis  metropolitan  area, in  regional
     Missouri,  in  central  and  southern  Illinois  and  in northern Illinois,
     including Chicago.
(2)  FB&T  operates  in  the  greater  Los Angeles  metropolitan area, including
     Ventura  County, Riverside  and Orange County, California; in Santa Barbara
     County, California; in  northern  California,  including  the  greater  San
     Francisco, San Jose and Sacramento metropolitan areas; and in the Houston,
     Dallas, Irving, McKinney and Denton metropolitan areas.

Competition  and  Branch  Banking.   Our  subsidiary   banks  engage  in  highly
competitive  activities.  Those  activities  and the  geographic  markets served
primarily  involve  competition  with other banks,  some of which are affiliated
with large  regional  or  national  holding  companies.  Financial  institutions
compete based upon interest  rates offered on deposit  accounts,  interest rates
charged on loans and other credit and service  charges,  the quality of services
rendered,  the  convenience of banking  facilities  and, in the case of loans to
large commercial borrowers, relative lending limits.

         Our principal  competitors  include  other  commercial  banks,  savings
banks,  savings and loan associations,  mutual funds,  finance companies,  trust
companies,  insurance  companies,  leasing  companies,  credit unions,  mortgage
companies, private issuers of debt obligations and suppliers of other investment
alternatives,  such as securities firms and financial holding companies. Many of
our non-bank  competitors  are not subject to the same degree of  regulation  as
that imposed on bank holding companies,  federally insured banks and national or
state chartered  banks. As a result,  such non-bank  competitors have advantages
over us in providing  certain  services.  We also compete with major  multi-bank
holding  companies,  which are  significantly  larger  than us and have  greater
access to capital and other resources.

         We believe we will continue to face  competition in the  acquisition of
independent banks and savings banks from banks and financial holding  companies.
We often  compete with larger  financial  institutions  that have  substantially
greater resources available for making acquisitions.

         Subject  to  regulatory   approval,   commercial   banks  operating  in
California,  Illinois,  Missouri and Texas are  permitted to establish  branches
throughout  their  respective   states,   thereby  creating  the  potential  for
additional competition in our service areas.

Supervision and Regulation

General. Federal and state laws extensively regulate our subsidiary banks and us
primarily to protect  depositors and customers of our subsidiary  banks.  To the
extent this discussion refers to statutory or regulatory  provisions,  it is not
intended to summarize  all such  provisions  and is qualified in its entirety by
reference  to the  relevant  statutory  and  regulatory  provisions.  Changes in
applicable laws,  regulations or regulatory  policies may have a material effect
on our business and prospects.  We are unable to predict the nature or extent of
the effects on our business and earnings that new federal and state  legislation
or regulation may have.  The enactment of the  legislation  described  below has
significantly  affected  the banking  industry  generally  and is likely to have
ongoing effects on us and our subsidiary banks in the future.
<PAGE>

         We are a registered bank holding company under the Bank Holding Company
Act of 1956. Consequently, the Board of Governors of the Federal Reserve System,
or Federal  Reserve,  regulates,  supervises  and  examines  us. We file  annual
reports with the Federal Reserve and provide to the Federal  Reserve  additional
information as it may require.

         Since First Bank is an  institution  chartered by the State of Missouri
and a member of the  Federal  Reserve,  both the State of  Missouri  Division of
Finance and the Federal Reserve supervise, regulate and examine First Bank. FB&T
is  chartered  by the  State  of  California  and  is  subject  to  supervision,
regulation  and   examination   by  the   California   Department  of  Financial
Institutions.  Our subsidiary  banks are also  regulated by the Federal  Deposit
Insurance  Corporation,  or FDIC,  which  provides  deposit  insurance  of up to
$100,000 for each insured depositor.

Bank Holding  Company  Regulation.  Our  activities  and those of our subsidiary
banks have in the past been  limited to the  business of banking and  activities
"closely related" or "incidental" to banking. Under the Gramm-Leach-Bliley  Act,
or GLB Act,  which was enacted in November  1999 and is  discussed  below,  bank
holding companies now have the opportunity to seek broadened authority,  subject
to  limitations on  investment,  to engage in activities  that are "financial in
nature" if all of their subsidiary depository institutions are well capitalized,
well  managed  and have at  least a  satisfactory  rating  under  the  Community
Reinvestment Act (discussed briefly below).

         We are also subject to capital  requirements  applied on a consolidated
basis, which are substantially similar to those required of our subsidiary banks
(briefly  summarized  below).  The Bank Holding Company Act also requires a bank
holding company to obtain approval from the Federal Reserve before:

          >>   acquiring,  directly or  indirectly,  ownership or control of any
               voting  shares of another bank or bank holding  company if, after
               such  acquisition,  it would own or control  more than 5% of such
               shares  (unless it already  owns or  controls a majority  of such
               shares);

          >>   acquiring all or substantially  all of the assets of another bank
               or bank holding company; or

          >>   merging or consolidating with another bank holding company.

         The  Federal  Reserve  will not  approve  any  acquisition,  merger  or
consolidation that would have a substantially  anti-competitive  result,  unless
the anti-competitive  effects of the proposed transaction are clearly outweighed
by a  greater  public  interest  in  meeting  the  convenience  and needs of the
community to be served.  The Federal Reserve also considers capital adequacy and
other financial and managerial factors in reviewing acquisitions and mergers.

Safety  and  Soundness  and  Similar  Regulations.  We are  subject  to  various
regulations and regulatory  policies directed at the financial  soundness of our
subsidiary banks.  These include,  but are not limited to, the Federal Reserve's
source of strength policy,  which obligates a bank holding company such as us to
provide financial and managerial strength to its subsidiary banks;  restrictions
on the nature and size of certain affiliate  transactions between a bank holding
company  and  its  subsidiary  depository  institutions;   and  restrictions  on
extensions of credit by our subsidiary banks to executive  officers,  directors,
principal stockholders and the related interests of such persons.

Regulatory Capital Standards.  The federal bank regulatory agencies have adopted
substantially  similar  risk-based and leverage  capital  guidelines for banking
organizations.  Risk-based  capital ratios are determined by classifying  assets
and  specified  off-balance-sheet  obligations  and financial  instruments  into
weighted categories, with higher levels of capital being required for categories
deemed to represent  greater  risk.  Federal  Reserve  policy also provides that
banking organizations  generally,  and in particular those that are experiencing
internal  growth or  actively  making  acquisitions,  are  expected  to maintain
capital positions that are substantially  above the minimum  supervisory levels,
without significant reliance on intangible assets.

         Under the risk-based capital standard,  the minimum  consolidated ratio
of total capital to risk-adjusted  assets required for bank holding companies is
8%. At least  one-half of the total  capital must be composed of common  equity,
retained earnings, qualifying noncumulative perpetual preferred stock, a limited
amount of qualifying cumulative perpetual preferred stock and minority interests
in the equity accounts of consolidated subsidiaries,  less certain items such as
goodwill and certain  other  intangible  assets,  which amount is referred to as
"Tier I  capital."  The  remainder  may  consist of  qualifying  hybrid  capital
instruments,  perpetual debt, mandatory  convertible debt securities,  a limited
amount of  subordinated  debt,  preferred  stock that does not qualify as Tier I
capital  and a limited  amount of loan and lease loss  reserves,  which  amount,
together with Tier I capital, is referred to as "Total Risk-Based Capital."

         In  addition  to the  risk-based  standard,  we are  subject to minimum
requirements  with  respect  to the ratio of our Tier I capital  to our  average


<PAGE>

assets less goodwill and certain other intangible assets, or the Leverage Ratio.
Applicable  requirements  provide  for a minimum  Leverage  Ratio of 3% for bank
holding  companies  that have the highest  supervisory  rating,  while all other
bankholding  companies must maintain a minimum  Leverage Ratio of at least 4% to
5%. The Office of the  Comptroller  of the  Currency,  or OCC, and the FDIC have
established capital requirements for banks under their respective  jurisdictions
that are  consistent  with those imposed by the Federal  Reserve on bank holding
companies.  Information  regarding our capital levels and our subsidiary  banks'
capital levels under the federal capital requirements is contained in Note 21 to
our consolidated financial statements appearing elsewhere in this report.

Prompt  Corrective  Action.  The FDIC  Improvement Act requires the federal bank
regulatory  agencies to take prompt  corrective  action in respect to depository
institutions  that  do not  meet  minimum  capital  requirements.  A  depository
institution's  status under the prompt corrective action provisions depends upon
how its capital levels compare to various  relevant  capital  measures and other
factors as established by regulation.

         The federal regulatory agencies have adopted  regulations  establishing
relevant capital measures and relevant capital levels. Under the regulations,  a
bank will be:

          >>   "well  capitalized" if it has a total risk-based capital ratio of
               10% or  greater,  a Tier I capital  ratio of 6% or greater  and a
               Leverage  Ratio of 5% or greater  and is not subject to any order
               or written directive by any such regulatory authority to meet and
               maintain a specific capital level for any capital measure;

          >>   "adequately  capitalized"  if it has a total  risk-based  capital
               ratio of 8% or greater,  a Tier I capital  ratio of 4% or greater
               and  a  Leverage   Ratio  of  4%  or   greater   (3%  in  certain
               circumstances);

          >>   "undercapitalized"  if it has a total risk-based capital ratio of
               less  than  8%,  a Tier I  capital  ratio  of  less  than 4% or a
               Leverage Ratio of less than 4% (3% in certain circumstances);

          >>   "significantly  undercapitalized"  if it has a  total  risk-based
               capital  ratio of less  than 6%, a Tier I  capital  ratio of less
               than 3% or a Leverage Ratio of less than 3%; and

          >>   "critically  undercapitalized" if its tangible equity is equal to
               or less than 2% of its average quarterly tangible assets.

         Under certain circumstances, a depository institution's primary federal
regulatory  agency  may use its  authority  to lower the  institution's  capital
category.  The banking  agencies are permitted to establish  individual  minimum
capital  requirements   exceeding  the  general  requirements  described  above.
Generally,  failing to maintain the status of "well  capitalized" or "adequately
capitalized"  subjects a bank to  restrictions  and  limitations on its business
that become progressively more severe as the capital levels decrease.

         A bank is prohibited  from making any capital  distribution  (including
payment of a dividend) or paying any  management  fee to its holding  company if
the  bank  would  thereafter  be   "undercapitalized."   Limitations  exist  for
"undercapitalized"  depository institutions regarding, among other things, asset
growth, acquisitions,  branching, new lines of business,  acceptance of brokered
deposits and borrowings from the Federal Reserve System.  These institutions are
also  required to submit a capital  restoration  plan that  includes a guarantee
from  the  institution's  holding  company.   "Significantly   undercapitalized"
depository  institutions  may  be  subject  to  a  number  of  requirements  and
restrictions,  including  orders  to sell  sufficient  voting  stock  to  become
"adequately  capitalized,"  requirements to reduce total assets and cessation of
receipt of deposits from  correspondent  banks. The appointment of a receiver or
conservator may be required for "critically undercapitalized" institutions.

Dividends.  Our primary source of funds in the future is the dividends,  if any,
paid by our  subsidiary  banks.  The  ability  of our  subsidiary  banks  to pay
dividends is limited by federal laws,  by  regulations  promulgated  by the bank
regulatory agencies and by principles of prudent bank management.

Customer Protection.  Our subsidiary banks are also subject to consumer laws and
regulations  intended  to protect  consumers  in  transactions  with  depository
institutions,  as well as  other  laws or  regulations  affecting  customers  of
financial  institutions  generally.  These laws and regulations  mandate various
disclosure requirements and substantively regulate the manner in which financial
institutions  must deal with their  customers.  Our subsidiary banks must comply
with  numerous   regulations   in  this  regard  and  are  subject  to  periodic
examinations with respect to their compliance with the requirements.

Community  Reinvestment  Act. The  Community  Reinvestment  Act of 1977 requires
that, in connection  with  examinations of financial  institutions  within their
jurisdiction,  the  federal  banking  regulators  evaluate  the  record  of  the
financial  institutions in meeting the credit needs of their local  communities,
including low and moderate  income  neighborhoods,  consistent with the safe and
sound operation of those banks.  These factors are also considered in evaluating
mergers, acquisitions and other applications to expand.
<PAGE>

The  Gramm-Leach-Bliley  Act. The GLB Act, enacted in 1999, amended and repealed
portions  of the  Glass-Steagall  Act and other  federal  laws  restricting  the
ability of bank holding companies,  securities firms and insurance  companies to
affiliate  with  each  other and to enter  new  lines of  business.  The GLB Act
established a comprehensive  framework to permit  financial  companies to expand
their activities, including through such affiliations, and to modify the federal
regulatory  structure  governing  some  financial  services   activities.   This
authority of financial firms to broaden the types of financial  services offered
to customers and to affiliates with other types of financial  services companies
may lead to further  consolidation in the financial services industry.  However,
it may lead to  additional  competition  in the  markets  in which we operate by
allowing new entrants  into various  segments of those  markets that are not the
traditional competitors in those segments. Furthermore, the authority granted by
the GLB Act may encourage the growth of larger competitors.

         The  GLB  Act  also  adopted  consumer  privacy  safeguards   requiring
financial services providers to disclose their policies regarding the privacy of
customer  information  to  their  customers  and,  subject  to some  exceptions,
allowing  customers  to "opt  out" of  policies  permitting  such  companies  to
disclose  confidential  financial  information to non-affiliated  third parties.
Final  regulations  implementing  the new privacy  standards became effective in
2001.

The  Sarbanes-Oxley  Act. On July 30, 2002,  President  Bush signed into law the
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act imposes a myriad of corporate
governance and accounting  measures  designed to ensure that the shareholders of
corporate  America are  treated  fairly and have full and  accurate  information
about the public companies in which they invest. All public companies, including
companies   that  file  periodic   reports  with  the  Securities  and  Exchange
Commission, or SEC, such as First Banks, are affected by the Sarbanes-Oxley Act.

         Certain   provisions  of  the   Sarbanes-Oxley   Act  became  effective
immediately,  while other  provisions  will become  effective  as the SEC adopts
rules to implement  those  provisions.  Some of the principal  provisions of the
Sarbanes-Oxley Act which may affect us include:

          >>   the  creation of an  independent  accounting  oversight  board to
               oversee the audit of public  companies  and  auditors who perform
               such audits;

          >>   auditor independence provisions which restrict non-audit services
               that independent accountants may provide to their audit clients;

          >>   additional corporate governance and responsibility measures which
               (i)  require  the chief  executive  officer  and chief  financial
               officer to certify financial statements and to forfeit salary and
               bonuses in certain  situations,  and (ii) protect  whistleblowers
               and informants;

          >>   expansion of the audit committee's  authority and  responsibility
               by requiring that the audit  committee (i) have direct control of
               the outside  auditor,  (ii) be able to hire and fire the auditor,
               and (iii) approve all non-audit services;

          >>   mandatory  disclosure  by  analysts  of  potential  conflicts  of
               interest; and

          >>   enhanced penalties for fraud and other violations.

         The Sarbanes-Oxley Act is expected to increase the administrative costs
and burden of doing business for public  companies;  however,  we cannot predict
the significance of any increase at this time.

The USA Patriot Act. In October 2001, the Patriot Act was enacted in response to
the  terrorist  attacks in New York,  Pennsylvania  and  Washington,  D.C.  that
occurred on September 11, 2001.  The Patriot Act is intended to  strengthen  the
ability of U.S. law  enforcement  agencies and the  intelligence  communities to
work cohesively to combat terrorism on a variety of fronts. The potential impact
of the Patriot Act on financial  institutions  of all kinds is  significant  and
wide  ranging.  The Patriot Act  contains  sweeping  anti-money  laundering  and
financial transparency laws and imposes various regulations, including standards
for verifying client  identification  at account  opening,  and rules to promote
cooperation  among  financial  institutions,   regulators  and  law  enforcement
entities in  identifying  parties  that may be involved  in  terrorism  or money
laundering. The Patriot Act is expected to increase the administrative costs and
burden of doing business for financial institutions;  however, we cannot predict
the significance of any increase at this time.

Reserve Requirements;  Federal Reserve System and Federal Home Loan Bank System.
The Federal Reserve  requires all depository  institutions to maintain  reserves
against their transaction accounts and non-personal time deposits.  The balances
maintained to meet the reserve  requirements  imposed by the Federal Reserve may
be used to satisfy liquidity requirements. Institutions are authorized to borrow
from the Federal Reserve Bank "discount window," but Federal Reserve regulations
require  institutions to exhaust other reasonable  alternative sources of funds,
including  advances  from Federal  Home Loan Banks,  before  borrowing  from the
Federal Reserve Bank.
<PAGE>

         First Bank is a member of the Federal Reserve  System.  Both First Bank
and FB&T are members of the Federal Home Loan Bank System. As members,  they are
required to hold  investments  in  regional  banks  within  those  systems.  Our
subsidiary  banks were in  compliance  with these  requirements  at December 31,
2002, with investments of $9.7 million in stock of the Federal Home Loan Bank of
Des Moines held by First Bank,  $450,000 in stock of the Federal  Home Loan Bank
of  Chicago  held by  First  Bank  (associated  with  the  acquisition  of Union
completed on December 31, 2001),  $2.4 million in stock of the Federal Home Loan
Bank of San  Francisco  held by FB&T,  and $7.5  million in stock of the Federal
Reserve Bank of St. Louis held by First Bank.

Monetary  Policy and  Economic  Control.  The  commercial  banking  business  is
affected by legislation,  regulatory policies and general economic conditions as
well as the  monetary  policies  of the  Federal  Reserve.  The  instruments  of
monetary policy available to the Federal Reserve include the following:

          >>   changes in the discount  rate on member bank  borrowings  and the
               targeted federal funds rate;

          >>   the availability of credit at the "discount window;"

          >>   open market operations;

          >>   the  imposition  of  changes  in  reserve   requirements  against
               deposits of domestic banks;

          >>   the  imposition  of  changes  in  reserve   requirements  against
               deposits and assets of foreign branches; and

          >>   the  imposition  of and changes in reserve  requirements  against
               certain borrowings by banks and their affiliates.

         These monetary  policies are used in varying  combinations to influence
overall growth and  distributions of bank loans,  investments and deposits,  and
this use may affect interest rates charged on loans or paid on liabilities.  The
monetary  policies of the Federal  Reserve have had a significant  effect on the
operating  results of commercial  banks and are expected to do so in the future.
Such  policies  are  influenced  by  various   factors,   including   inflation,
unemployment,  and short-term and long-term changes in the  international  trade
balance and in the fiscal policies of the U.S. Government. We cannot predict the
effect that changes in monetary  policy or in the  discount  rate on member bank
borrowings  will  have on our  future  business  and  earnings  or  those of our
subsidiary banks.

Employees

         As of March 25, 2003, we employed  approximately 2,200 employees.  None
of the employees are subject to a collective bargaining  agreement.  We consider
our relationships with our employees to be good.

Executive Officers of the Registrant

         Information  regarding  executive  officers is  contained in Item 10 of
Part III hereof (pursuant to General  Instruction G) and is incorporated  herein
by this reference.

Item 2.  Properties

         We own our  office  building,  which  houses  our  principal  place  of
business, located at 135 North Meramec, Clayton, Missouri 63105. The property is
in good  condition  and consists of  approximately  41,763 square feet, of which
approximately  1,791 square feet is currently leased to others. Of our other 150
offices and two  operations  and  administrative  facilities,  91 are located in
buildings that we own and 62 are located in buildings that we lease.

         We  consider  the  properties  at  which we do  business  to be in good
condition generally and suitable for our business conducted at each location. To
the extent our properties or those acquired in connection  with our  acquisition
of other entities  provide space in excess of that  effectively  utilized in the
operations  of our  subsidiary  banks,  we seek to lease or sub-lease any excess
space to third  parties.  Additional  information  regarding  the  premises  and
equipment utilized by our subsidiary banks appears in Note 7 to our consolidated
financial statements appearing elsewhere in this report.

Item 3.  Legal Proceedings

         In the ordinary  course of  business,  we and our  subsidiaries  become
involved  in legal  proceedings.  Our  management,  in  consultation  with legal
counsel,  believes that the ultimate resolution of existing proceedings will not
have a material adverse effect on our business,  financial  condition or results
of operations.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.




<PAGE>


                                     PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

Market Information. There is no established public trading market for our common
stock. Various trusts, which were created by and are administered by and for the
benefit of Mr. James F. Dierberg,  our Chairman of the Board and Chief Executive
Officer, and members of his immediate family, own all of our voting stock.

Dividends.  In recent  years,  we have  paid  minimal  dividends  on our Class A
Convertible  Adjustable  Rate  Preferred  Stock and our Class B  Non-Convertible
Adjustable Rate Preferred Stock, and have paid no dividends on our Common Stock.
Our ability to pay  dividends is limited by regulatory  requirements  and by the
receipt of dividend payments from our subsidiary  banks,  which are also subject
to regulatory requirements.  The dividend limitations are included in Note 22 to
our consolidated financial statements appearing elsewhere in this report.


<PAGE>


Item 6.  Selected Financial Data

         The selected  consolidated  financial  data set forth below are derived
from our consolidated financial statements, which have been audited by KPMG LLP.
This  information  is  qualified  by  reference  to our  consolidated  financial
statements  appearing  elsewhere in this report. This information should be read
in conjunction with such consolidated  financial  statements,  the related notes
thereto and  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations."
<TABLE>
<CAPTION>
                                                               As of or For the Year Ended December 31, (1)
                                                        -----------------------------------------------------------
                                                            2002         2001        2000        1999        1998
                                                            ----         ----        ----        ----        ----
                                                           (dollars expressed in thousands, except per share data)
Income Statement Data:
<S>                                                       <C>           <C>         <C>          <C>         <C>
    Interest income...................................   $  424,910     444,743     422,826      353,082     327,860
    Interest expense..................................      156,740     209,604     200,852      170,751     172,021
                                                         ----------  ----------  ----------   ----------  ----------
    Net interest income...............................      268,170     235,139     221,974      182,331     155,839
    Provision for loan losses.........................       55,500      23,510      14,127       13,073       9,000
                                                         ----------  ----------  ----------   ----------  ----------
    Net interest income after provision
      for loan losses.................................      212,670     211,629     207,847      169,258     146,839
    Noninterest income................................       89,455      98,609      42,778       41,650      36,497
    Noninterest expense...............................      232,756     211,671     157,990      138,757     128,862
                                                         ----------  ----------  ----------   ----------  ----------
    Income before provision for income taxes,
      minority interest in income of subsidiary
      and cumulative effect of change in
      accounting principle............................       69,369      98,567      92,635       72,151      54,474
    Provision for income taxes........................       22,771      30,048      34,482       26,313      19,693
                                                         ----------  ----------  ----------   ----------  ----------
    Income before minority interest in income
      of subsidiary and cumulative effect of
      change in accounting principle..................       46,598      68,519      58,153       45,838      34,781
    Minority interest in income of subsidiary.........        1,431       2,629       2,046        1,660       1,271
                                                         ----------  ----------  ----------   ----------  ----------
    Income before cumulative effect of change in
      accounting principle............................       45,167      65,890      56,107       44,178      33,510
    Cumulative effect of change in
      accounting principle, net of tax................           --      (1,376)         --           --          --
                                                         ----------  ----------  ----------   ----------  ----------
    Net income........................................   $   45,167      64,514      56,107       44,178      33,510
                                                         ==========  ==========  ==========   ==========  ==========
Dividends:
    Preferred stock...................................   $      786         786         786          786         786
    Common stock......................................           --          --          --           --          --
    Ratio of total dividends declared to net income...         1.74%       1.22%       1.40%        1.78%       2.35%
Per Share Data:
    Earnings per common share:
      Basic:
       Income before cumulative effect of change
         in accounting principle......................   $ 1,875.69    2,751.54    2,338.04     1,833.91    1,383.04
       Cumulative effect of change in
         accounting principle, net of tax.............           --      (58.16)         --           --          --
                                                         ----------  ----------  ----------   ----------  ----------

       Basic..........................................   $ 1,875.69    2,693.38    2,338.04     1,833.91    1,383.04
                                                         ==========  ==========  ==========   ==========  ==========
      Diluted:
       Income before cumulative effect of change
         in accounting principle......................   $ 1,853.64    2,684.93    2,267.41     1,775.47    1,337.09
       Cumulative effect of change in accounting
         principle, net of tax........................           --      (58.16)         --           --          --
                                                         ----------  ----------  ----------   ----------  ----------
       Diluted........................................   $ 1,853.64    2,626.77    2,267.41     1,775.47    1,337.09
                                                         ==========  ==========  ==========   ==========  ==========

      Weighted average common stock outstanding.......       23,661      23,661      23,661       23,661      23,661

<PAGE>

Balance Sheet Data:
    Investment securities.............................   $1,137,320     631,068     563,534      451,647     534,796
    Loans, net of unearned discount...................    5,432,588   5,408,869   4,752,265    3,996,324   3,580,105
    Total assets......................................    7,342,800   6,778,451   5,876,691    4,867,747   4,554,810
    Total deposits....................................    6,172,820   5,683,904   5,012,415    4,251,814   3,939,985
    Notes payable.....................................        7,000      27,500      83,000       64,000      50,048
    Guaranteed preferred beneficial interests in
       subordinated debentures........................      270,039     235,881     182,849      127,611     127,443
    Common stockholders' equity.......................      505,978     435,594     339,783      281,842     250,300
    Total stockholders' equity........................      519,041     448,657     352,846      294,905     263,363
Earnings Ratios:
    Return on average total assets....................         0.64%       1.08%       1.09%       0.95%       0.78%
    Return on average total stockholders' equity......         9.44       15.96       17.43       15.79       13.64
    Efficiency ratio (2)..............................        65.08       63.42       59.67       61.95       67.00
    Net interest margin (3)...........................         4.24        4.34        4.65        4.24        3.94
Asset Quality Ratios:
    Allowance for loan losses to loans................         1.83        1.80        1.72        1.72        1.70
    Nonperforming loans to loans (4)..................         1.38        1.24        1.12        0.99        1.22
    Allowance for loan losses to
       nonperforming loans (4)........................       132.29      144.36      153.47      172.66      140.04
    Nonperforming assets to loans and
       other real estate (5)..........................         1.52        1.32        1.17        1.05        1.32
    Net loan charge-offs to average loans.............         1.01        0.45        0.17        0.22        0.05
Capital Ratios:
    Average total stockholders' equity
       to average total assets........................         6.79        6.74        6.25        6.01        5.74
    Total risk-based capital ratio....................        10.68       10.53       10.21       10.05       10.28
    Leverage ratio....................................         6.45        7.24        7.46        7.15        7.78

--------------------------------
(1)  The comparability of the selected data presented is affected by the acquisitions of 13  banks  and  four  branch  offices
     during the five-year period ended December 31, 2002. These acquisitions were accounted for as purchases and, accordingly,
     the selected data includes the financial position and results of operations of each acquired entity only for  the periods
     subsequent to its respective date of acquisition.
(2)  Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
(3)  Net interest rate margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average
     interest-earning assets.
(4)  Nonperforming loans consist of nonaccrual loans and certain loans with restructured terms.
(5)  Nonperforming assets consist of nonperforming loans and other real estate.

</TABLE>


<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         The  following  presents  management's  discussion  and analysis of our
financial  condition  and  results  of  operations  as of the  dates and for the
periods  indicated.  You should read this  discussion  in  conjunction  with our
"Selected Financial Data," our consolidated financial statements and the related
notes thereto, and the other financial data contained elsewhere in this report.

         This discussion contains forward-looking  statements that involve risks
and  uncertainties.  Our actual  results could differ  significantly  from those
anticipated in these forward-looking  statements as a result of various factors.
See "Special Note Regarding  Forward-Looking  Statements" appearing elsewhere in
this report.

RESULTS OF OPERATIONS

Overview

         Net income was $45.2  million,  $64.5 million and $56.1 million for the
years ended  December 31,  2002,  2001 and 2000  respectively.  Results for 2002
reflect  increased  net  interest  income  offset by higher  operating  expenses
primarily  resulting from our  acquisitions  completed in 2001 and 2002. We also
experienced  increased  provisions  for loan losses,  indicative  of the current
economic  environment,   reflected  in  increased   charge-off,   past  due  and
nonperforming trends. For the three months ended December 31, 2002 and 2001, our
net income was $14.8 million and $29.9  million,  respectively.  Included in our
results  for the  fourth  quarter  and  year  ended  December  31,  2001  were a
nonrecurring gain of $12.4 million, net of related income taxes, relating to the
exchange of our investment in an unaffiliated financial institution for cash and
stock  in  another  unaffiliated  financial  institution,   and  a  nonrecurring
adjustment of our deferred income tax valuation reserve of $8.1 million, both of
which increased net income.

         The implementation of Statement of Financial Accounting  Standards,  or
SFAS,  No.  142,  Goodwill  and Other  Intangible  Assets,  on  January 1, 2002,
resulted  in  the   discontinuation  of  amortization  of  certain   intangibles
associated with the purchase of subsidiaries. If we had implemented SFAS No. 142
at the  beginning  of 2001,  net  income  for the three  months  and year  ended
December  31,  2001  would  have   increased  $2.6  million  and  $8.1  million,
respectively.  In addition,  the implementation of SFAS No. 133,  Accounting for
Derivative  Instruments and Hedging Activities,  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.  Excluding this item, net income
would have been $65.9 million for the year ended December 31, 2001.

         The decline in our earnings in 2002 primarily resulted from the reduced
interest rate environment and weak economic  conditions within our market areas,
as well as the related decline in asset quality. Throughout 2002, we experienced
higher than normal loan charge-offs,  loan delinquencies and nonperforming loans
that led to  significant  increases in the  provision  for loan losses,  thereby
reducing net income.  While we believe we have aggressively  addressed the asset
quality  problems that have arisen  throughout  the year, we continue to closely
monitor our operations to address the challenges  posed by the current  economic
environment,  including reduced loan demand and lower prevailing interest rates.
We attribute the improved  earnings for 2001 primarily to increased net interest
income and  noninterest  income,  including a gain on the  exchange of an equity
investment in an unaffiliated  financial institution in October 2001, as well as
a reduced  provision for income taxes.  The improvement in our earnings for 2001
was significantly  offset by reductions in prevailing  interest rates throughout
2001,  resulting  in an overall  decline in our net interest  rate  margin.  Our
earnings progress for 2000 was primarily driven by increased net interest income
generated from our acquisitions completed in 1999 and 2000, continued growth and
diversification  in the  composition  of our loan  portfolio,  and  increases in
prevailing   interest   rates  which   resulted  in  increased   yields  on  our
interest-earning assets.

Financial Condition and Average Balances

         Our average total assets were $7.05 billion for the year ended December
31,  2002,  compared  to $5.99  billion  and $5.15  billion  for the years ended
December 31, 2001 and 2000,  respectively.  We  attribute  the increase of $1.06
billion in total average assets for 2002 primarily to our 2002  acquisitions  of
Plains and the UP branches,  which  provided  assets of $256.3 million and $63.7
million, respectively, and our acquisitions of Charter Pacific Bank, BYL Bancorp
and Union,  completed  during the fourth  quarter of 2001. The increase in total
assets was  partially  offset by lower loan demand and an  anticipated  level of
attrition associated with these acquisitions. We attribute the increase in total
average  assets for 2001  primarily  to our  acquisitions  completed  during the
fourth quarter of 2000 and in 2001;  internal loan growth generated  through the
efforts of our business development staff; increased bank premises and equipment
associated  with the  expansion and  renovation of various  corporate and branch
offices;  and valuation of derivative  instruments on the consolidated  balances
sheets  resulting  from a change in accounting  principle.  The  acquisition  of
Union, which provided total assets of $360.0 million,  was completed on December
31, 2001,  and therefore did not have a significant  impact on our average total
assets for the year ended December 31, 2001, but has  contributed to the overall
increase in average total assets in 2002.
<PAGE>

         The increase in assets for 2002 was primarily  funded by an increase in
average  deposits of $867.3 million to $5.96 billion for the year ended December
31, 2002, and an increase of $36.0 million in average  short-term  borrowings to
$194.1 million for the year ended December 31, 2002. We utilized the majority of
the funds  generated  from our  deposit  growth to invest in  available-for-sale
investment  securities  and the  remaining  funds were  temporarily  invested in
federal  funds sold,  resulting in increases in average  federal  funds sold and
average investment securities of $29.7 million and $362.4 million, respectively,
to $123.3 million and $813.8 million,  respectively, for the year ended December
31, 2002. Similarly, we funded the increase in assets for 2001 by an increase in
average  deposits of $612.9 million to $5.09 billion for the year ended December
31, 2001, and an increase of $51.9 million in average  short-term  borrowings to
$158.0 million for the year ended December 31, 2001. We utilized the majority of
the funds  generated  from our  deposit  growth  to fund a  portion  of our loan
growth,  and the  remaining  funds were either  temporarily  invested in federal
funds sold or invested in available-for-sale investment securities, resulting in
increases in average  federal  funds sold and average  investment  securities of
$26.1  million  and $19.4  million,  respectively,  to $93.6  million and $451.4
million, respectively, for the year ended December 31, 2001.

         Loans, net of unearned discount,  averaged $5.42 billion, $4.88 billion
and  $4.29  billion  for the  years  ended  December  31,  2002,  2001 and 2000,
respectively. The acquisitions we completed during 2001 and 2002 provided loans,
net of unearned  discount,  of $508.7 million and $151.0 million,  respectively.
The increase for 2002 is primarily due to the loans provided by  acquisitions as
well as a $36.1 million  increase in  residential  real estate  lending,  due to
increased volumes  resulting from the current interest rate  environment.  These
increases  were  offset  by a $119.3  million  decline  in  commercial  lending,
primarily due to reduced loan demand resulting from current economic  conditions
prevalent  within our markets.  We also  experienced  continuing  reductions  in
consumer and installment loans, net of unearned discount,  which decreased $44.1
million to $79.1 million at December 31, 2002. This decrease reflects reductions
in new loan volumes and the  repayment  of principal on our existing  portfolio,
and is also consistent with our objectives of  de-emphasizing  consumer  lending
and expanding  commercial  lending.  These changes result from the focus we have
placed on our business development efforts and the portfolio repositioning which
we  originally  began  in  the  mid-1990s.   This  repositioning   provided  for
substantially all of our residential  mortgage loan production to be sold in the
secondary mortgage market and the origination of indirect automobile loans to be
substantially reduced.

         In addition to the growth provided by  acquisitions,  for 2001,  $174.6
million  of  net  loan  growth  was  provided  by  corporate   banking  business
development, consisting of increases of $24.9 million of lease financing, $145.8
million  of  commercial  real  estate  loans  and $8.4  million  of real  estate
construction  and  development  loans,  offset by a decrease of $4.5  million of
commercial, financial and agricultural loans. Furthermore, the increase in loans
is  also  attributable  to an  increase  in  residential  real  estate  lending,
including  loans held for sale, of $48.6 million for the year ended December 31,
2001. We primarily  attribute this increase to be the result of a  significantly
higher volume of  residential  mortgage  loans  originated,  including  both new
fundings and refinancings,  as a result of declining  interest rates experienced
throughout  2001 as well as an  expansion of our  mortgage  banking  activities.
These  overall  increases  were  partially  offset by  continuing  reductions in
consumer and installment loans, net of unearned discount,  which decreased $75.3
million to $122.1  million at  December  31, 2001 due to the sale of our student
loan and credit  card  portfolios,  and is  consistent  with our  objectives  of
de-emphasizing consumer lending and expanding commercial lending.

         Investment  securities  averaged  $813.8  million,  $451.4  million and
$431.9  million  for  the  years  ended  December  31,  2002,   2001  and  2000,
respectively,  reflecting  increases of $362.4 million and $19.5 million for the
years ended December 31, 2002 and 2001,  respectively.  The significant increase
in  2002  is   primarily   attributable   to  an   increase  in   purchases   of
available-for-sale  investment  securities  due to reduced  loan  demand and our
acquisition  of  Plains,  which  provided  us with $81.0  million in  investment
securities.  The  increase  for 2001 is  primarily  associated  with  investment
securities that we acquired in conjunction  with our 2000 and 2001  acquisitions
and the  investment of excess funds  available due to reduced loan demand.  This
increase was partially offset by the liquidation of certain acquired  investment
securities,  a higher than normal level of calls of investment  securities prior
to their normal  maturity dates  experienced  throughout 2001 resulting from the
general  decline in  interest  rates,  and sales of  certain  available-for-sale
investment securities.

         Nonearning  assets  averaged $687.8 million for the year ended December
31,  2002,  compared to $562.9  million  and $359.2  million for the years ended
December 31, 2001 and 2000,  respectively.  The increases in average  nonearning
assets in 2002 and 2001 are primarily due to additional  derivative  instruments
associated  with  three  new  swap  agreements  entered  into in  2002,  and the
implementation of SFAS No. 133 in January 2001, respectively.  Bank premises and
equipment, net of depreciation and amortization,  was $152.4 million at December
31, 2002,  in comparison  to $149.6  million and $114.8  million at December 31,
2001 and  2000,  respectively.  We  primarily  attribute  the  increase  in bank
premises and equipment to our acquisitions, the purchase and remodeling of a new

<PAGE>

operations  center and corporate  administrative  building  during 2001, and the
construction  and/or  renovation of various  branch  offices.  In addition,  the
increase in  intangibles  of $26.7  million from $125.4  million at December 31,
2001 to $152.1  million at December 31, 2002 results from goodwill  attributable
to our 2002  acquisitions,  including $12.4 million associated with the purchase
of the public shares of FBA.

         We use deposits as our primary  funding  source and acquire them from a
broad base of local markets,  including both individual and corporate customers.
Deposits  averaged $5.96 billion,  $5.09 billion and $4.48 billion for the years
ended December 31, 2002, 2001 and 2000,  respectively.  Total deposits increased
by $488.9  million to $6.17  billion at December 31, 2002 from $5.68  billion at
December  31,  2001.  We credit  the  increases  primarily  to our  acquisitions
completed during the respective periods and the expansion of our deposit product
and service offerings available to our customer base. The increase for 2002 also
reflects an increase in savings  accounts  offset by a decline in certain  large
commercial accounts due primarily to general economic conditions  resulting from
the fact that  consumers are generally more inclined to retain a higher level of
liquid assets  during times of economic  uncertainty.  The overall  increase for
2001  was  partially  offset  by  an  anticipated  level  of  account  attrition
associated  with our  acquisitions  during the fourth  quarter of 2000 and $50.0
million of time deposits of $100,000 or more that either  matured or were called
in September 2001.

         Short-term  borrowings  averaged  $194.1  million,  $158.0  million and
$106.1  million  for  the  years  ended  December  31,  2002,   2001  and  2000,
respectively.  The  increase  in the average  balance for 2002  reflects a $54.1
million increase in securities sold under  agreements to repurchase  principally
in connection  with the cash  management  activities of our  commercial  deposit
customers as well as a $15.0 million increase in federal funds purchased, offset
by a $17.0  million  decline  in  Federal  Home Loan Bank  advances.  Short-term
borrowings  increased by $102.5  million to $243.1  million at December 31, 2001
from $140.6 million at December 31, 2000. This increase reflects a $17.5 million
increase in  securities  sold under  agreements to  repurchase,  a $15.1 million
increase in Federal Home Loan Bank  advances  acquired in  conjunction  with our
Union acquisition, and a $70.0 million increase in federal funds purchased.

         Our note  payable  averaged  $17.9  million,  $41.6  million  and $51.9
million for the years ended December 31, 2002, 2001 and 2000, respectively.  Our
note  payable  decreased  by $20.5  million to $7.0 million at December 31, 2002
from $27.5  million at December  31,  2001 due to  repayments  funded  primarily
through  dividends from our  subsidiaries  and the issuance of additional  trust
preferred  securities in April 2002,  offset by a $36.5 million advance utilized
to fund our acquisition of Plains in January 2002. Similarly,  the reduction for
2001 was primarily  funded with dividends from our subsidiaries and the issuance
of additional  trust  preferred  securities in November 2001. The balance of our
note payable at December 31, 2002 results from a $7.0 million  advance  drawn on
December 31, 2002 to partially fund our purchase of the public shares of FBA.

         During  October  2000,  First  Preferred  Capital Trust II issued $57.5
million of 10.24% trust preferred securities.  Proceeds from this offering,  net
of underwriting fees and offering expenses,  were $55.1 million and were used to
reduce  borrowings  and  subsequently  to  partially  fund our  acquisitions  of
Commercial Bank of San Francisco in October 2000 and Millennium Bank in December
2000.  Distributions  payable  on these  trust  preferred  securities  were $5.9
million for the years ended December 31, 2002 and 2001, and $1.2 million for the
year ended December 31, 2000.  During  November 2001,  First  Preferred  Capital
Trust III issued $55.2  million of 9.00% trust  preferred  securities.  Proceeds
from this offering,  net of underwriting fees and offering expenses,  were $52.9
million and were used to reduce borrowings. Distributions payable on these trust
preferred securities were $5.0 million and $634,000 for the years ended December
31, 2002 and 2001,  respectively.  On April 10, 2002,  First Bank Capital  Trust
issued $25.0 million of variable rate cumulative trust preferred securities in a
private  placement.  Proceeds from this offering,  net of underwriting  fees and
offering  expenses,  were  $24.2  million  and were used to  reduce  borrowings.
Distributions  payable on these trust preferred securities were $1.1 million for
the year ended December 31, 2002. The  distributions  on all issues of our trust
preferred  securities  are  recorded  as  interest  expense in our  consolidated
financial statements appearing elsewhere in this report.

         Stockholders' equity averaged $478.6 million, $404.1 million and $321.9
million for the years ended December 31, 2002, 2001 and 2000,  respectively.  We
primarily  attribute the increase for 2002 to net income of $45.2 million and an
increase in accumulated other comprehensive  income of $26.2 million,  offset by
dividends  paid on our Class A and Class B preferred  stock.  The $26.2  million
increase in  accumulated  other  comprehensive  income  reflects  $17.3  million
associated with our derivative financial instruments as accounted for under SFAS
No. 133 and $8.9  million  associated  with the change in  unrealized  gains and
losses on  available-for-sale  investment securities as accounted for under SFAS
No. 115. The increase in 2001 is attributable to net income of $64.5 million and
an increase in accumulated other  comprehensive  income of $28.3 million,  which
reflects  $30.1 million  associated  with our derivative  financial  instruments
offset by a $1.9 million reduction in other comprehensive  income resulting form
the  change in  unrealized  gains and  losses on  available-for-sale  investment
securities.  The overall increase in stockholders' equity for 2001 also reflects
an increase of $3.8  million  associated  with capital  stock and certain  other
equity  transactions of FBA,  partially  offset by dividends paid on our Class A
and Class B preferred stock.
<PAGE>
<TABLE>
<CAPTION>

         The following  table sets forth,  on a  tax-equivalent  basis,  certain
information  relating to our average  balance  sheet,  and  reflects the average
yield earned on  interest-earning  assets, the average cost of  interest-bearing
liabilities and the resulting net interest income for the periods indicated.

                                                                         Years Ended December 31,
                                        -------------------------------------------------------------------------------------
                                                    2002                            2001                        2000
                                        -----------------------------   --------------------------  -------------------------
                                                    Interest                        Interest                    Interest
                                         Average    Income/  Yield/      Average    Income/  Yield/   Average   Income/ Yield/
                                         Balance    Expense   Rate       Balance    Expense   Rate    Balance   Expense  Rate
                                         -------    -------   ----       -------    -------   ----    -------   -------  ----
                                                                  (dollars expressed in thousands)

                   ASSETS
                   ------

Interest-earning assets:
    Loans: (1) (2) (3)
<S>                                    <C>          <C>        <C>     <C>         <C>        <C>   <C>         <C>      <C>
       Taxable........................ $5,408,018   389,090    7.19%   $4,876,615  411,663    8.44% $4,281,290  389,687  9.10%
       Tax-exempt (4).................     16,490     1,495    9.07         7,684      754    9.81       9,668      992 10.26
    Investment securities:
       Taxable........................    765,734    31,034    4.05       433,454   26,244    6.05     412,932   27,331  6.62
       Tax-exempt (4).................     48,078     2,869    5.97        17,910    1,366    7.63      18,996    1,478  7.78
    Federal funds sold and other......    123,285     1,949    1.58        93,561    5,458    5.83      67,498    4,202  6.23
                                       ----------   -------            ----------  -------          ----------  -------
         Total interest-
           earning assets.............  6,361,605   426,437    6.70     5,429,224  445,485    8.21   4,790,384  423,690  8.84
                                                    -------                        -------                      -------

Nonearning assets.....................    687,752                         562,918                      359,196
                                       ----------                      ----------                   ----------
         Total assets................. $7,049,357                      $5,992,142                   $5,149,580
                                       ==========                      ==========                   ==========

               LIABILITIES AND
            STOCKHOLDERS' EQUITY
            --------------------

Interest-bearing liabilities:
    Interest-bearing deposits:
       Interest-bearing
         demand deposits.............. $  755,879     7,551    1.00%   $  507,011    7,019    1.38% $  421,986    5,909  1.40%
       Savings deposits...............  1,991,510    35,668    1.79     1,548,441   50,388    3.25   1,279,378   51,656  4.04
       Time deposits (3)..............  2,295,431    85,049    3.71     2,278,263  125,131    5.49   2,139,305  120,257  5.62
                                       ----------   -------            ----------  -------          ----------  -------
         Total interest-
           bearing deposits...........  5,042,820   128,268    2.54     4,333,715  182,538    4.21   3,840,669  177,822  4.63
    Short-term borrowings.............    194,077     3,450    1.78       158,047    5,847    3.70     106,123    5,881  5.54
    Note payable......................     17,947     1,032    5.75        41,590    2,629    6.32      51,897    3,976  7.66
    Guaranteed preferred
       debentures (3).................    257,366    23,990    9.32       189,440   18,590    9.81     138,605   13,173  9.50
                                       ----------   -------            ----------  -------          ----------  -------

         Total interest-bearing
           liabilities................  5,512,210   156,740    2.84     4,722,792  209,604    4.44   4,137,294  200,852  4.85
                                                    -------                        -------                      -------
Noninterest-bearing liabilities:
    Demand deposits...................    912,915                         754,763                      634,886
    Other liabilities.................    145,640                         110,480                       55,473
                                        ---------                      ----------                   ----------
         Total liabilities............  6,570,765                       5,588,035                    4,827,653
Stockholders' equity..................    478,592                         404,107                      321,927
                                       ----------                      ----------                   ----------
         Total liabilities and
           stockholders' equity....... $7,049,357                      $5,992,142                   $5,149,580
                                       ==========                      ==========                   ==========
Net interest income...................              269,697                        235,881                      222,838
                                                    =======                        =======                      =======
Interest rate spread..................                         3.86                           3.77                       3.99
Net interest margin (5)...............                         4.24%                          4.34%                      4.65%
                                                              =====                          =====                      =====
     ------------------------
(1)   For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2)   Interest income on loans includes loan fees.
(3)   Interest income and interest expense includes the effects of interest rate swap agreements.
(4)   Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The tax-equivalent adjustments were
      approximately $1.5 million, $742,000 and $864,000 for the years ended December 31, 2002, 2001 and 2000, respectively.
(5)   Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-earning
      assets.
</TABLE>



<PAGE>
<TABLE>
<CAPTION>
         The following table indicates,  on a tax-equivalent  basis, the changes
in interest income and interest  expense,  which are  attributable to changes in
average  volume,  and changes in average rates, in comparison with the preceding
year. The change in interest due to the combined  rate/volume  variance has been
allocated to rate and volume  changes in proportion to the dollar amounts of the
change in each.

                                                         Increase (Decrease) Attributable to Change in:
                                                ------------------------------------------------------------------
                                                December 31, 2002 Compared           December 31, 2001 Compared
                                                   to December 31, 2001                 to December 31, 2000
                                                ----------------------------       -------------------------------
                                                                          Net                                Net
                                               Volume        Rate       Change     Volume       Rate       Change
                                               ------        ----       ------     ------       ----       ------
                                                                 (dollars expressed in thousands)

Interest earned on:
    Loans: (1) (2) (3)
<S>                                          <C>          <C>         <C>         <C>        <C>          <C>
       Taxable.............................  $ 42,110     (64,683)    (22,573)    51,584     (29,608)     21,976
       Tax-exempt (4)......................       802         (61)        741       (196)        (42)       (238)
    Investment securities:
       Taxable.............................    15,461     (10,671)      4,790      1,325      (2,412)     (1,087)
       Tax-exempt (4)......................     1,858        (355)      1,503        (84)        (28)       (112)
    Federal funds sold and other...........     1,349      (4,858)     (3,509)     1,540        (284)      1,256
                                             --------     -------     -------    -------     -------     -------
           Total interest income...........    61,580     (80,628)    (19,048)    54,169     (32,374)     21,795
                                             --------     -------     -------    -------     -------     -------
Interest paid on:
    Interest-bearing demand deposits.......     2,809      (2,277)        532      1,194         (84)      1,110
    Savings deposits.......................    11,866     (26,586)    (14,720)     9,818     (11,086)     (1,268)
    Time deposits (3) .....................       932     (41,014)    (40,082)     7,696      (2,822)      4,874
    Short-term borrowings..................     1,121      (3,518)     (2,397)     2,306      (2,340)        (34)
    Note payable...........................    (1,378)       (219)     (1,597)      (716)       (631)     (1,347)
    Guaranteed preferred debentures (3)....     6,369        (969)      5,400      4,974         443       5,417
                                             --------     -------     -------    -------     -------     -------
           Total interest expense..........    21,719     (74,583)    (52,864)    25,272     (16,520)      8,752
                                             --------     -------     -------    -------     -------     -------
           Net interest income.............  $ 39,861      (6,045)     33,816     28,897     (15,854)     13,043
                                             ========     =======     =======    =======     =======     =======
     ------------------------
(1) For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2) Interest income on loans includes loan fees.
(3) Interest income and interest expense includes the effect of interest rate swap agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%.
</TABLE>

Net Interest Income

         The primary source of our income is net interest  income,  which is the
difference  between the interest earned on our  interest-earning  assets and the
interest  paid  on  our  interest-bearing   liabilities.   Net  interest  income
(expressed on a tax-equivalent  basis) increased to $269.7 million,  or 4.24% of
average  interest-earning  assets,  for the year ended  December 31, 2002,  from
$235.9 million,  or 4.34% of  interest-earning  assets,  and $222.8 million,  or
4.65% of  interest-earning  assets,  for the years ended  December  31, 2001 and
2000, respectively. We credit the increased net interest income primarily to the
net  interest-earning  assets provided by our acquisitions  completed during the
fourth  quarter of 2001 and in January  2002 as well as earnings on our interest
rate swap agreements that we entered into in conjunction  with our interest rate
risk management program.  These agreements provided net interest income of $53.0
million  and $23.4  million  for the years  ended  December  31,  2002 and 2001,
respectively. The increase in net interest income, however, was partially offset
by reductions in prevailing  interest  rates,  generally  weaker loan demand and
overall economic  conditions,  resulting in the decline in our net interest rate
margin.  Guaranteed  preferred debentures expense was $24.0 million for the year
ended  December 31, 2002,  compared to $18.6  million and $13.2  million for the
comparable  periods in 2001 and 2000,  respectively.  The  increase  for 2002 is
primarily  attributable  to the issuance of trust  preferred  securities  by our
financing subsidiaries.  In 2001, First Preferred Capital Trust III issued $55.2
million of trust  preferred  securities  and in April 2002,  First Bank  Capital
Trust issued $25.0 million of trust preferred  securities.  The overall increase
also  reflects a change in estimate  reducing the period over which the deferred
issuance costs are being  amortized from maturity date to call date. This change
in  estimate  was deemed  necessary  as a result of the  significant  decline in
prevailing  interest rates  experienced  during 2001. Such decline increased the
likelihood that we would redeem certain of our trust preferred securities issues

<PAGE>

prior to maturity and obtain replacement  regulatory  capital,  probably through
the issuance of additional trust preferred securities  at a lower interest rate.
The increase was partially  offset by earnings of $4.5 million  associated  with
our  interest  rate  swap  agreements  entered  into in May and June  2002.  The
increase for 2001 is solely  attributable  to the  issuance of $57.5  million of
trust preferred  securities by First Preferred  Capital Trust II in October 2000
and the issuance of $55.2 million of trust preferred securities in November 2001
by First  Preferred  Capital  Trust III. We credit the  increased  net  interest
income for 2001  primarily to the net  interest-earning  assets  provided by our
acquisitions  completed during 2000 and 2001,  internal loan growth and earnings
on our  interest  rate swap  agreements.  The overall  increase in net  interest
income was  significantly  offset by  reductions in  prevailing  interest  rates
throughout 2001, resulting in the overall decline in our net interest margin.

         Average total loans, net of unearned  discount,  were $5.42 billion for
the year ended  December  31, 2002,  in  comparison  to $4.88  billion and $4.29
billion for the years ended December 31, 2001 and 2000, respectively.  The yield
on our loan portfolio,  however,  decreased to 7.20% for the year ended December
31, 2002, in  comparison to 8.44% for 2001 and 9.10% for 2000.  This was a major
contributor  to the declines in our net interest rate margin of ten basis points
for 2002 and 31 basis points for 2001.  We  attribute  the decline in yields and
our net interest rate margin  primarily to the decreases in prevailing  interest
rates.  During the period from  January 1, 2001 through  December 31, 2002,  the
Board of Governors of the Federal Reserve System  decreased the targeted federal
funds rate 12 times,  resulting  in 12  decreases  in the prime rate of interest
from 9.50% to 4.25%.  This is reflected not only in the rate of interest  earned
on loans  that are  indexed  to the prime  rate,  but also in other  assets  and
liabilities  which either have variable or adjustable rates, or which matured or
repriced during this period.  As discussed  above, the reduced level of interest
income earned on our loan portfolio as a result of declining  interest rates and
increased  competition  within our market areas was  partially  mitigated by the
earnings associated with our interest rate swap agreements.

         For the years ended  December 31, 2002,  2001 and 2000,  the  aggregate
weighted average rate paid on our interest-bearing  deposit portfolio was 2.54%,
4.21% and 4.63%, respectively.  We attribute the decline primarily to rates paid
on savings and time  deposits,  which have  continued to decline in  conjunction
with the interest rate reductions  previously  discussed.  The decrease in rates
paid is a result  of  generally  decreasing  interest  rates in 2002 and 2001 as
compared  to  generally  increasing  rates in  2000.  However,  the  competitive
pressures on deposits within our market areas precluded us from fully reflecting
the general interest rate decreases in our deposit pricing while still providing
an adequate funding source for loan growth.

         The aggregate  weighted  average rate on our note payable  decreased to
5.75% for the year ended  December 31, 2002,  from 6.32% and 7.66% for the years
ended  December  31, 2001 and 2000,  respectively.  The  overall  changes in the
weighted  average rates paid reflect changing market interest rates during these
periods.  Amounts  outstanding  under our $45.0 million revolving line of credit
with a group of unaffiliated  financial  institutions  bear interest at the lead
bank's  corporate  base rate or, at our option,  at the  Eurodollar  rate plus a
margin determined by the outstanding  balance and our  profitability.  Thus, our
revolving  credit line  represents  a  relatively  high-cost  funding  source as
increased  advances have the effect of increasing  the weighted  average rate of
non-deposit  liabilities.  The overall cost of this funding source, however, has
been significantly  mitigated by the reductions in the prime lending rate and in
the  outstanding  balance of our note  payable in 2002.  During  2001,  our note
payable was fully  repaid from the  proceeds of the trust  preferred  securities
issued by First Preferred Capital Trust III.  However,  on December 31, 2001, we
obtained a $27.5 million advance to fund our acquisition of Union and in January
and December  2002,  we utilized the note  payable to fund our  acquisitions  of
Plains  and the  public  shares of FBA,  respectively.  The  aggregate  weighted
average rate paid on our  short-term  borrowings  also declined to 1.78% for the
year ended  December 31, 2002, as compared to 3.70% and 5.54% for 2001 and 2000,
respectively, reflecting reductions in the current interest rate environment.

         The aggregate  weighted  average rate paid on our guaranteed  preferred
debentures  was 9.32%,  9.81% and 9.50% for the years ended  December  31, 2002,
2001 and 2000, respectively.  The decreased rate for 2002 primarily reflects the
earnings  impact  of  $4.5  million  associated  with  our  interest  rate  swap
agreements  entered into in May and June 2002. The decline was partially  offset
by the additional  expense of our trust preferred  securities issued in November
2001 and April 2002 as well as a change in  estimate  regarding  the period over
which the deferred  issuance costs  associated with these  obligations are being
amortized.  As  further  discussed  in  Note  12 to our  consolidated  financial
statements  appearing elsewhere in this report, this change in estimate resulted
in a  reduction  of net income in the amount of $2.8  million for the year ended
December  31,  2002,  as compared to what  results  would have been  without the
change. The increase for the year ended December 31, 2001 primarily reflects the
additional expense of our trust preferred securities issued in November 2001.
<PAGE>

Comparison of Results of Operations for 2002 and 2001

         Net Income.  Net income was $45.2  million for the year ended  December
31, 2002, compared to $64.5 million for 2001. Results for 2002 reflect increased
net interest income offset by higher operating expenses primarily resulting from
our  acquisitions  completed  in 2001 and 2002.  We also  experienced  increased
provisions  for loan losses,  indicative  of the current  economic  environment,
reflected in increased loan  charge-off,  past due and  nonperforming  trends as
further  discussed under  "--Provision for Loan Losses." The  implementation  of
SFAS No. 142 on January 1, 2002, resulted in the discontinuation of amortization
of certain intangibles  associated with the purchase of subsidiaries.  If we had
implemented SFAS No. 142 at the beginning of 2001, net income for the year ended
December  31,  2001  would  have  increased  $8.1  million.  In  addition,   the
implementation  of SFAS No. 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 $65.9 million for the year ended December 31, 2001. The accounting for
derivatives  under the  requirements  of SFAS No. 133 will  continue  to have an
impact on future  financial  results as further  discussed under  "--Noninterest
Income."

         The  overall  increase  in  operating  expenses  for 2002,  as  further
discussed   under   "--Noninterest   Expense,"  was  partially   offset  by  the
discontinuation  of  amortization  of certain  intangibles  associated  with the
purchase of subsidiaries in accordance with the  implementation of SFAS No. 142.
Amortization  of  intangibles  for the year  ended  December  31,  2002 was $2.0
million  compared to $8.2 million for 2001.  The higher  operating  expenses and
increased  provisions  for loan losses were  partially  offset by increased  net
interest income as further discussed under "--Net Interest Income."
<PAGE>

         Provision  for Loan  Losses.  The  provision  for loan losses was $55.5
million  and $23.5  million  for the years  ended  December  31,  2002 and 2001,
respectively.  The significant  increase in the provision for loan losses during
2002 reflects the higher level of problem loans and related loan charge-offs and
past due loans experienced  during the period. The increase in problem assets is
a result of the  economic  conditions  within our markets,  additional  problems
identified in acquired  loan  portfolios  and  continuing  deterioration  in the
portfolio  of  leases  to  the  airline  industry  as  further  discussed  under
"--Lending   Activities"  and  "Loans  and  Allowance  for  Loan  Losses."  Loan
charge-offs  were  $70.5  million  for the year  ended  December  31,  2002,  in
comparison  to  $31.5  million  for  2001.  Included  in this  were  charge-offs
aggregating $38.6 million on ten large credit relationships, representing nearly
55% of loan charge-offs in 2002.  Additionally,  nonperforming  assets increased
$11.2  million  to $82.8  million at  December  31,  2002 from $71.6  million at
December 31, 2001, further contributing to the need for increased provisions for
loan  losses  in 2002.  Our loan  policy  requires  all  loans to be placed on a
nonaccrual  status once principal or interest  payments become 90 days past due.
Our general procedures for monitoring these loans allow individual loan officers
to submit a written  request for approval to continue the accrual of interest on
loans  that  become 90 days past  due.  These  requests  must be  submitted  for
approval  consistent  with the authority  levels provided in our credit approval
policies,  and they are only granted if an expected near term future event, such
as a pending renewal or expected payoff,  exists at the time the loan becomes 90
days  past  due.  If the  expected  near  term  future  event  does not occur as
anticipated,  the loan is placed on  nonaccrual  status.  Management  considered
these trends in its overall assessment of the adequacy of the allowance for loan
losses.  In addition,  our  acquisition  of Plains in January 2002 provided $1.4
million in additional allowance for loan losses.

         Tables summarizing  nonperforming assets, past due loans and charge-off
and recovery  experience  are  presented  under  "--Loans and Allowance for Loan
Losses."
<TABLE>
<CAPTION>

         Noninterest   Income  and  Expense.   The  following  table  summarizes
noninterest income and noninterest expense for the years ended December 31, 2002
and 2001:
                                                                                December 31,        Increase (Decrease)
                                                                             ------------------     -------------------
                                                                              2002         2001        Amount       %
                                                                              ----         ----        ------       -
                                                                                   (dollars expressed in thousands)

     Noninterest income:
<S>                                                                         <C>           <C>         <C>        <C>
        Service charges on deposit accounts and customer service fees.....  $  30,978     22,865      8,113      35.48%
        Gain on mortgage loans sold and held for sale.....................     28,415     14,983     13,432      89.65
        Gain on sale of credit card portfolio, net of expenses............         --      1,853     (1,853)   (100.00)
        Net gain on sales of available-for-sale investment securities.....         90     18,722    (18,632)    (99.52)
        Bank-owned life insurance investment income.......................      5,928      4,415      1,513      34.27
        Net gain on derivative instruments................................      2,181     18,583    (16,402)    (88.26)
        Other.............................................................     21,863     17,188      4,675      27.20
                                                                            ---------   --------   --------
              Total noninterest income....................................  $  89,455     98,609     (9,154)     (9.28)
                                                                            =========   ========   ========   ========

     Noninterest expense:
        Salaries and employee benefits....................................  $ 111,513     93,452     18,061      19.33%
        Occupancy, net of rental income...................................     21,030     17,432      3,598      20.64
        Furniture and equipment...........................................     17,495     12,612      4,883      38.72
        Postage, printing and supplies....................................      5,556      4,869        687      14.11
        Information technology fees.......................................     32,135     26,981      5,154      19.10
        Legal, examination and professional fees..........................      9,284      6,988      2,296      32.86
        Amortization of intangibles associated with
           the purchase of subsidiaries...................................      2,012      8,248     (6,236)    (75.61)
        Communications....................................................      3,166      3,247        (81)     (2.49)
        Advertising and business development..............................      5,023      5,237       (214)     (4.09)
        Other.............................................................     25,542     32,605     (7,063)    (21.66)
                                                                            ---------   --------   --------
              Total noninterest expense...................................  $ 232,756    211,671     21,085       9.96
                                                                            =========   ========   ========   ========
</TABLE>
<PAGE>

         Noninterest  Income.  Noninterest income was $89.5 million for the year
ended December 31, 2002, compared to $98.6 million for 2001.  Noninterest income
consists  primarily of service charges on deposit  accounts and customer service
fees,  mortgage-banking  revenues,  bank-owned life insurance investment income,
net gains on derivative instruments and other income.

         Service charges on deposit accounts and customer service fees increased
to $31.0  million  for 2002,  from $22.9  million  for 2001.  We  attribute  the
increase in service charges and customer service fees to:

         >>    our acquisitions completed during 2001 and 2002;

         >>    additional  products and services  available  and utilized by our
               expanding base of retail and commercial customers;

         >>    increased fee income resulting from revisions of customer service
               charge rates effective July 1, 2002, and enhanced  control of fee
               waivers; and

         >>    increased   income   associated  with  automated  teller  machine
               services and debit cards.

         The gain on mortgage  loans sold and held for sale  increased  to $28.4
million  from $15.0  million  for the years  ended  December  31, 2002 and 2001,
respectively.  The increase is primarily  attributable to a significant increase
in the volume of loans originated and sold  commensurate  with the reductions in
mortgage  loan  rates  experienced  in 2001  and  2002 as well as the  continued
expansion of our mortgage banking activities.

         During  2001,  we  recorded  a $1.9  million  gain on the sale,  net of
expenses,  of our  credit  card  portfolio.  The  sale  of  this  portfolio  was
consistent with our strategic  decision to exit this product line and enter into
an agent relationship with a larger credit card service provider.

         Noninterest  income  for the years  ended  December  31,  2002 and 2001
includes net gains on the sale of  available-for-sale  investment  securities of
$90,000  and  $18.7  million,  respectively.  The net  gain  for  2002  resulted
primarily  from the sales of  certain  investment  securities  held by  acquired
institutions that did not meet our overall investment  objectives.  The net gain
in 2001 results from a $19.1  million gain  recognized in  conjunction  with the
exchange  of an  equity  investment  in  the  common  stock  of an  unaffiliated
publicly-traded  financial  institution  for $10.0  million  in cash and a $14.4
million equity investment in the acquiring  unaffiliated  financial institution.
We owned  7.47% and  7.93% of the  outstanding  shares  of  common  stock of the
unaffiliated financial institution at December 31, 2002 and 2001,  respectively.
This gain was partially  offset by a net loss that resulted from the liquidation
of certain equity investment securities.

         Bank-owned  life  insurance  income was $5.9 million for the year ended
December 31, 2002, in comparison  to $4.4 million for the  comparable  period in
2001.  The  increase  for 2002  reflects  changes  in the  portfolio  mix of the
underlying  investments,  which improved our return on this product,  as well as
the reinvestment of earnings.

         The net gain on  derivative  instruments  was $2.2 million for the year
ended December 31, 2002, in comparison to $18.6 million in 2001. The decrease in
income from derivative instruments reflects $4.1 million of gains resulting from
the  terminations of certain  interest rate swap agreements in 2001, the sale of
our interest rate floor agreements in 2001 and ongoing changes in the fair value
of our interest rate cap agreements and fair value hedges.

         Other  income was $21.9  million and $17.2  million for the years ended
December 31, 2002 and 2001, respectively. We attribute the primary components of
this increase to:

         >>    our acquisitions completed during 2001 and 2002;

         >>    increased portfolio  management fee income of $789,000 associated
               with our Institutional Money Management Division;

         >>    increased  earnings  associated  with our  international  banking
               products;

         >>    increased  rental income  associated with our commercial  leasing
               activities;

         >>    increased  rental fees from First  Services,  L.P. for the use of
               data processing and other equipment owned by First Banks; and

         >>    a gain of  approximately  $448,000  in March  2002 on the sale of
               certain  operating  lease  equipment  associated  with  equipment
               leasing  activities  that we  acquired  in  conjunction  with our
               acquisition of Bank of San Francisco in December 2000; offset by
<PAGE>

         >>    the write-down of approximately  $943,000 on certain aircraft and
               aircraft parts equipment  associated with our commercial  leasing
               operation to its estimable  recoverable  value in June 2002.  The
               write-down  of these assets  became  necessary as a result of the
               continued decline in the airline industry,  primarily  associated
               with  the  terrorist  attacks  on  September  11,  2001,  and the
               oversupply in the market for liquidating this type of equipment.

         Noninterest  Expense.  Noninterest  expense was $232.8  million for the
year ended  December 31, 2002,  in comparison  to $211.7  million for 2001.  The
increase for 2002 reflects the noninterest expense of our acquisitions completed
during 2001 and 2002,  particularly  information technology fees associated with
integrating  the acquired  entities'  systems,  as well as general  increases in
salaries and employee  benefit  expenses,  occupancy and furniture and equipment
expenses and information technology fees, offset by a decline in amortization of
intangibles associated with the purchase of subsidiaries and other expense.

         We  record  the  majority  of  integration  costs  attributable  to our
acquisitions as of the consummation date of our purchase business  combinations.
These costs include, but are not limited to, items such as:

         >>    write-downs  and  impairment  of assets of the acquired  entities
               that  will no longer be  usable  subsequent  to the  consummation
               date, primarily data processing equipment,  incompatible hardware
               and software,  bank signage, etc. These adjustments are generally
               recorded  as of the  consummation  date as an  allocation  of the
               purchase  price with the  offsetting  adjustment  recorded  as an
               increase to  goodwill.  In addition,  for all periods  presented,
               these adjustments are not material to our operations;

         >>    costs  associated  with a  planned  exit  of an  activity  of the
               acquired entity that is not associated with or is not expected to
               generate  revenues after the consummation  date (e.g. credit card
               lending).   These  costs  are   generally   recorded  as  of  the
               consummation   date  through  the  establishment  of  an  accrued
               liability with the offsetting  adjustment recorded as an increase
               to goodwill.  These costs are  infrequently  encountered and, for
               all periods presented, are not material to our operations.;

         >>    planned involuntary employee termination benefits (i.e. severance
               costs) as further discussed under  "-Acquisitions-Acquisition and
               Integration Costs'; and

         >>    contractual  obligations  of the acquired  entities  that existed
               prior to the  consummation  date  that  either  have no  economic
               benefit  to the  combined  entity or have a penalty  that we will
               incur to cancel the  contractual  obligation.  These  contractual
               obligations   generally   relate  to  existing  data   processing
               contracts of the acquired  entities  that include  penalties  for
               early termination. In conjunction with the merger and integration
               of our  acquisitions,  the acquired entities are converted to our
               existing data  processing  and  information  technology  systems.
               Consequently,  the costs associated with terminating the existing
               contracts of the acquired  entities are generally  recorded as of
               the  consummation  date through the  establishment  of an accrued
               liability with the offsetting  adjustment recorded as an increase
               to goodwill as further discussed under "-Acquisitions-Acquisition
               and Integration Costs."

         We make adjustments to the fair value of the acquired  entities' assets
and liabilities for these items as of the consummation  date and include them in
the allocation of the overall  acquisition  cost. We also incur costs associated
with our acquisitions that are expensed in our statements of income. These costs
relate  specifically to additional  costs incurred in conjunction  with the data
processing  conversions  of the  acquired  entities  as  further  described  and
quantified below.

         Salaries and  employee  benefits  increased by $18.0  million to $111.5
million  from $93.5  million  for the years  ended  December  31, 2002 and 2001,
respectively.  We  primarily  associate  the  increase  with  our  2001 and 2002
acquisitions and higher commissions paid to our mortgage loan originators due to
increased  loan volume.  However,  the increase also reflects  higher salary and
employee  benefit  costs  associated  with  employing  and  retaining  qualified
personnel.  In  addition,  the  increase  includes  various  additions  to staff
throughout  2001 to enhance senior  management  expertise and expand our product
lines.
<PAGE>

         Occupancy,  net of rental income,  and furniture and equipment  expense
totaled $38.5  million and $30.0  million for the years ended  December 31, 2002
and  2001,   respectively.   We   primarily   attribute   the  increase  to  our
aforementioned  acquisitions,  including certain expenses  associated with lease
termination  obligations,  the  relocation of certain  branches and  operational
areas,   increased   depreciation   expense  associated  with  numerous  capital
expenditures and the continued expansion and renovation of various corporate and
branch offices,  including our facility that houses our  centralized  operations
and certain corporate and administrative functions.

         Information  technology  fees were $32.1  million and $27.0 million for
the years ended December 31, 2002 and 2001, respectively.  First Services, L.P.,
a limited  partnership  indirectly  owned by our  Chairman  and  members  of his
immediate  family,  provides  information  technology  and  various  operational
support  services  to our  subsidiaries  and us under the  terms of  information
technology   agreements.   We  attribute  the  increased   fees  to  growth  and
technological  advancements  consistent with our product and service  offerings,
continued  expansion  and  upgrades to  technological  equipment,  networks  and
communication  channels,  and expenses of approximately $554,000 associated with
the data  processing  conversions  of Union and Plains,  completed  in the first
quarter  of  2002,  and of the  Denton  and  Garland,  Texas  branch  purchases,
completed in the second quarter of 2002.

         Legal,  examination  and  professional  fees were $9.3 million and $7.0
million  for the  years  ended  December  31,  2002 and 2001,  respectively.  We
primarily  attribute  the increase in these fees to the  continued  expansion of
overall  corporate  activities,  the ongoing  professional  services utilized by
certain of our  acquired  entities  and  increased  legal fees  associated  with
commercial loan documentation, collection efforts, expanded corporate activities
and certain defense litigation particularly related to acquired entities.

         Amortization   of   intangibles   associated   with  the   purchase  of
subsidiaries  was $2.0 million and $8.2 million for the years ended December 31,
2002 and 2001,  respectively.  The significant decrease for 2002 is attributable
to the implementation of SFAS No. 142 in January 2002.
<PAGE>

         Other  expense was $24.5  million and $32.6 million for the years ended
December 31, 2002 and 2001,  respectively.  Other expense  encompasses  numerous
general and administrative  expenses including travel,  meals and entertainment,
insurance, freight and courier services, correspondent bank charges, advertising
and business development,  miscellaneous losses and recoveries,  memberships and
subscriptions, transfer agent fees and sales taxes.

         We attribute  the majority of the decrease in other expense for 2002 to
an $11.5 million  nonrecurring  litigation  settlement charge in June 2001. This
litigation was initiated by an unaffiliated bank against one of our subsidiaries
and certain  individuals and related to allegations  arising from the employment
by our subsidiary of individuals  previously  employed by the plaintiff bank, as
well as the conduct of those  individuals  while employed by the plaintiff bank.
The  nature of the  litigation  was not  covered  under the terms of either  our
general  liability  or  directors  and officers  liability  insurance  policies.
Consequently,  when it became  apparent that the trial was not  proceeding as we
anticipated,  a decision was made to settle the matter to avoid the risk of more
substantial expenses. Because of the uninsured nature of this litigation and the
unique circumstances  leading to the litigation,  we do not consider this charge
to be a recurring expense.

         The decrease in other  expense also  reflects  the  establishment  of a
specific  reserve for an unfunded letter of credit in the amount of $1.8 million
during 2001. The letter of credit was issued in connection  with a participation
in a credit for the  development of a nuclear waste  remediation  facility.  The
aggregate  credit   arrangement   included  a  line  of  credit,   in  which  we
participated,  and the sale of bonds to various investors,  which were backed by
the letters of credit,  in which we also  participated.  Because the development
failed  to meet  remediation  performance  expectations,  and  consequently  the
economic viability required,  the bondholders  required payment from the issuers
of the letters of credit.  Upon funding the letter of credit, the balance became
an addition to the loan principal, which was then fully charged-off.

         The overall  decrease in other expenses for 2002 was offset by expenses
associated with our  acquisitions  completed during 2001 and 2002 as well as the
continued growth and expansion of our banking franchise.

         Provision  for Income  Taxes.  The provision for income taxes was $22.8
million for the year ended December 31, 2002,  representing an effective  income
tax rate of 32.8%,  in comparison to $30.0  million,  representing  an effective
income tax rate of 30.5%,  for the year ended December 31, 2001. The increase in
the effective income tax rate is primarily attributable to:

         >>    a reduction  of our  deferred  tax asset  valuation  allowance of
               $13.1 million recorded in December 2001. This reduction, of which
               $8.1 million  represented a reduction in our provision for income
               taxes  and  $5.0  million  represented  an  increase  in  capital
               surplus,  reflects the recognition of deferred tax assets for net
               operating  loss  carryforwards  and  the  expectation  of  future
               taxable income sufficient to realize the net deferred tax assets;
               partially offset by

         >>    the   significant   decrease  in   amortization   of  intangibles
               associated  with the purchase of  subsidiaries in accordance with
               the requirements of SFAS No. 142, which is not deductible for tax
               purposes.

Comparison of Results of Operations for 2001 and 2000

         Net Income.  Net income was $64.5  million for the year ended  December
31, 2001, compared to $56.1 million for 2000. The implementation of SFAS No. 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.
Excluding  this item,  net income was $65.9 million for the year ended  December
31, 2001.  The improved  earnings  primarily  result from increased net interest
income and  noninterest  income,  including a gain on the  exchange of an equity
investment in an unaffiliated  financial institution in October 2001, as well as
a reduced  provision  for income taxes.  The reduced  provision for income taxes
includes  the effect of an $8.1  million  reduction  in our  deferred  tax asset
valuation  allowance  that was no longer  deemed  necessary  as our  overall net
deferred tax assets are expected to be recoverable through future earnings.  The
overall  improvement in earnings was partially offset by an increased  provision
for loan losses and higher operating expenses,  including  nonrecurring  charges
associated with the  establishment of a specific reserve related to a contingent
liability and the settlement of certain litigation.
<PAGE>

         Net interest income  (expressed on a tax-equivalent  basis) improved to
$235.9 million for the year ended December 31, 2001,  compared to $222.8 million
for 2000.  However,  our net interest rate margin declined to 4.34% for the year
ended  December  31, 2001 from 4.65% for 2000.  Net  interest  income  increased
primarily as a result of increased  earning assets  generated  through  internal
loan growth  along with our  acquisitions  completed  throughout  2000 and 2001.
However,  the improvement in net interest income was significantly  mitigated by
continued reductions in prevailing interest rates throughout 2001. We funded the
overall loan growth primarily  through  deposits added through  acquisitions and
internal  deposit growth.  During the year ended December 31, 2001,  noninterest
income improved  significantly to $98.6 million from $42.8 million for the years
ended  December  31, 2001 and 2000,  respectively,  as further  discussed  under
"--Noninterest Income."

         The  improvement  in net  interest  income and  noninterest  income was
partially  offset by a $53.7  million  increase in operating  expenses to $211.7
million for the year ended  December  31, 2001,  compared to $158.0  million for
2000. The increased operating expenses are primarily attributable to:

         >>    the  operating   expenses  of  our  2000  and  2001  acquisitions
               subsequent to their respective acquisition dates;

         >>    increased salaries and employee benefit expenses;

         >>    increased information technology fees;

         >>    increased legal, examination and professional fees;

         >>    increased   amortization  of  intangibles   associated  with  the
               purchase of subsidiaries;

         >>    a nonrecurring litigation settlement charge; and

         >>    a charge to other expense  associated with the establishment of a
               specific reserve on an unfunded letter of credit.

         These higher operating expenses, exclusive of the litigation settlement
and the specific  reserve on the unfunded  letter of credit,  are  reflective of
significant  investments  that we have made in  personnel,  technology,  capital
expenditures  and new business lines in conjunction  with our overall  strategic
growth plan. The payback on these investments is expected to occur over a longer
period of time through higher and more diversified revenue streams.

         Provision  for Loan  Losses.  The  provision  for loan losses was $23.5
million  and $14.1  million  for the years  ended  December  31,  2001 and 2000,
respectively.  We  attribute  the  increase  in the  provision  for loan  losses
primarily to the overall growth in our loan portfolio, both internal and through
acquisitions,  a general increase in risk associated with the continued changing
composition  of our loan portfolio and a significant  increase in  nonperforming
assets  and past due  loans,  which is  further  discussed  under  "--Loans  and
Allowance  for Loan Losses."  Loan  charge-offs  were $31.5 million for the year
ended  December  31, 2001,  in  comparison  to $17.1  million for the year ended
December 31, 2000.  The increase in loan  charge-offs  is due to $6.7 million in
charge-offs  related to our commercial  leasing  business,  a single loan in the
amount of $4.5 million that was  charged-off  due to suspected fraud on the part
of the  borrower,  $3.6  million  in  charge-offs  on a shared  national  credit
relationship  as  well  as the  effects  of the  general  slowdown  in  economic
conditions  prevalent within our markets.  Loan recoveries were $9.5 million for
the year ended  December  31,  2001,  in  comparison  to $9.8  million for 2000.
Nonperforming  assets and past due loans  have  increased  significantly  during
2001,  and  we  anticipate  these  trends  will  continue  in the  near  future.
Management  considered these trends in its overall assessment of the adequacy of
the allowance for loan losses.  Our  acquisitions  during 2000 and 2001 provided
$6.1 million and $14.0 million,  respectively,  in additional allowance for loan
losses at their respective acquisition dates.
<PAGE>

<TABLE>
<CAPTION>

         Noninterest   Income  and  Expense.   The  following  table  summarizes
noninterest income and noninterest expense for the years ended December 31, 2001
and 2000:

                                                                                December 31,         Increase (Decrease)
                                                                             --------------------   --------------------
                                                                              2001         2000        Amount       %
                                                                              ----         ----        ------       -
                                                                                   (dollars expressed in thousands)

     Noninterest income:
<S>                                                                         <C>           <C>         <C>        <C>
        Service charges on deposit accounts and customer service fees.....  $  22,865     19,794      3,071      15.51%
        Gain on mortgage loans sold and held for sale.....................     14,983      7,806      7,177      91.94
        Gain on sale of credit card portfolio, net of expenses............      1,853         --      1,853     100.00
        Net gain on sales of available-for-sale investment securities.....     18,722        168     18,554        --
        Gain on sales of branches, net of expenses........................         --      1,355     (1,355)   (100.00)
        Bank-owned life insurance investment income.......................      4,415      4,314        101       2.34
        Gain on derivative instruments, net...............................     18,583         --     18,583     100.00
        Other.............................................................     17,188      9,341      7,847      84.01
                                                                            ---------    -------    -------
              Total noninterest income....................................  $  98,609     42,778     55,831     130.51
                                                                            =========    =======    =======    =======

     Noninterest expense:
        Salaries and employee benefits....................................  $  93,452     73,391     20,061      27.33%
        Occupancy, net of rental income...................................     17,432     14,675      2,757      18.79
        Furniture and equipment...........................................     12,612     11,702        910       7.78
        Postage, printing and supplies....................................      4,869      4,431        438       9.88
        Information technology fees.......................................     26,981     22,359      4,622      20.67
        Legal, examination and professional fees..........................      6,988      4,523      2,465      54.50
        Amortization of intangibles associated
           with the purchase of subsidiaries..............................      8,248      5,297      2,951      55.71
        Communications....................................................      3,247      2,625        622      23.70
        Advertising and business development..............................      5,237      4,331        906      20.92
        Other.............................................................     32,605     14,656     17,949     122.47
                                                                            ---------    -------    -------
              Total noninterest expense...................................  $ 211,671    157,990     53,681      33.98
                                                                            =========    =======    =======    =======
</TABLE>

         Noninterest  Income.  Noninterest income was $98.6 million for the year
ended December 31, 2001, compared to $42.8 million for 2000.  Noninterest income
consists  primarily of service charges on deposit  accounts and customer service
fees,  mortgage-banking  revenues,  net  gains on  sales  of  available-for-sale
investment securities, net gains on derivative instruments and other income.

         Service charges on deposit accounts and customer service fees increased
to $22.9  million  for 2001,  from $19.8  million  for 2000.  We  attribute  the
increase in service charges and customer service fees to:

         >>    increased deposit balances provided by internal growth;

         >>    our  acquisitions  completed during 2000 and, to a lesser degree,
               2001;

         >>    additional  products and services  available  and utilized by our
               expanding base of retail and commercial customers;

         >>    increased fee income resulting from revisions of customer service
               charge rates effective  September 30, 2000, and July 1, 2001, and
               enhanced control of fee waivers; and

         >>    increased   income   associated  with  automated  teller  machine
               services and debit cards.

         The gain on mortgage  loans sold and held for sale  increased  to $15.0
million  from $7.8  million  for the years  ended  December  31,  2001 and 2000,
respectively.  We attribute the increase to a significant increase in the volume
of loans  originated  and sold  commensurate  with the  continued  reductions in
mortgage loan rates experienced  during 2001 as well as the continued  expansion
of our mortgage banking activities into new and existing markets.

         During 2001,  we recorded a $1.9 million gain on the sale of our credit
card portfolio,  which results from our strategic  decision to exit this product
line and enter into an agent  relationship  with a larger  credit  card  service
provider.
<PAGE>

         Noninterest  income  for the years  ended  December  31,  2001 and 2000
included net gains on the sale of  available-for-sale  investment  securities of
$18.7  million and  $168,000,  respectively.  The  significant  increase in 2001
results from a $19.1 million gain recognized in conjunction with the exchange of
an equity  investment  in the common  stock of an  unaffiliated  publicly-traded
financial  institution  for $10.0  million  in cash and a $14.4  million  equity
investment  in the acquiring  unaffiliated  financial  institution.  In 1993, we
acquired  an equity  investment  in the  common  stock of  Southside  Bancshares
Corporation, or Southside,  located in St. Louis, Missouri, and we increased our
investment through  additional  purchases of common stock over time. At December
31,  2000,  we owned 18.87% of  Southside.  In 2001,  Southside  was acquired by
Allegiant  Bancorp,  Inc., or Allegiant,  located in St. Louis,  Missouri.  Upon
consummation  of that business  combination,  we exchanged our Southside  common
stock for $10.0  million in cash and a $14.4  million  equity  investment in the
common stock of  Allegiant.  The $19.1 million gain recorded as a result of this
transaction was measured as the difference  between the sum of the fair value of
the equity  investment in Allegiant's  common stock on the  transaction  closing
date  and the  cash  received,  and our  cumulative  cost  basis  in the  equity
investment  in  Southside.  We owned 7.93% of the  outstanding  shares of common
stock of Allegiant at December 31, 2001. This gain was partially offset by a net
loss that resulted from the liquidation of certain equity investment securities.
The net gain for 2000 resulted  primarily  from the sales of certain  investment
securities  held  by  acquired  institutions  that  did  not  meet  our  overall
investment objectives.

         The gain on sales of branches,  net of  expenses,  was $1.4 million for
the year ended December 31, 2000, and results from the divestiture of one of our
branch  locations  in central  Illinois.  In 2001,  we did not sell any existing
branches.

         The net gain on  derivative  instruments  of $18.6 million for the year
ended  December  31, 2001  includes  $4.1  million of gains  resulting  from the
terminations  of certain  interest rate floor and swap  agreements to adjust our
interest rate hedge position  consistent with changes in the portfolio structure
and mix. In  addition,  the net gain  reflects  changes in the fair value of our
interest  rate cap  agreements,  interest rate floor  agreements  and fair value
hedges, in accordance with the requirements of SFAS No. 133.

         Other  income was $17.2  million  and $9.3  million for the years ended
December 31, 2001 and 2000, respectively. We attribute the primary components of
this increase to:

         >>    our  acquisitions  completed during 2000 and, to a lesser extent,
               2001;

         >>    increased  portfolio   management  fee  income  of  $3.4  million
               associated  with our  Institutional  Money  Management  Division,
               which was formed in August 2000;

         >>    increased  brokerage revenue of $1.1 million,  which is primarily
               associated with the stock option services acquired in conjunction
               with our acquisition of Bank of San Francisco in December 2000;

         >>    increased  rental  income  of $2.1  million  associated  with our
               commercial  leasing  activities that were acquired in conjunction
               with our acquisition of a leasing company in February 2000; and

         >>    income of  approximately  $1.1 million  associated with equipment
               leasing  activities  that were acquired in  conjunction  with our
               acquisition of Bank of San Francisco.

         Noninterest  Expense.  Noninterest  expense was $211.7  million for the
year ended  December 31, 2001,  in comparison  to $158.0  million for 2000.  The
increase reflects:

         >>    the  noninterest   expense   associated  with  our   acquisitions
               completed   during  2000  and  2001,   particularly   information
               technology fees;

         >>    increased salaries and employee benefit expenses;

         >>    increased information technology fees;

         >>    increased legal, examination and professional fees;

         >>    increased   amortization  of  intangibles   associated  with  the
               purchase of subsidiaries; and

         >>    increased other expense.
<PAGE>

         Salaries and  employee  benefits  increased  by $20.1  million to $93.5
million  from $73.4  million  for the years  ended  December  31, 2001 and 2000,
respectively.  We  primarily  associate  the  increase  with  our  2000 and 2001
acquisitions and our Institutional Money Management  Division,  which was formed
in August 2000. However, the increase also reflects the competitive  environment
in the  employment  market  that has  resulted  in a higher  demand for  limited
resources, thus escalating industry salary and employee benefit costs associated
with  employing and retaining  qualified  personnel.  In addition,  the increase
includes  various  additions to staff  throughout 2000 to enhance  executive and
senior  management   expertise,   improve  technological   support,   strengthen
centralized operational functions and expand our product lines.

         Occupancy,  net of rental income,  and furniture and equipment  expense
totaled $30.0  million and $26.4  million for the years ended  December 31, 2001
and 2000,  respectively.  The increase is attributable to our acquisitions,  the
relocation of certain branches and operational areas and increased  depreciation
expense  associated  with  numerous  capital  expenditures,  including  our  new
facility that houses various  centralized  operations and certain  corporate and
administrative functions.

         Information  technology  fees were $27.0  million and $22.4 million for
the years ended  December  31, 2001 and 2000,  respectively.  We  attribute  the
increased information  technology fees to growth and technological  advancements
consistent  with our product  and service  offerings,  continued  expansion  and
upgrades to technological  equipment,  networks and communication  channels, and
expenses of  approximately  $1.8  million  associated  with the data  processing
conversions of Century Bank, Lippo Bank, Commercial Bank of San Francisco,  Bank
of San Francisco,  Millennium  Bank,  Charter  Pacific Bank and BYL completed in
2001.

         Legal,  examination  and  professional  fees were $7.0 million and $4.5
million  for the  years  ended  December  31,  2001 and 2000,  respectively.  We
primarily  attribute  the  increase  in these fees to the  ongoing  professional
services utilized by certain of our acquired  entities,  increased  professional
fees associated with our Institutional  Money Management  Division and increased
legal fees associated with commercial loan  documentation,  collection  efforts,
expanded corporate activities and certain defense litigation.
<PAGE>

         Amortization   of   intangibles   associated   with  the   purchase  of
subsidiaries  was $8.2 million and $5.3 million for the years ended December 31,
2001 and 2000, respectively.  The increase for 2001 is primarily attributable to
amortization  of the cost in excess of the fair value of the net assets acquired
for the nine acquisitions that we completed during 2000.

         Other  expense was $32.6  million and $14.7 million for the years ended
December 31, 2001 and 2000,  respectively.  Other expense  encompasses  numerous
general and administrative  expenses including travel,  meals and entertainment,
insurance, freight and courier services, correspondent bank charges, advertising
and business development,  miscellaneous losses and recoveries,  memberships and
subscriptions, transfer agent fees and sales taxes. We attribute the majority of
the increase in other expense to:

         >>    our acquisitions completed during 2000 and 2001;

         >>    increased   advertising   and   business   development   expenses
               associated  with  various  product  and service  initiatives  and
               enhancements;

         >>    increased  travel  expenses  primarily  associated  with business
               development  efforts and the ongoing  integration of the recently
               acquired entities into our corporate culture and systems;

         >>    a  nonrecurring  litigation  settlement  charge in the  amount of
               $11.5   million   associated   with  a  lawsuit   brought  by  an
               unaffiliated  bank  against one of our  subsidiaries  and certain
               individuals related to allegations arising from the employment by
               our  subsidiary  of  individuals   previously   employed  by  the
               plaintiff bank, as well as the conduct of those individuals while
               employed by the plaintiff bank;

         >>    the  establishment  of a  $1.8  million  specific  reserve  on an
               unfunded letter of credit; and

         >>    overall continued growth and expansion of our banking franchise.

         Provision  for Income  Taxes.  The provision for income taxes was $30.0
million for the year ended December 31, 2001,  representing an effective  income
tax rate of 30.5%,  in comparison to $34.5  million,  representing  an effective
income tax rate of 37.2%,  for the year ended December 31, 2000. The decrease in
the effective income tax rate is primarily attributable to:

         >>    a reduction  of our  deferred  tax asset  valuation  allowance of
               $13.1 million recorded in December 2001. This reduction, of which
               $8.1 million  represented a reduction in our provision for income
               taxes  and  $5.0  million  represented  an  increase  in  capital
               surplus,  reflects the recognition of deferred tax assets for net
               operating  loss  carryforwards  and  the  expectation  of  future
               taxable income sufficient to realize the net deferred tax assets;
               partially offset by

         >>    the increase in amortization  of intangibles  associated with the
               purchase  of  subsidiaries,  which  is  not  deductible  for  tax
               purposes.
<PAGE>

Interest Rate Risk Management

         For financial institutions,  the maintenance of a satisfactory level of
net interest income is a primary factor in achieving  acceptable  income levels.
However,  the maturity and repricing  characteristics  of the institution's loan
and investment portfolios may differ significantly from those within its deposit
structure.  The nature of the loan and deposit  markets within which a financial
institution  operates,  and its objectives for business development within those
markets at any point in time, influence these characteristics.  In addition, the
ability of borrowers to repay loans and  depositors  to withdraw  funds prior to
stated maturity dates introduces  divergent option  characteristics that operate
primarily as interest rates change.  These factors cause various elements of the
institution's balance sheet to react in different manners and at different times
relative to changes in interest rates, thereby leading to increases or decreases
in net interest  income over time.  Depending upon the direction and velocity of
interest  rate  movements  and their  effect on the specific  components  of the
institution's  balance  sheet,  the  effects  on  net  interest  income  can  be
substantial.   Consequently,   managing   a   financial   institution   requires
establishing  effective  control over the exposure of the institution to changes
in interest rates.

         We strive to manage our interest rate risk by:

         >>    maintaining an Asset Liability Committee, or ALCO, responsible to
               our Board of Directors,  to review the overall interest rate risk
               management activity and approve actions taken to reduce risk;

         >>    maintaining  an  effective  simulation  model  to  determine  our
               exposure to changes in interest rates;

         >>    coordinating  the  lending,   investing  and   deposit-generating
               functions to control the assumption of interest rate risk; and

         >>    employing various financial  instruments,  including derivatives,
               to offset inherent interest rate risk when it becomes excessive.

         The objective of these  procedures is to limit the adverse  impact that
changes in interest rates may have on our net interest income.

         The ALCO has overall  responsibility  for the  effective  management of
interest rate risk and the approval of policy guidelines.  The ALCO includes our
Chairman and Chief Executive  Officer,  President and Chief  Financial  Officer,
Chief  Operating  Officer  and the senior  executives  of  investments,  credit,
finance, and certain other officers. The Asset Liability Management Group, which
monitors interest rate risk,  supports the ALCO, prepares analyses for review by
the ALCO and  implements  actions that are either  specifically  directed by the
ALCO or established by policy guidelines.

         In  managing  sensitivity,  we strive to reduce the  adverse  impact on
earnings by managing interest rate risk within internal policy constraints.  Our
policy is to  manage  exposure  to  potential  risks  associated  with  changing
interest  rates by  maintaining  a balance  sheet  posture  in which  annual net
interest income is not significantly  impacted by reasonably  possible near-term
changes in interest  rates.  To measure the effect of interest rate changes,  we
project our net income over two  one-year  horizons  on a pro forma  basis.  The
analysis assumes various scenarios for increases and decreases in interest rates
including both instantaneous and gradual,  and parallel and non-parallel  shifts
in the yield curve, in varying  amounts.  For purposes of arriving at reasonably
possible  near-term  changes in interest  rates,  we include  scenarios based on
actual changes in interest  rates,  which have occurred over a two-year  period,
simulating  both  a  declining  and  rising  interest  rate  scenario.   We  are
"asset-sensitive,"  indicating  that our assets  would  generally  reprice  with
changes in rates more rapidly than our  liabilities,  and our  simulation  model
indicates a loss of projected net interest income should interest rates decline.
While a decline in interest rates of less than 100 basis points has a relatively
minimal impact on our net interest income, an instantaneous  parallel decline in
the interest yield curve of 100 basis points indicates a pre-tax  projected loss
of approximately 7.3% of net interest income, based on assets and liabilities at
December 31, 2002.  Although we do not anticipate that  instantaneous  shifts in
the yield curve as  projected  in our  simulation  model are  likely,  these are
indications of the effects that changes in interest rates would have over time.


<PAGE>


         We also prepare and review a more traditional interest rate sensitivity
position in conjunction with the results of our simulation  model. The following
table  presents the  projected  maturities  and periods to repricing of our rate
sensitive  assets and  liabilities as of December 31, 2002,  adjusted to account
for anticipated prepayments:
<TABLE>
<CAPTION>

                                                                   Over       Over
                                                                   three       six        Over
                                                        Three     through    through       one       Over
                                                       months       six      twelve      through     five
                                                       or less    months     months    five years    years      Total
                                                       -------    ------     ------    ----------    -----      -----
                                                                    (dollars expressed in thousands)

Interest-earning assets:
<S>                                                 <C>           <C>        <C>        <C>          <C>    <C>
   Loans (1)......................................  $4,166,669    503,365    448,380    311,668      2,506  5,432,588
   Investment securities..........................     438,563    135,762    140,917    396,173     25,905  1,137,320
   Federal funds sold and other...................       8,732         --         --         --         --      8,732
                                                    ----------  ---------  ---------  ---------  ---------  ---------
       Total interest-earning assets..............   4,613,964    639,127    589,297    707,841     28,411  6,578,640
   Effect of interest rate swap agreements........  (1,050,000)        --         --  1,050,000         --         --
                                                    ----------  ---------  ---------  ---------  ---------  ---------
       Total interest-earning assets
         after the effect
         of interest rate swap agreements.........  $3,563,964    639,127    589,297  1,757,841     28,411  6,578,640
                                                    ==========  =========  =========  =========  =========  =========
Interest-bearing liabilities:
   Interest-bearing demand accounts...............  $  303,189    188,469    122,914     90,137    114,720    819,429
   Money market demand accounts...................   1,698,541         --         --         --         --  1,698,541
   Savings accounts...............................      81,273     66,930     57,369     81,273    191,230    478,075
   Time deposits..................................     477,797    441,899    549,888    720,117        400  2,190,101
   Note payable...................................          --         --      7,000         --         --      7,000
   Other borrowed funds...........................     251,644      2,000      5,000      4,000      3,000    265,644
                                                    ----------  ---------  ---------  ---------  ---------  ---------
       Total interest-bearing liabilities.........   2,812,444    699,298    742,171    895,527    309,350  5,458,790
   Effect of interest rate swap agreements........     200,000         --         --   (200,000)        --         --
                                                    ----------  ---------  ---------  ---------  ---------  ---------
       Total interest-bearing liabilities
         after the effect of interest rate
         swap agreements..........................  $3,012,444    699,298    742,171    695,527    309,350  5,458,790
                                                    ==========  =========  =========  =========  =========  =========
Interest-sensitivity gap:
   Periodic.......................................  $  551,520    (60,171)  (152,874) 1,062,314   (280,939) 1,119,850
                                                                                                            =========
   Cumulative.....................................     551,520    491,349    338,475  1,400,789  1,119,850
                                                    ==========  =========  =========  =========  =========
     Ratio of interest-sensitive assets to
       interest-sensitive liabilities:
     Periodic.....................................        1.18       0.91       0.79       2.53       0.09       1.21
                                                                                                            =========
     Cumulative...................................        1.18       1.13       1.08       1.27       1.21
                                                    ==========  =========  =========  =========  =========
---------------------------
(1) Loans are presented net of unearned discount.
</TABLE>

         Management made certain  assumptions in preparing the foregoing  table.
These assumptions included:

         >>    loans will repay at projected repayment rates;

         >>    mortgage-backed  securities,  included in investment  securities,
               will repay at projected repayment rates;

         >>    interest-bearing   demand  accounts  and  savings   accounts  are
               interest-sensitive  at rates  ranging  from 11% to 37% and 12% to
               40%,  respectively,  of the  remaining  balance  for each  period
               presented; and

         >>    fixed maturity deposits will not be withdrawn prior to maturity.

         A  significant  variance  in actual  results  from one or more of these
assumptions could materially affect the results reflected in the table.
<PAGE>

         At December  31,  2002,  our  asset-sensitive  position on a cumulative
basis  through the  twelve-month  time horizon was $338.5  million,  or 4.61% of
total  assets,  in comparison  to our  asset-sensitive  position on a cumulative
basis through the twelve-month time horizon of $313.8 million, or 4.63% of total
assets at December  31,  2001.  We  attribute  the change for 2002 to changes in
customer  preferences  related to the current low interest rate  environment and
economic  conditions.  This is  observed in the  shifting of deposits  from time
deposits to money market deposits and in relatively  small loan growth resulting
in  increases  in the  amount  of  short-term  investment  securities.  This was
partially  offset  by  our  interest  rate  swap  agreements   entered  into  in
conjunction with our interest rate risk management program during 2002.

         The interest-sensitivity position is one of several measurements of the
impact of interest  rate  changes on net  interest  income.  Its  usefulness  in
assessing the effect of potential changes in net interest income varies with the
constant  change in the composition of our assets and liabilities and changes in
interest  rates.  For this reason,  we place greater  emphasis on our simulation
model for monitoring our interest rate risk exposure.
<TABLE>
<CAPTION>

         As previously discussed, we utilize derivative financial instruments to
assist  in  our  management  of  interest  rate  sensitivity  by  modifying  the
repricing,   maturity  and  option   characteristics   of  certain   assets  and
liabilities.  The  derivative  financial  instruments  we hold are summarized as
follows:

                                                           December 31, 2002           December 31, 2001
                                                       -----------------------      ----------------------
                                                        Notional      Credit        Notional      Credit
                                                         Amount      Exposure        Amount      Exposure
                                                         ------      --------        ------      --------
                                                                 (dollars expressed in thousands)

<S>                                                   <C>              <C>           <C>           <C>
         Cash flow hedges............................ $1,050,000       2,179         900,000       1,764
         Fair value hedges...........................    301,200      11,449         200,000       6,962
         Interest rate cap agreements................    450,000          94         450,000       2,063
         Interest rate lock commitments..............     89,000          --          88,000          --
         Forward commitments to sell
           mortgage-backed securities................    235,000          --         209,000          --
                                                      ==========      ======       =========      ======
</TABLE>

         The  notional  amounts  of  derivative  financial  instruments  do  not
represent amounts exchanged by the parties and, therefore,  are not a measure of
our credit exposure  through our use of these  instruments.  The credit exposure
represents  the accounting  loss we would incur in the event the  counterparties
failed completely to perform according to the terms of the derivative  financial
instruments  and the  collateral  held to support the credit  exposure was of no
value.

         During 2002 and 2001,  we realized  net interest  income on  derivative
financial  instruments  of $53.0  million and $23.4  million,  respectively,  in
comparison to net interest expense of $4.7 million in 2000. The increase in 2002
is  primarily  due to  interest  income  associated  with  the  additional  swap
agreements  entered  into  during  May and June 2002 as well as the  decline  in
prevailing  interest  rates.  In addition,  we recorded a net gain on derivative
instruments,  which  is  included  in  noninterest  income  in the  consolidated
statements  of income,  of $2.2  million  and $18.6  million for the years ended
December 31, 2002 and 2001,  respectively.  The net decrease in income from 2001
reflects  $8.1  million  of gains  resulting  from the  termination  of  certain
interest  rate swap  agreements  in 2001,  the sale of our  interest  rate floor
agreements  in 2001 and  changes  in the fair  value  of our  interest  rate cap
agreements and fair value hedges.
<PAGE>

         Cash Flow Hedges.  We entered  into the  following  interest  rate swap
agreements,  designated  as  cash  flow  hedges,  to  effectively  lengthen  the
repricing  characteristics of certain interest-earning assets to correspond more
closely with their funding source with the objective of  stabilizing  cash flow,
and accordingly, net interest income over time.

         >>    During 1998, we entered into $280.0  million  notional  amount of
               interest rate swap  agreements  that provided for us to receive a
               fixed rate of  interest  and pay an  adjustable  rate of interest
               equivalent to the daily weighted average prime lending rate minus
               2.705%.  The terms of the swap agreements  provided for us to pay
               quarterly  and  receive  payment  semiannually.  In June 2001 and
               November  2001,  we terminated  $205.0  million and $75.0 million
               notional amount,  respectively,  of these swap agreements,  which
               would have expired in 2002, in order to appropriately  modify our
               overall hedge position in accordance  with our interest rate risk
               management program.  In conjunction with these  terminations,  we
               recorded gains of $2.8 million and $1.7 million, respectively.

         >>    During  September  1999, we entered into $175.0 million  notional
               amount of interest rate swap  agreements  that provided for us to
               receive a fixed rate of interest  and pay an  adjustable  rate of
               interest  equivalent  to the weighted  average prime lending rate
               minus 2.70%. The terms of the swap agreements  provided for us to
               pay and receive  interest on a quarterly basis. In April 2001, we
               terminated  these swap  agreements,  which would have  expired in
               September  2001,  and replaced them with similar swap  agreements
               with extended  maturities in order to lengthen the period covered
               by the swaps.  In conjunction  with the termination of these swap
               agreements, we recorded a gain of $985,000.

         >>    During  September 2000, March 2001, April 2001 and March 2002, we
               entered into $600.0 million,  $200.0 million,  $175.0 million and
               $150.0 million  notional amount,  respectively,  of interest rate
               swap agreements.  The underlying  hedged assets are certain loans
               within our commercial loan portfolio. The swap agreements provide
               for us to receive a fixed rate of interest and pay an  adjustable
               rate of interest equivalent to the weighted average prime lending
               rate minus 2.70%, 2.82%, 2.82% and 2.80%, respectively. The terms
               of the swap agreements provide for us to pay and receive interest
               on a quarterly  basis.  In November  2001,  we  terminated  $75.0
               million notional amount of the swap agreements originally entered
               into in April 2001,  which would have  expired in April 2006,  in
               order to  appropriately  modify our  overall  hedge  position  in
               accordance  with our interest rate risk  management  program.  We
               recorded  a  gain  of  $2.6  million  in  conjunction   with  the
               termination of these swap agreements. The amount receivable by us
               under the swap  agreements  was $3.1  million and $2.9 million at
               December 31, 2002 and 2001, respectively,  and the amount payable
               by us was  $888,000  and $1.1  million at  December  31, 2002 and
               2001, respectively.
<PAGE>

<TABLE>
<CAPTION>

         The maturity dates, notional amounts,  interest rates paid and received
and fair value of our  interest  rate swap  agreements  designated  as cash flow
hedges as of December 31, 2002 and 2001 were as follows:

                                                         Notional       Interest Rate    Interest Rate      Fair
                  Maturity Date                           Amount            Paid           Received         Value
                  -------------                         ----------      -------------    -------------    ---------
                                                                      (dollars expressed in thousands)

         December 31, 2002:
<S>                                                    <C>                  <C>               <C>         <C>
             March 14, 2004..........................  $  150,000           1.45%             3.93%       $  4,130
             September 20, 2004......................     600,000           1.55              6.78          48,891
             March 21, 2005..........................     200,000           1.43              5.24          13,843
             April 2, 2006...........................     100,000           1.43              5.45           9,040
                                                       ----------                                         --------
                                                       $1,050,000           1.50              5.95        $ 75,904
                                                       ==========          =====             =====        ========

         December 31, 2001:
             September 20, 2004......................  $  600,000           2.05%             6.78%       $ 40,980
             March 21, 2005..........................     200,000           1.93              5.24           4,951
             April 2, 2006...........................     100,000           1.93              5.45           2,305
                                                       ----------                                         --------
                                                       $  900,000           2.01              6.29        $ 48,236
                                                       ==========          =====             =====        ========
</TABLE>

         Fair Value  Hedges.  We entered into the  following  interest rate swap
agreements,  designated  as  fair  value  hedges,  to  effectively  shorten  the
repricing characteristics of certain interest-bearing  liabilities to correspond
more closely with their  funding  source with the objective of  stabilizing  net
interest income over time:

         >>    During  September  2000, we entered into $25.0  million  notional
               amount  of  one-year  interest  rate  swap  agreements  and $25.0
               million  notional  amount of five and one-half year interest rate
               swap  agreements  that  provided for us to receive fixed rates of
               interest  ranging from 6.60% to 7.25% and pay an adjustable  rate
               equivalent  to the  three-month  London  Interbank  Offering Rate
               minus rates  ranging  from 0.02% to 0.11%.  The terms of the swap
               agreements  provided for us to pay interest on a quarterly  basis
               and receive  interest on either a  semiannual  basis or an annual
               basis.  In  September  2001,  the  one-year  interest  rate  swap
               agreements matured,  and we terminated the five and one-half year
               interest   rate   swap   agreements    because   the   underlying
               interest-bearing liabilities had either matured or been called by
               their  respective  counterparties.  There  was no  gain  or  loss
               recorded as a result of the terminations.

         >>    During  January  2001,  we entered  into $50.0  million  notional
               amount of  three-year  interest rate swap  agreements  and $150.0
               million   notional   amount  of  five-year   interest  rate  swap
               agreements  that  provide  for us to  receive  a  fixed  rate  of
               interest and pay an adjustable rate of interest equivalent to the
               three-month London Interbank Offering Rate. The underlying hedged
               liabilities  are a portion of our other time deposits.  The terms
               of the  swap  agreements  provide  for us to  pay  interest  on a
               quarterly basis and receive  interest on a semiannual  basis. The
               amount  receivable  by us  under  the  swap  agreements  was $5.2
               million at December 31, 2002 and 2001,  and the amount payable by
               us under the swap  agreements  was  $821,000  and $1.2 million at
               December 31, 2002 and 2001, respectively.
<PAGE>

         >>    During May 2002 and June 2002,  we entered into $55.2 million and
               $86.3 million  notional  amount,  respectively,  of interest rate
               swap  agreements  that  provide for us to receive a fixed rate of
               interest and pay an adjustable rate of interest equivalent to the
               three-month  London Interbank Offering Rate plus 2.30% and 2.75%,
               respectively.  In  addition,  during June 2002,  we entered  into
               $46.0 million  notional  amount of interest rate swap  agreements
               that  provide for us to receive a fixed rate of interest  and pay
               an  adjustable  rate of interest  equivalent  to the  three-month
               London Interbank  Offering Rate plus 1.97%. The underlying hedged
               liabilities are our guaranteed  preferred beneficial interests in
               our  subordinated  debentures.  The terms of the swap  agreements
               provide for us to pay and receive  interest on a quarterly basis.
               There were no amounts receivable or payable by us at December 31,
               2002.  The  $86.3  million  notional  amount  interest  rate swap
               agreement  was called by its  counterparty  on  November  8, 2002
               resulting  in  final   settlement  of  this  interest  rate  swap
               agreement  on  December  18,  2002.  There  was no  gain  or loss
               recorded as a result of this transaction.

<TABLE>
<CAPTION>

         The maturity dates, notional amounts,  interest rates paid and received
and fair value of our interest  rate swap  agreements  designated  as fair value
hedges as of December 31, 2002 and 2001 were as follows:

                                                        Notional       Interest Rate     Interest Rate      Fair
                         Maturity Date                   Amount            Paid            Received         Value
                         -------------                   ------            ----            --------         -----
                                                                       (dollars expressed in thousands)

         December 31, 2002:
<S>                                                    <C>                  <C>               <C>         <C>
             January 9, 2004.........................  $  50,000            1.76%             5.37%       $  1,972
             January 9, 2006.........................    150,000            1.76              5.51          13,476
             June 30, 2028...........................     46,000            3.77              8.50             495
             December 31, 2031.......................     55,200            4.10              9.00           4,688
                                                       ---------                                          --------
                                                       $ 301,200            2.49              6.58        $ 20,631
                                                       =========           =====             =====        ========
         December 31, 2001:
             January 9, 2004.........................  $  50,000            2.48%             5.37%       $  1,761
             January 9, 2006.........................    150,000            2.48              5.51           3,876
                                                       ---------                                          --------
                                                       $ 200,000            2.48              5.47        $  5,637
                                                       =========           =====             =====        ========
</TABLE>

         Interest Rate Floor Agreements.  During January 2001 and March 2001, we
entered into $200.0 million and $75.0 million notional amount, respectively,  of
four-year  interest  rate floor  agreements  to further  stabilize  net interest
income  in the  event of a  falling  rate  scenario.  The  interest  rate  floor
agreements  provided for us to receive a quarterly  adjustable  rate of interest
equivalent to the differential between the three-month London Interbank Offering
Rate  and the  strike  prices  of  5.50%  or  5.00%,  respectively,  should  the
three-month  London  Interbank  Offering Rate fall below the  respective  strike
prices.  In November 2001, we terminated these interest rate floor agreements in
order to appropriately  modify our overall hedge position in accordance with our
interest rate risk management program.  In conjunction with the termination,  we
recorded an  adjustment of $4.0 million  representing  the decline in fair value
from our previous  month-end  measurement  date. These  agreements  provided net
interest income of $2.1 million for the year ended December 31, 2001.

         Interest Rate Cap  Agreements.  In  conjunction  with the interest rate
swap  agreements  designated  as cash flow hedges that mature on  September  20,
2004, we also entered into $450.0 million notional amount of four-year  interest
rate cap  agreements  to limit  the net  interest  expense  associated  with our
interest  rate swap  agreements  in the  event of a rising  rate  scenario.  The
interest rate cap  agreements  provide for us to receive a quarterly  adjustable
rate of interest  equivalent to the differential  between the three-month London
Interbank  Offering  Rate and the strike price of 7.50%  should the  three-month
London Interbank Offering Rate exceed the strike price. At December 31, 2002 and
2001,  the  carrying  value of these  interest  rate  cap  agreements,  which is
included in derivative  instruments  in the  consolidated  balance  sheets,  was
$94,000 and $2.1 million, respectively.
<PAGE>

         Pledged  Collateral.  At  December  31,  2002 and 2001,  we had pledged
investment  securities  available for sale with a carrying value of $5.8 million
and $1.1  million,  respectively,  in  connection  with our  interest  rate swap
agreements.  In addition,  at December 31, 2002 and 2001,  we had  accepted,  as
collateral in connection with our interest rate swap  agreements,  cash of $99.1
million and $4.9  million,  respectively.  At  December  31,  2001,  we had also
accepted investment  securities with a fair value of $53.9 million as collateral
in  connection  with our  interest  rate swap  agreements.  We are  permitted by
contract to sell or repledge the  collateral  accepted from our  counterparties,
however, at December 31, 2002 and 2001, we had not done so.

         Interest  Rate  Lock   Commitments  /  Forward   Commitments   to  Sell
Mortgage-Backed  Securities.  Derivative  financial  instruments  issued  by  us
consist  of  interest  rate lock  commitments  to  originate  fixed-rate  loans.
Commitments to originate  fixed-rate loans consist primarily of residential real
estate loans. These net loan commitments and loans held for sale are hedged with
forward contracts to sell mortgage-backed securities.

Mortgage Banking Activities

         Our mortgage banking  activities  consist of the origination,  purchase
and servicing of residential  mortgage  loans.  The purchase of loans to be held
for sale is limited to loans held for sale that we acquire in  conjunction  with
our  acquisition of other  financial  institutions.  Exclusive of these acquired
loans,  we do not  purchase  loans to be held for sale.  Generally,  we sell our
production  of  residential  mortgage  loans  in  the  secondary  loan  markets.
Servicing rights are retained with respect to conventional FHA and VA conforming
fixed-rate and conventional  adjustable rate residential mortgage loans. We sell
other nonconforming residential mortgage loans on a servicing released basis.

         For the  three  years  ended  December  31,  2002,  2001 and  2000,  we
originated and purchased loans for resale totaling $1.95 billion,  $1.52 billion
and $532.2  million and sold loans  totaling  $1.62  billion,  $1.35 billion and
$413.2  million,  respectively.  The  origination  and  purchase of  residential
mortgage  loans and the related  sale of the loans  provides us with  additional
sources of income  including the gain or loss  realized upon sale,  the interest
income  earned  while  the  loan is held  awaiting  sale  and the  ongoing  loan
servicing  fees from the loans sold with  servicing  rights  retained.  Mortgage
loans serviced for investors aggregated $1.29 billion,  $1.07 billion and $957.2
million at December 31, 2002, 2001 and 2000, respectively.

         The gain on mortgage loans originated for resale,  including loans sold
and held for sale,  was $28.4  million,  $15.0  million and $7.8 million for the
years ended December 31, 2002, 2001 and 2000,  respectively.  We determine these
gains,  net of  losses,  on a lower of cost or  market  basis.  These  gains are
realized at the time of sale. The cost basis  reflects:  (1)  adjustments of the
carrying values of loans held for sale to the lower of cost, adjusted to include
the cost of hedging the loans held for sale, or current market  values;  and (2)
adjustments  for any gains or losses on loan  commitments for which the interest
rate has been established, net of anticipated underwriting "fallout," (loans not
funded due to issues  discovered  during the underwriting  process) adjusted for
the cost of hedging these loan commitments.  The increases for 2002 and 2001 are
primarily  attributable  to a  significant  increase  in  the  volume  of  loans
originated and sold commensurate  with the prevailing  interest rate environment
experienced throughout 2001, including continued reductions in mortgage interest
rates and our growth in mortgage banking activities.

         The  interest  income on loans held for sale was $15.1  million for the
year ended  December 31, 2002,  in  comparison to $11.1 million and $3.5 million
for the years  ended  December  31, 2001 and 2000,  respectively.  The amount of
interest  income  realized  on loans held for sale is a function  of the average
balance of loans held for sale,  the period for which the loans are held and the
prevailing  interest rates when the loans are made. The average balance of loans
held for sale was $206.0 million, $150.8 million and $47.0 million for the years
ended December 31, 2002, 2001 and 2000,  respectively.  On an annualized  basis,
our yield on the portfolio of loans held for sale was 7.32%, 7.38% and 7.49% for
the years ended December 31, 2002,  2001 and 2000,  respectively.  This compares
with our cost of funds, as a percentage of average interest-bearing liabilities,
of 2.84%,  4.44% and 4.85% for the years ended December 31, 2002, 2001 and 2000,
respectively.
<PAGE>

         We report  mortgage loan servicing fees net of amortization of mortgage
servicing rights, interest shortfall and mortgage-backed  security guarantee fee
expense. Interest shortfall equals the difference between the interest collected
from a  loan-servicing  customer upon  prepayment of the loan and a full month's
interest that is required to be remitted to the security  owner.  Loan servicing
fees, net, which are included in other  noninterest  income in the statements of
operations,  were  $321,000,  $222,000 and $486,000 for the years ended December
31, 2002,  2001 and 2000,  respectively.  The increase in loan servicing fees in
2002  primarily  reflects  the  significant  increase  in the  volume  of  loans
originated and sold  commensurate with the reductions in mortgage interest rates
experienced  in 2001. We attribute the decrease in loan  servicing fees for 2001
primarily to increased  amortization of mortgage servicing rights,  reduced late
charge fees and a higher level of interest  shortfall.  Amortization of mortgage
servicing  rights was $3.8 million,  $3.7 million and $3.1 million for the years
ended December 31, 2002, 2001 and 2000, respectively.

         Our interest  rate risk  management  policy  provides  certain  hedging
parameters  to reduce the interest  rate risk  exposure  arising from changes in
loan prices from the time of commitment  until the sale of the security or loan.
To  reduce  this  exposure,  we  use  forward  commitments  to  sell  fixed-rate
mortgage-backed  securities at a specified  date in the future.  At December 31,
2002,  2001 and 2000, we had $232.5  million,  $197.5 million and $37.6 million,
respectively,  of loans held for sale and related commitments,  net of committed
loan sales and estimated  underwriting fallout, of which $234.6 million,  $209.9
million and $32.0  million,  respectively,  were hedged  through the use of such
forward commitments.

Investment Securities

         We classify the securities  within our investment  portfolio as held to
maturity or available  for sale.  We do not engage in the trading of  investment
securities.  Our investment  security portfolio consists primarily of securities
designated as available for sale.  The investment  security  portfolio was $1.14
billion and $631.1 million at December 31, 2002 and 2001, respectively, compared
to $563.5  million at December 31, 2000. We attribute the increase in investment
securities to securities acquired through  acquisitions and the overall level of
loan demand within our market areas, which affects the amount of funds available
for investment.  In addition,  the increase for 2001 was partially offset by the
liquidation of certain investment securities and a significant increase in calls
of investment securities prior to their normal maturity dates resulting from the
general decline in interest rates during 2001.

Loans and Allowance for Loan Losses

         Interest earned on our loan portfolio  represents the principal  source
of income for our subsidiary banks. Interest and fees on loans were 91.8%, 92.7%
and 92.3% of total interest  income for the years ended December 31, 2002,  2001
and 2000, respectively.  We recognize interest and fees on loans as income using
the  interest  method of  accounting.  Loan  origination  fees are  deferred and
accreted  to  interest  income  over the  estimated  life of the loans using the
interest method of accounting.  The accrual of interest on loans is discontinued
when it appears that interest or principal may not be paid in a timely manner in
the  normal  course of  business.  We  generally  record  payments  received  on
nonaccrual and impaired loans as principal reductions, and defer the recognition
of  interest  income  on  loans  until  all  principal  has  been  repaid  or an
improvement  in the  condition of the loan has occurred  which would warrant the
resumption of interest accruals.

         Loans, net of unearned  discount,  represented 74.0% of total assets as
of December  31,  2002,  compared to 79.8% of total assets at December 31, 2001.
Total loans, net of unearned discount,  increased $23.7 million to $5.43 billion
for the year ended  December 31, 2002,  and $656.6  million to $5.41 billion for
the year ended December 31, 2001.  Exclusive of our acquisition of Plains, which
provided loans,  net of unearned  discount,  of $150.4 million,  loans decreased
$126.7 million in 2002. The decrease primarily results from:

         >>    Weaker  loan  demand  from  our  commercial  customers,  which is
               indicative of the current  economic  conditions  prevalent within
               most of our markets;
<PAGE>

         >>    Continued reductions in new consumer and installment loan volumes
               and  the  repayment  of  principal  on  our  existing   portfolio
               consistent with our objectives of de-emphasizing consumer lending
               and expanding commercial lending; and

         >>    Declines in our commercial,  financial and agricultural portfolio
               due to an  anticipated  amount of attrition  associated  with our
               acquisitions  completed during the fourth quarter of 2001 and the
               first quarter of 2002.

         In our evaluation of  acquisitions,  it is anticipated that as we apply
our standards for credit structuring, underwriting,  documentation and approval,
a portion  of the  existing  borrowers  will  elect to  refinance  with  another
financial  institution,  because  there  may be an  aggressive  effort  by other
financial  institutions to attract them,  because they do not accept the changes
involved,  or  because  they are  unable  to meet our  credit  requirements.  In
addition,  another  portion  of the  portfolio  may  either  enter our  remedial
collection  process to reduce undue credit exposure or improve problem loans, or
may be charged-off.  The amount of this attrition will vary substantially  among
acquisitions  depending  on: (a) the strength and  discipline  within the credit
function of the acquired institution; (b) the magnitude of problems contained in
the acquired  portfolio;  (c) the  aggressiveness  of competing  institutions to
attract  business;  and (d) the significance of the acquired  institution to the
overall banking  market.  Typically,  in acquisitions of institutions  that have
strong credit  cultures  prior to their  acquisitions  and operate in relatively
large  markets,  there is  relatively  little  attrition  that occurs  after the
acquisition.  However,  in those acquisitions in which the credit discipline has
been weak, and particularly  those in small  metropolitan or rural areas, in our
experience  substantially greater attrition can occur.  Generally,  this process
occurs  within  approximately  three  to  six  months  after  completion  of the
acquisition.

         The decrease in loans was offset by a $145.8 million  increase in loans
held  for  sale,  which  is  primarily  attributable  to  increased  volumes  of
residential  mortgage loans resulting from the current interest rate environment
and the continuing expansion of our mortgage banking business.

         During the five years ended  December  31, 2002,  total  loans,  net of
unearned  discount,  increased  significantly from $3.00 billion at December 31,
1997 to $5.43  billion at December 31,  2002.  Throughout  this period,  we have
substantially  enhanced our  capabilities  for achieving  and managing  internal
growth.  A key element of this process has been the  expansion of our  corporate
business  development staff,  which is responsible for the internal  development
and management of both loan and deposit relationships with commercial customers.
While this process was occurring, in an attempt to achieve more diversification,
a higher level of interest  yield and a reduction  in interest  rate risk within
our loan  portfolio,  we also focused on  repositioning  our  portfolio.  As the
corporate  business  development  effort  continued to  originate a  substantial
volume of new loans,  substantially all of our conforming  residential  mortgage
loan  production has been sold in the secondary  mortgage  market.  We have also
substantially  reduced our consumer lending by discontinuing  the origination of
indirect  automobile loans and the sale of our student loan and credit card loan
portfolios.  This  allowed  us to fund part of the growth in  corporate  lending
through  reductions in residential  real estate,  indirect  automobile and other
consumer-related loans.

         In addition,  our  acquisitions  added  substantial  portfolios  of new
loans. Some of these portfolios  contained  significant loan problems,  which we
had anticipated and considered in our  acquisition  pricing.  As we resolved the
asset quality issues,  the portfolios of the acquired entities tended to decline
due to the  elimination  of problem loans and because many of the resources that
would  otherwise be directed  toward  generating new loans were  concentrated on
improving or eliminating existing relationships.  We continue to experience this
trend as a result of our  acquisitions of Millennium Bank and Union completed in
December 2000 and 2001, respectively.
<PAGE>

<TABLE>
<CAPTION>

         The following table summarizes the effects of these factors on our loan
portfolio for the five years ended December 31, 2002:
                                                                   Increase (Decrease) For the Year Ended December 31,
                                                              ----------------------------------------------------------
                                                                   2002         2001        2000       1999       1998
                                                                   ----         ----        ----       ----       ----
                                                                            (dollars expressed in thousands)

      Internal loan volume (decrease) increase:
<S>                                                           <C>             <C>         <C>        <C>        <C>
          Commercial lending................................  $ (119,295)     174,568     360,410    363,486    633,660
          Residential real estate lending (1) ..............      36,074       48,616      20,137   (126,418)  (152,849)
          Consumer lending, net of unearned discount........     (44,060)     (75,280)    (64,606)   (56,349)   (30,506)
      Loans provided by acquisitions........................     151,000      508,700     440,000    235,500    127,600
                                                              ----------    ---------   ---------  ---------  ---------
          Total increase in loans, net of unearned discount.  $   23,719      656,604     755,941    416,219    577,905
                                                              ==========    =========   =========  =========  =========
      -------------------------
      (1) Includes loans held for sale, which increased $145.8 million for the year ended December 31, 2002.
</TABLE>
         Our lending strategy  emphasizes quality,  growth and  diversification.
Throughout our organization,  we employ a common credit underwriting policy. Our
commercial  lenders  focus  principally  on  small to  middle-market  companies.
Consumer lenders focus principally on residential  loans,  including home equity
loans,  automobile financing and other consumer financing  opportunities arising
out of our branch banking network.

         Commercial,  financial  and  agricultural  loans include loans that are
made primarily  based on the borrowers'  general credit  strength and ability to
generate cash flows for repayment from income sources even though such loans may
also be secured by real estate or other  assets.  Real estate  construction  and
development loans,  primarily relating to residential  properties and commercial
properties,  represent financing secured by real estate under construction. Real
estate  mortgage  loans  consist  primarily of loans  secured by  single-family,
owner-occupied  properties  and various types of commercial  properties on which
the income from the property is the intended  source of repayment.  Consumer and
installment  loans are  loans to  individuals  and  consist  primarily  of loans
secured by  automobiles.  Loans held for sale are primarily fixed and adjustable
rate residential mortgage loans pending sale in the secondary mortgage market in
the  form of a  mortgage-backed  security,  or to  various  private  third-party
investors.
<TABLE>
<CAPTION>

         The following table summarizes the composition of our loan portfolio by
major category and the percent of each category to the total portfolio as of the
dates presented:

                                                                           December 31,
                                    -----------------------------------------------------------------------------------------
                                          2002               2001                2000            1999             1998
                                    -----------------   ---------------    --------------    -------------     --------------
                                     Amount       %      Amount      %     Amount      %     Amount      %     Amount       %
                                     ------       -      ------      -     ------      -     ------      -     ------       -
                                                                (dollars expressed in thousands)

Commercial, financial
<S>                                 <C>         <C>   <C>          <C>   <C>         <C>   <C>          <C>   <C>        <C>
    and agricultural.............  $1,443,016   28.4% $1,532,875   29.5% $1,372,196  29.3% $1,086,919   27.4% $  920,007  26.7%
Real estate construction
    and development..............     989,650   19.5     954,913   18.4     809,682  17.3     795,081   20.1     720,910  20.9
Real estate mortgage:
    One-to-four-family
      residential loans..........     694,604   13.7     798,089   15.3     726,474  15.5     720,630   18.2     739,442  21.5
    Multi-family
      residential loans..........     112,517    2.2     148,684    2.9      80,220   1.7      73,864    1.9      63,679   1.8
    Commercial real
      estate loans...............   1,637,001   32.2   1,499,074   28.8   1,396,163  29.8   1,057,075   26.7     726,056  21.1
Lease financing..................     126,738    2.5     148,971    2.8     124,088   2.7          --     --          --    --
Consumer and installment, net of
    unearned discount............      79,097    1.5     122,057    2.3     174,337   3.7     225,343    5.7     274,392   8.0
                                   ----------  -----  ---------- ------  ---------- -----  ----------  -----  ---------- -----
        Total loans, excluding
           loans held for sale...   5,082,623  100.0%  5,204,663  100.0%  4,683,160 100.0%  3,958,912  100.0%  3,444,486 100.0%
                                               =====              =====             =====              =====             =====
Loans held for sale..............     349,965            204,206             69,105            37,412            135,619
                                   ----------         ----------         ----------        ----------         ----------
        Total loans..............  $5,432,588         $5,408,869         $4,752,265        $3,996,324         $3,580,105
                                   ==========         ==========         ==========        ==========         ==========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


         Loans at December 31, 2002 mature as follows:

                                                                            Over One Year
                                                                            Through Five
                                                                                Years          Over Five Years
                                                                          ------------------  -----------------
                                                             One Year     Fixed     Floating    Fixed  Floating
                                                             or Less      Rate        Rate      Rate     Rate      Total
                                                             -------      ----        ----      ----     ----      -----
                                                                          (dollars expressed in thousands)

<S>                                                         <C>            <C>        <C>      <C>       <C>    <C>
Commercial, financial and agricultural....................  $ 1,365,060    33,042     22,062   22,852       --  1,443,016
Real estate construction and development..................      860,481   113,452     12,602    3,115       --    989,650
Real estate mortgage......................................    1,378,941   714,169    217,712  130,122    3,178  2,444,122
Lease financing...........................................       13,776   109,086         --    3,876       --    126,738
Consumer and installment, net of unearned discount........       32,772    40,515        593    5,217       --     79,097
Loans held for sale.......................................      349,965        --         --       --       --    349,965
                                                            ----------- ---------   --------  -------  -------  ---------
      Total loans.........................................  $ 4,000,995 1,010,264    252,969  165,182    3,178  5,432,588
                                                            =========== =========   ========  =======  =======  =========


         Nonperforming  assets include nonaccrual loans,  restructured loans and
other real estate.  The following table presents the categories of nonperforming
assets and certain ratios as of the dates indicated:

                                                                                  December 31,
                                                           ------------------------------------------------------------
                                                               2002        2001         2000         1999         1998
                                                               ----        ----         ----         ----         ----
                                                                           (dollars expressed in thousands)

   Commercial, financial and agricultural:
       Nonaccrual......................................     $  15,787      17,141       21,424      18,397       15,385
       Restructured terms..............................            --          --           22          29           --
   Real estate construction and development:
       Nonaccrual......................................        23,378       3,270       11,068       1,886        3,858
   Real estate mortgage:
     One-to-four family residential loans:
       Nonaccrual......................................        14,833      20,780        5,645       7,703        9,929
       Restructured terms..............................            15          20           28          18           50
     Multi-family residential loans:
       Nonaccrual......................................           772         476          593         722        2,706
       Restructured terms..............................            --          --          908         923        1,562
     Commercial real estate loans:
       Nonaccrual......................................         8,890      20,642       10,286       7,989        6,223
       Restructured terms..............................         1,907       1,993        2,016       2,038        3,609
   Lease financing:
       Nonaccrual......................................         8,723       2,185        1,013          --           --
   Consumer and installment:
       Nonaccrual......................................           860         794          155          32          216
       Restructured terms..............................            --           7            8          --           --
                                                           ----------   ---------    ---------   ---------    ---------
              Total nonperforming loans................        75,165      67,308       53,166      39,737       43,538
   Other real estate...................................         7,609       4,316        2,487       2,129        3,709
                                                           ----------   ---------    ---------   ---------    ---------
              Total nonperforming assets...............    $   82,774      71,624       55,653      41,866       47,247
                                                           ==========   =========    =========   =========    =========

   Loans, net of unearned discount.....................    $5,432,588   5,408,869    4,752,265   3,996,324    3,580,105
                                                           ==========   =========    =========   =========    =========

   Loans past due 90 days or more and still accruing...    $    4,635      15,156        3,009       5,844        4,674
                                                           ==========   =========    =========   =========    =========

   Ratio of:
       Allowance for loan losses to loans..............          1.83%       1.80%        1.72%       1.72%        1.70%
       Nonperforming loans to loans....................          1.38        1.24         1.12        0.99         1.22
       Allowance for loan losses to
         nonperforming loans...........................        132.29      144.36       153.47      172.66       140.04
       Nonperforming assets to loans
         and other real estate.........................          1.52        1.32         1.17        1.05         1.32
                                                          ===========   =========    =========   =========    =========
</TABLE>
<PAGE>

         Nonperforming  loans,  consisting  of loans on  nonaccrual  status  and
certain  restructured  loans,  were  $75.2  million at  December  31,  2002,  in
comparison  to $67.3  million and $53.2  million at December  31, 2001 and 2000,
respectively. As further discussed under "--Lending Activities," the increase in
nonperforming  loans in 2002 is primarily  attributable to the economic slowdown
previously   discussed,   additional   problems   identified  in  acquired  loan
portfolios,  continuing  deterioration in the portfolio of leases to the airline
industry  and  the  addition  of  a  $16.1  million  borrowing  relationship  to
nonaccrual  real estate  construction  and  development  loans during the second
quarter of 2002.  The  relationship  relates to a residential  and  recreational
development project that had significant financial  difficulties and experienced
inadequate project financing,  project delays and weak project management.  This
relationship  had  previously  been on  nonaccrual  status and was removed  from
nonaccrual status during the third quarter of 2001 due to financing being recast
with  a  new  borrower,   who  appeared  able  to  meet  ongoing   developmental
expectations.  Subsequent to that time,  the new borrower  encountered  internal
management  problems,  which negatively impacted and further delayed development
of the project. Loan charge-offs also increased significantly to $70.5 million
for the year ended December 31, 2002,  from $31.5 million for 2001.  Included in
this  were   charge-offs   aggregating   $38.6   million  on  ten  large  credit
relationships,   representing  nearly  55%  of  loan  charge-offs  in  2002.  We
anticipate this trend of higher nonperforming and delinquent loans will continue
in the near  future.  The  increase  in  nonperforming  loans for 2001  reflects
cyclical trends  experienced within the banking industry as a result of economic
slowdown,  as well as the asset  quality  of  acquired  institutions.  Our Union
acquisition,   completed  in  December   2001,   resulted  in  the  addition  of
approximately $8.9 million of nonperforming loans and $3.6 million of loans past
due 90 days or more.  The increase in  nonperforming  loans in 2000  reflected a
small number of credit  relationships  that were placed on nonaccrual during the
year and the overall growth of the loan  portfolio.  These  nonperforming  loans
were symptomatic of circumstances specific to those borrower relationships.

         As of December 31, 2002, 2001 and 2000, $173.3 million,  $123.2 million
and $50.2 million,  respectively,  of loans not included in the table above were
identified by management as having  potential  credit problems  (problem loans).
The  significant  increase in problem loans for the year ended December 31, 2002
is primarily due to problem loans included in the acquisitions of Millenium Bank
and  Union,  completed  in  December  2000 and  2001,  respectively,  continuing
deterioration of leases to the airline industry, portfolio growth (both internal
and  external)  and the gradual slow down and  uncertainties  that have recently
occurred  in the  economy  surrounding  the  markets  in  which we  operate.  As
previously  discussed  under  "--Lending   Activities,"  certain  acquired  loan
portfolios  exhibited  varying  degrees of distress prior to their  acquisition.
While these  problems had been  identified  and  considered  in our  acquisition
pricing, the acquisitions led to an increase in nonperforming assets and problem
loans.  As of December 31, 1999,  1998 and 1997,  problem  loans  totaled  $36.3
million, $21.3 million and $27.9 million, respectively.

         Our credit  management  policies and procedures  focus on  identifying,
measuring  and  controlling   credit  exposure.   These   procedures   employ  a
lender-initiated  system  of  rating  credits,  which  is  ratified  in the loan
approval  process and  subsequently  tested in internal loan  reviews,  external
audits and regulatory bank examinations. The system requires rating all loans at
the time they are originated,  except for homogeneous  categories of loans, such
as residential real estate mortgage loans and consumer loans.  These homogeneous
loans are assigned an initial rating based on our  experience  with each type of
loan. We adjust these ratings  based on payment  experience  subsequent to their
origination.
<PAGE>

         We include  adversely  rated credits,  including  loans requiring close
monitoring  which  would  not  normally  be  considered  criticized  credits  by
regulators,  on a monthly loan watch list.  Loans may be added to our watch list
for reasons that are temporary and  correctable,  such as the absence of current
financial  statements  of the  borrower or a deficiency  in loan  documentation.
Other loans are added whenever any adverse  circumstance is detected which might
affect the borrower's  ability to meet the terms of the loan. The delinquency of
a scheduled loan payment,  deterioration in the borrower's  financial  condition
identified in a review of periodic financial statements, a decrease in the value
of the  collateral  securing the loan,  or a change in the economic  environment
within which the borrower  operates could initiate the addition of a loan to the
list.  Loans on the watch list require  periodic  detailed  loan status  reports
prepared by the responsible officer, which are discussed in formal meetings with
loan review and credit  administration  staff  members.  Downgrades of loan risk
ratings may be initiated by the responsible  loan officer at any time.  However,
upgrades of risk ratings may only be made with the  concurrence of selected loan
review and credit  administration  staff  members  generally  at the time of the
formal watch list review meetings.

         Each month, the credit  administration  department  provides management
with detailed  lists of loans on the watch list and summaries of the entire loan
portfolio  of each  subsidiary  bank by risk  rating.  These  are  coupled  with
analyses of changes in the risk profiles of the portfolios,  changes in past-due
and  nonperforming  loans and  changes in watch list and  classified  loans over
time. In this manner, we continually  monitor the overall increases or decreases
in the  levels  of risk in the  portfolios.  Factors  are  applied  to the  loan
portfolios  for each  category of loan risk to  determine  acceptable  levels of
allowance  for loan  losses.  We  derive  these  factors  from the  actual  loss
experience of our subsidiary banks and from published  national surveys of norms
in the industry.  The calculated allowances required for the portfolios are then
compared to the actual allowance balances to determine the provisions  necessary
to maintain the  allowances  at  appropriate  levels.  In  addition,  management
exercises a certain  degree of judgment in its analysis of the overall  adequacy
of the allowance for losses. In its analysis, management considers the change in
the portfolio, including growth, composition and the ratio of net loans to total
assets, and the economic conditions of the regions in which we operate. Based on
this quantitative and qualitative analysis, provisions are made to the allowance
for loan losses. Such provisions are reflected in our consolidated statements of
income.
<PAGE>

         The  allocation  of the allowance for loan losses by loan category is a
result  of the  application  of our  risk  rating  system.  As  such,  the  same
procedures we employ to determine the overall risk in our loan portfolio and our
requirements  for the allowance for loan losses  determines the  distribution of
the allowance by loan category.  Consequently, the distribution of the allowance
will change from period to period due to:

         >>    Changes in the aggregate loan balances by loan category;

         >>    Changes in the identified risk in each loan in the portfolio over
               time,  excluding  those  homogeneous  categories of loans such as
               consumer and installment  loans and residential real estate loans
               for which risk ratings are changed based on payment  performance;
               and

         >>   Changes in loan concentrations by borrower.

         Since the methods of calculating  the allowance  requirements  have not
changed over time, the  reallocations  among different  categories of loans that
appear between  periods are the result of the  redistribution  of the individual
loans that  comprise the aggregate  portfolio  due to the factors  listed above.
However,  the  perception  of risk with respect to  particular  loans within the
portfolio  will  change  over  time  as a  result  of  the  characteristics  and
performance of those loans,  as well as the overall  economic  trends and market
trends,  including  our  actual  and  expected  trends in  nonperforming  loans.
Consequently, while there are no specific allocations of the allowance resulting
from economic or market conditions or actual or expected trends in nonperforming
loans, these factors are considered in the initial assignment of risk ratings to
loans and in subsequent changes to those risk ratings.
<TABLE>
<CAPTION>

         The following  table is a summary of loan loss  experience for the five
years ended December 31, 2002:

                                                                As of or For the Years Ended December 31,
                                                      -------------------------------------------------------------
                                                           2002        2001        2000         1999         1998
                                                           ----        ----        ----         ----         ----
                                                                       (dollars expressed in thousands)

<S>                                                   <C>             <C>         <C>          <C>           <C>
Allowance for loan losses, beginning of year......... $   97,164      81,592      68,611       60,970        50,509
Acquired allowances for loan losses..................      1,366      14,046       6,062        3,008         3,200
                                                      ----------  ----------  ----------    ---------    ----------
                                                          98,530      95,638      74,673       63,978        53,709
                                                      ----------  ----------  ----------    ---------    ----------

Loans charged-off:
    Commercial, financial and agricultural...........    (45,697)    (21,085)     (9,690)     (10,855)       (3,908)
    Real estate construction and development.........     (7,778)       (108)     (2,229)        (577)         (185)
    Real estate mortgage:
       One-to-four family residential loans..........     (2,697)       (802)       (452)      (1,010)       (1,786)
       Multi-family residential loans................       (109)         (4)         --          (19)          (78)
       Commercial real estate loans..................     (2,747)     (1,012)     (1,761)      (1,532)         (525)
    Lease financing..................................     (8,426)     (6,749)        (78)          --            --
    Consumer and installment.........................     (3,070)     (1,693)     (2,840)      (3,728)       (3,701)
                                                      ----------  ----------  ----------    ---------    ----------
          Total......................................    (70,524)    (31,453)    (17,050)     (17,721)      (10,183)
                                                      ----------  ----------  ----------    ---------    ----------
Recoveries of loans previously charged-off:
    Commercial, financial and agricultural...........      8,331       4,015       5,556        3,602         3,417
    Real estate construction and development.........        631       1,171         319          849           342
    Real estate mortgage:
       One-to-four family residential loans..........        628         755         536          407           564
       Multi-family residential loans................        792          15          93          286            45
       Commercial real estate loans..................      3,491       1,332       1,308        1,664         1,420
    Lease financing..................................        494         435          65           --            --
    Consumer and installment.........................      1,566       1,746       1,965        2,473         2,656
                                                      ----------  ----------  ----------    ---------    ----------
          Total......................................     15,933       9,469       9,842        9,281         8,444
                                                      ----------  ----------  ----------    ---------    ----------
          Net loans charged-off......................    (54,591)    (21,984)     (7,208)      (8,440)       (1,739)
                                                      ----------  ----------  ----------    ---------    ----------
Provision for loan losses............................     55,500      23,510      14,127       13,073         9,000
                                                      ----------  ----------  ----------    ---------    ----------
Allowance for loan losses, end of year............... $   99,439      97,164      81,592       68,611        60,970
                                                      ==========  ==========  ==========    =========    ==========
<PAGE>

Loans outstanding, net of unearned discount:
    Average.......................................... $5,424,508   4,884,299   4,290,958    3,812,508     3,250,719
    End of year......................................  5,432,588   5,408,869   4,752,265    3,996,324     3,580,105
    End of year, excluding loans held for sale.......  5,082,623   5,204,663   4,683,160    3,958,912     3,444,486
                                                      ==========  ==========  ==========    =========    ==========

Ratio of allowance for loan losses to
    loans outstanding:
    Average..........................................       1.83%       1.99%       1.90%        1.80%         1.88%
    End of year......................................       1.83        1.80        1.72         1.72          1.70
    End of year, excluding loans held for sale.......       1.96        1.87        1.74         1.73          1.77
Ratio of net charge-offs to
    average loans outstanding........................       1.01        0.45        0.17         0.22          0.05
Ratio of current year recoveries to
    preceding year's total charge-offs...............      50.66       55.54       55.54        91.14         50.17
                                                      ==========  ==========  ==========    =========    ==========
</TABLE>



<PAGE>
<TABLE>
<CAPTION>


         The following table is a summary of the allocation of the allowance for
loan losses for the five years ended December 31, 2002:

                                           2002              2001              2000             1999               1998
                                      ---------------  ----------------  ---------------  ----------------   -----------------
                                              Percent          Percent           Percent          Percent             Percent
                                                of               of                of               of                  of
                                             Category         Category          Category         Category            Category
                                                to               to                to               to                  to
                                               Total            Total             Total            Total               Total
                                      Amount   Loans    Amount  Loans    Amount   Loans    Amount  Loans      Amount   Loans
                                      ------   -----    ------  -----    ------   -----    ------  -----      ------   -----

<S>                                    <C>      <C>     <C>     <C>      <C>      <C>      <C>      <C>      <C>       <C>
Commercial, financial
   and agricultural.................  $34,915  26.56%  $40,161  28.34%   $32,130  28.87%   $24,898  27.20%   $19,239   25.70%
Real estate construction
   and development..................   22,667  18.22    21,598  17.65     14,667  17.04     13,264  19.90     15,073   20.14
Real estate mortgage:
   One-to-four family
     residential loans..............    7,913  12.79     5,349  14.76      4,334  15.29      3,449  18.03      5,037   20.65
   Multi-family residential loans...       32   2.07        81   2.75         12   1.69          3   1.85          5    1.78
   Commercial real estate loans.....   28,477  30.13    25,167  27.71     20,345  29.38     17,138  26.45     13,193   20.28
Lease financing.....................    3,649   2.33     3,062   2.75      1,114   2.61         --     --         --      --
Consumer and installment............      703   1.46       937   2.26      2,028   3.67      4,390   5.64      5,180    7.66
Loans held for sale.................    1,083   6.44       809   3.78        222   1.45        160   0.93        539    3.79
Unallocated (1).....................       --     --        --     --      6,740     --      5,309     --      2,704      --
                                      ------  ------   ------- ------    ------- ------    ------- ------    -------  ------
     Total..........................  $99,439 100.00%  $97,164 100.00%   $81,592 100.00%   $68,611 100.00%   $60,970  100.00%
                                      ======= ======   ======= ======    ======= ======    ======= ======    =======  ======
</TABLE>

----------------------
(1) During 2001, we reviewed our practice of maintaining unallocated reserves in
    light  of  continuing  refinement  in  our  loss  estimation  processes.  We
    concluded  the  use  of  unallocated   reserves   would   be   discontinued.
    Consequently, reserves were aligned with their respective portfolios.

Deposits

         Deposits are the primary source of funds for our subsidiary  banks. Our
deposits  consist  principally  of core  deposits  from each bank's local market
areas, including individual and corporate customers.
<TABLE>
<CAPTION>

         The following table sets forth the  distribution of our average deposit
accounts for the years indicated and the weighted average interest rates on each
category of deposits:

                                                                   Year Ended December 31,
                                    -----------------------------------------------------------------------------------
                                               2002                        2001                         2000
                                    --------------------------  --------------------------   --------------------------
                                                Percent                      Percent                   Percent
                                                  of                           of                         of
                                     Amount    Deposits   Rate    Amount    Deposits  Rate    Amount   Deposits    Rate
                                     ------    --------   ----    ------    --------  ----    ------   --------    ----
                                                                (dollars expressed in thousands)

<S>                                <C>           <C>       <C>  <C>          <C>       <C>    <C>        <C>         <C>
Noninterest-bearing
   demand deposits..............  $  912,915     15.33%    --% $  754,763    14.83%    --%  $  634,886   14.18%      --%
Interest-bearing
   demand deposits..............     755,879     12.69   1.00     507,011     9.97   1.38      421,986    9.43     1.40
Savings deposits................   1,991,510     33.44   1.79   1,548,441    30.43   3.25    1,279,378   28.59     4.04
Time deposits ..................   2,295,431     38.54   3.71   2,278,263    44.77   5.49    2,139,305   47.80     5.62
                                  ----------    ------   ====  ----------   ------   ====   ----------  ------   ======
      Total average deposits....  $5,955,735    100.00%        $5,088,478   100.00%         $4,475,555  100.00%
                                  ==========    ======         ==========   ======          ==========  ======
</TABLE>
<PAGE>

Capital and Dividends

         Historically,  we have accumulated  capital to support our acquisitions
by retaining  most of our earnings.  We pay  relatively  small  dividends on our
Class A convertible,  adjustable rate preferred stock and our Class B adjustable
rate preferred stock,  totaling  $786,000 for the years ended December 31, 2002,
2001 and  2000.  We have  never  paid,  and have no  present  intention  to pay,
dividends on our common stock.

         Management  believes as of December 31, 2002 and 2001,  our  subsidiary
banks  and we  were  "well  capitalized,"  as  defined  by the  Federal  Deposit
Insurance Corporation Improvement Act of 1991.

         In December  1996, we formed our initial  financing  subsidiary,  First
Preferred  Capital  Trust,  for the purpose of issuing  $86.25  million of trust
preferred  securities,  and  in  June  1998,  we  formed  our  second  financing
subsidiary,  First  America  Capital  Trust,  for the  purpose of issuing  $46.0
million of trust  preferred  securities.  In October  2000,  we formed our third
financing  subsidiary,  First  Preferred  Capital  Trust II, for the  purpose of
issuing $57.5 million of trust  preferred  securities,  and in November 2001, we
formed our fourth financing  subsidiary,  First Preferred Capital Trust III, for
the purpose of issuing $55.2 million of trust preferred securities. On April 10,
2002,  we formed  First Bank  Capital  Trust and issued  $25.0  million of trust
preferred securities in a private placement.  For regulatory reporting purposes,
these  preferred  securities  are  eligible  for  inclusion,  subject to certain
limitations, in our Tier 1 capital. Because of these limitations, as of December
31, 2002,  $117.1 million of these  preferred  securities were not includable in
our Tier I capital,  although  this amount was included in our total  risk-based
capital.

Liquidity

         Our liquidity and the liquidity of our subsidiary  banks is the ability
to  maintain  a cash flow that is  adequate  to fund  operations,  service  debt
obligations and meet  obligations and other  commitments on a timely basis.  Our
subsidiary  banks  receive  funds for liquidity  from  customer  deposits,  loan
payments,  maturities  of  loans  and  investments,  sales  of  investments  and
earnings.  In  addition,  we may avail  ourselves  of other  sources of funds by
issuing  certificates of deposit in denominations of $100,000 or more, borrowing
federal funds,  selling  securities under agreements to repurchase and utilizing
borrowings from the Federal Home Loan Banks and other borrowings,  including our
revolving  credit line.  The  aggregate  funds  acquired from these sources were
$742.5 million and $754.8 million at December 31, 2002 and 2001, respectively.
<TABLE>
<CAPTION>

         The  following  table  presents the  maturity  structure of these other
sources of funds, which consists of certificates of deposit of $100,000 or more,
short-term borrowings and our note payable, at December 31, 2002:

                                                                Certificates of Deposit      Other
                                                                  of $100,000 or More      Borrowings         Total
                                                                  -------------------      ----------         -----
                                                                          (dollars expressed in thousands)

<S>                                                                  <C>                  <C>               <C>
         Three months or less.....................................   $   134,875          251,644           386,519
         Over three months through six months.....................        95,169            2,000            97,169
         Over six months through twelve months....................       105,939           12,000           117,939
         Over twelve months.......................................       133,921            7,000           140,921
                                                                     -----------        ---------         ---------
              Total...............................................   $   469,904          272,644           742,548
                                                                     ===========        =========         =========
</TABLE>

         In  addition  to these  sources  of funds,  our  subsidiary  banks have
established  borrowing  relationships  with the Federal  Reserve  Banks in their
respective  districts.  These  borrowing  relationships,  which are  secured  by
commercial loans,  provide an additional liquidity facility that may be utilized
for contingency  purposes. At December 31, 2002 and 2001, the borrowing capacity
of our subsidiary banks under these agreements was  approximately  $1.22 billion
and $1.21 billion,  respectively.  In addition,  our subsidiary banks' borrowing
capacity  through  their  relationships  with the  Federal  Home Loan  Banks was
approximately  $223.6  million and $234.6 million at December 31, 2002 and 2001,
respectively.  Exclusive of the Federal Home Loan Bank advances  outstanding  at
First Bank of $9.0  million  and $20.1  million at  December  31, 2002 and 2001,
respectively,  our subsidiary banks had no amounts  outstanding  under either of
these  agreements at December 31, 2002 and 2001.  Under a separate  Federal Home
Loan Bank  agreement,  FB&T had advances  outstanding  of $5.0 million and $10.5
million at December 31, 2002 and 2001, respectively.
<PAGE>

<TABLE>
<CAPTION>

         In addition  to our owned  banking  facilities,  we have  entered  into
long-term leasing  arrangements to support our ongoing activities.  The required
payments under such  commitments and other  obligations at December 31, 2002 are
as follows:

                                                                                Over 1 Year
                                                                    Less than  But Less Than    Over
                                                                     1 Year       5 Years      5 Years       Total
                                                                     ------      ---------     -------       -----
                                                                          (dollars expressed in thousands)

<S>                                                              <C>             <C>           <C>           <C>
         Operating leases....................................    $    8,913      22,126        21,708        52,747
         Certificates of deposit.............................     1,472,401     717,301           399     2,190,101
         Note payable........................................         7,000          --            --         7,000
         Guaranteed preferred beneficial interest
              in subordinated debentures.....................            --          --       270,039       270,039
         Federal Home Loan Bank advances.....................         7,000       4,000         3,000        14,000
                                                                 ==========     =======       =======     =========
</TABLE>

         Management  believes the available  liquidity and operating  results of
our  subsidiary  banks will be  sufficient  to  provide  funds for growth and to
permit the  distribution of dividends to us sufficient to meet our operating and
debt service requirements,  both on a short-term and long-term basis, and to pay
the  dividends  on the  trust  preferred  securities  issued  by  our  financing
subsidiaries,  First Preferred Capital Trust, First America Capital Trust, First
Preferred  Capital  Trust II, First  Preferred  Capital Trust III and First Bank
Capital Trust.

Critical Accounting Policies

         Our  financial  condition  and results of  operations  presented in the
consolidated  financial  statements,  accompanying  notes  to  the  consolidated
financial  statements,  selected consolidated and other financial data appearing
elsewhere in this report, and management's  discussion and analysis of financial
condition and results of operations  are, to large  degree,  dependent  upon our
accounting  policies.  The selection and application of our accounting  policies
involve judgments, estimates and uncertainties that are susceptible to change.

         We have  identified the following  accounting  policies that we believe
are the most  critical  to the  understanding  of our  financial  condition  and
results of operations.  These critical accounting policies require  management's
most  difficult,  subjective  and  complex  judgments  about  matters  that  are
inherently uncertain. In the event that different assumptions or conditions were
to prevail,  and depending upon the severity of such changes, the possibility of
a materially different financial condition and/or results of operations could be
a reasonable  likelihood.  The impact and any  associated  risks  related to our
critical accounting policies on our business operations is discussed  throughout
"--Management's  Discussion  and Analysis of Financial  Condition and Results of
Operations,"  where such  policies  affect our reported  and expected  financial
results.  For a  detailed  discussion  on the  application  of these  and  other
accounting  policies,  see  Note  1 to  our  consolidated  financial  statements
appearing elsewhere in this report.

         Loans and Allowance for Loan Losses.  We maintain an allowance for loan
losses at a level we consider  adequate to provide  for  probable  losses in our
loan  portfolio.  The  determination  of our allowance for loan losses  requires
management to make  significant  judgments  and estimates  based upon a periodic
analysis of our loans held for  portfolio and held for sale  considering,  among
other factors,  current economic conditions,  loan portfolio  composition,  past
loan loss experience,  independent appraisals, the fair value of underlying loan
collateral,  our customers' ability to pay and selected key financial ratios. If
actual events prove the estimates and  assumptions  we used in  determining  our
allowance  for  loan  losses  were  incorrect,  we may  need to make  additional
provisions for loan losses.  See further discussion under "--Loans and Allowance
for Loan Losses" and Note 4 to our consolidated  financial  statements appearing
elsewhere in this report.

         Derivative  Financial  Instruments.  We  utilize  derivative  financial
instruments  to  assist  in our  management  of  interest  rate  sensitivity  by
modifying the repricing,  maturity and option  characteristics of certain assets
and  liabilities.  The judgments and  assumptions  that are most critical to the
application  of  this  critical   accounting  policy  are  those  affecting  the
estimation of fair value and hedge effectiveness.  Fair value is based on quoted
market prices where  available.  If quoted market prices are  unavailable,  fair
value is based upon quoted market prices of comparable  derivative  instruments.
Factors that affect  hedge  effectiveness  include the initial  selection of the
derivative that will be used as a hedge and how well changes in its cash flow or
fair value have  correlated  and are expected to  correlate  with changes in the
cash  flow or fair  value of the  underlying  hedged  asset or  liability.  Past
correlation  is easy to  demonstrate,  but  expected  correlation  depends  upon
projections and trends that may not always hold true within  acceptable  limits.

<PAGE>

Changes in  assumptions  and  conditions  could result in greater than  expected
inefficiencies  that,  if large  enough,  could reduce or eliminate the economic
benefits   anticipated  when  the  hedges  were  established  and/or  invalidate
continuation of hedge accounting. Greater inefficiency and/or discontinuation of
hedge  accounting  are  likely to result in  increased  volatility  to  reported
earnings.  For cash flow hedges,  this would result as more or all of the change
in the fair value of the  affected  derivative  being  reported  in  noninterest
income.  For fair value hedges,  this would result as less or none as the change
in the fair value of the affected  derivative  would be offset by changes in the
fair value of the underlying hedged asset or liability.  See further  discussion
under "--Interest Rate Risk Management" and Note 5 to our consolidated financial
statements appearing elsewhere in this report.

         Deferred Tax Assets.  We recognize  deferred tax assets and liabilities
for the  estimated  future tax effects of temporary  differences,  net operating
loss carryforwards and tax credits.  We recognize deferred tax assets subject to
management's  judgment  based upon available  evidence that  realization is more
likely  than not.  Our  deferred  tax assets are  reduced,  if  necessary,  by a
deferred tax asset valuation allowance.  In the event that we determine we would
not be able to realize all or part of our net deferred tax assets in the future,
we would need to adjust the recorded  value of our  deferred  tax assets,  which
would result in a direct  charge to our provision for income taxes in the period
in such  determination is made. See further  discussion  under  "--Comparison of
Results of  Operations  for 2001 and 2000 - Provision for Income Taxes" and Note
13 to our consolidated financial statements appearing elsewhere in this report.

         Business   Combinations.   We  emphasize   acquiring   other  financial
institutions as one means of achieving our growth objectives.  The determination
of the fair value of the assets and liabilities  acquired in these  transactions
as well as the returns on investment that may be achieved requires management to
make  significant  judgments and estimates  based upon detailed  analyses of the
existing and future  economic  value of such assets and  liabilities  and/or the
related  income steams,  including the resulting  intangible  assets.  If actual
events prove the  estimates  and  assumptions  we used in  determining  the fair
values of the  acquired  assets and  liabilities  or the  projected  income were
incorrect,  we may need to make additional adjustments to the recorded values of
such assets and  liabilities,  which could  result in  increased  volatility  to
reported earnings.  In addition,  we may need to make additional  adjustments to
the  recorded  value  of  our  intangible  assets,  which  directly  impact  our
regulatory  capital  levels.  See  further  discussion  under  "--Acquisitions,"
"--Effects of New Accounting  Standards,"  and Note 2, Note 8 and Note 21 to our
consolidated financial statements appearing elsewhere in this report.

Effects of New Accounting Standards

         In July 2001, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 142 -- Goodwill and Other Intangible Assets. SFAS No. 142 requires that
goodwill  and  intangible  assets  with  indefinite  useful  lives no  longer be
amortized,  but instead  tested for  impairment at least  annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 also requires that  intangible
assets with definite useful lives be amortized over their  respective  estimated
useful lives to their estimated  residual values, and reviewed for impairment in
accordance  with SFAS No. 144 --  Accounting  for the  Impairment or Disposal of
Long-Lived  Assets, as discussed below. The amortization of goodwill ceased upon
adoption of SFAS No. 142, which for calendar  year-end  companies was January 1,
2002.

         On January 1, 2002,  we adopted  SFAS No. 142. At the date of adoption,
we had  unamortized  goodwill of $115.9 million and core deposit  intangibles of
$9.6 million,  which were subject to the transition  provisions of SFAS No. 142.
Under SFAS No. 142, we continue to amortize,  on a straight-line basis, our core
deposit  intangibles  and goodwill  associated with purchases of branch offices.
Goodwill  associated with the purchase of  subsidiaries is no longer  amortized,
but instead, is tested annually for impairment following our existing methods of
measuring  and  recording  impairment  losses  as  described  in  Note  1 to our
consolidated financial statements appearing elsewhere in this report.

         We completed the transitional  goodwill  impairment test required under
SFAS No. 142, to determine the  potential  impact,  if any, on our  consolidated
financial  statements.  The  results  of our  transitional  goodwill  impairment
testing did not identify any goodwill impairment losses.

         In August  2001,  the FASB  issued SFAS No. 144 --  Accounting  for the
Impairment or Disposal of Long-Lived  Assets.  SFAS No. 144 supersedes  SFAS No.
121 -- Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be  Disposed  Of.  SFAS No. 144  addresses  financial  accounting  and
reporting for the impairment or disposal of long-lived  assets and requires that
one accounting  model be used for  long-lived  assets to be disposed of by sale,
whether  previously held and used or newly  acquired.  SFAS No. 144 broadens the
presentation of discontinued  operations to include more disposal  transactions.
Therefore, the accounting for similar events and circumstances will be the same.
The provisions of SFAS No. 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged.  The provisions of SFAS No. 144
generally are to be applied  prospectively.  On January 1, 2002, we  implemented
SFAS No. 144, which did not have a material effect on our consolidated financial
statements.
<PAGE>

         In June 2002,  the FASB  issued  SFAS No. 146 --  Accounting  for Costs
Associated  with Exit or Disposal  Activities.  SFAS No. 146 nullifies  Emerging
Issues Task Force, or EITF, Issue No. 94-3 -- Liability  Recognition for Certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (including
Certain Costs Incurred in a  Restructuring).  The provisions of SFAS No. 146 are
effective for exit or disposal  activities that are initiated after December 31,
2002,  with  early  application  encouraged.  We are  currently  evaluating  the
requirements of SFAS No. 146 and do not believe they will have a material effect
on our consolidated financial statements.

         On October 1, 2002,  the FASB  issued SFAS No. 147 --  Acquisitions  of
Certain  Financial  Institutions,  an amendment of SFAS No. 72 -- Accounting for
Certain  Acquisitions  of  Banking  or Thrift  Institutions  and SFAS No. 144 --
Accounting  for the  Impairment  or  Disposal  of  Long-Lived  Assets  and  FASB
Interpretation  No. 9 -- Applying  APB Opinions No. 16 and 17 When a Savings and
Loan Association or a Similar Institution is Acquired in a Business  Combination
Accounted  for by the Purchase  Method.  SFAS No. 147  addresses  the  financial
accounting  and  reporting  for the  acquisition  of all or part of a  financial
institution,  except for  transactions  between two or more mutual  enterprises.
SFAS  No.  147  removes  acquisitions  of  financial  institutions,  other  than
transactions between two or more mutual enterprises,  from the scope of SFAS No.
72. SFAS No. 147 also  provides  guidance on the  accounting  for  impairment or
disposal  of  acquired   long-term   customer-relationship   intangible  assets,
including those acquired in transactions between two or more mutual enterprises.
The  provisions  of SFAS No.  147 are  effective  for  acquisitions  on or after
October 1, 2002. On October 1, 2002, we implemented  SFAS No. 147, which did not
have a material effect on our consolidated financial statements.

         In  November  2002,  the FASB  issued  FASB  Interpretation  No.  45 --
Guarantor's  Accounting and Disclosure  Requirements  for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of  Others,  an  interpretation  of FASB
Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. This
interpretation  elaborates on the  disclosures  to be made by a guarantor in its
interim and annual  financial  statements  about its  obligations  under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize,  at the  inception of a guarantee,  a liability for the fair value of
the obligation undertaken in issuing the guarantee.  The initial recognition and
measurement  provisions of this  Interpretation  are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002,  irrespective of
the guarantor's fiscal year-end. The disclosure requirements  are  effective for
financial  statements  of interim or annual  periods  ending after  December 15,
2002.  We have  evaluated the  requirements  of FASB  Interpretation  No. 45 and
believe  they  will not have a  material  effect on our  consolidated  financial
statements other than the additional disclosure requirements included in Note 24
to our consolidated financial statements appearing elsewhere in this report.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

         The  quantitative  and  qualitative  disclosures  about market risk are
included  under "Item 7. -  Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations - Interest Rate Risk  Management"  appearing
on pages 33 through 37 of this report.

Effects of Inflation

         Inflation  affects  financial  institutions  less than  other  types of
companies.   Financial   institutions  make  relatively  few  significant  asset
acquisitions that are directly affected by changing prices.  Instead, the assets
and liabilities are primarily monetary in nature.  Consequently,  interest rates
are more  significant  to the  performance  of financial  institutions  than the
effect of general  inflation  levels.  While a  relationship  exists between the
inflation  rate and interest  rates,  we believe  this is  generally  manageable
through our asset-liability management program.

Item 8.  Financial Statements and Supplementary Data

         The  financial  statements  and  supplementary  data appear on pages 57
through 95 of this report.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         None.


<PAGE>


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

Board of Directors
<TABLE>
<CAPTION>

         Our Board of Directors,  consisting of eight members,  is identified in
the following  table.  Each of our directors was elected or appointed to serve a
one-year term and until his successor has been duly qualified for office.


                                      Director               Principal Occupation(s) During Last Five Years
          Name                 Age      Since                    and Directorships of Public Companies
          ----                 ---      -----                    -------------------------------------

<S>                             <C>     <C>       <C>
James F. Dierberg (1)           65      1979      Chairman of the Board of Directors  and Chief  Executive  Officer of
                                                  First Banks,  Inc. since 1988;  President of First Banks,  Inc. from
                                                  1979 to 1992 and from 1994 to October  1999;  Chairman  of the Board
                                                  of  Directors,  President  and Chief  Executive  Officer of FBA from
                                                  1994  until its  merger  with  First  Banks on  December  31,  2002;
                                                  Trustee of First  Preferred  Capital  Trust,  First America  Capital
                                                  Trust,  First Preferred Capital Trust II and First Preferred Capital
                                                  Trust III since 1997, 1998, May 2001 and October 2001, respectively.

Allen H. Blake                  60      1988      President of First Banks,  Inc. since October 1999; Chief Financial
                                                  Officer of First Banks,  Inc. from 1984 to September 1999 and since
                                                  May 2001;  Chief Operating  Officer of First Banks,  Inc. from 1998
                                                  to June 2002;  Director and  Secretary of First Banks,  Inc.  since
                                                  1988; Director,  Executive Vice President,  Chief Operating Officer
                                                  and  Secretary  of FBA from 1998 until its merger  with First Banks
                                                  on December 31, 2002;  Chief Financial  Officer of FBA from 1994 to
                                                  September  1999  and  from  May  2001  until  December  2002;  Vice
                                                  President and Secretary of FBA from 1994 to 1998;  Trustee of First
                                                  Preferred  Capital  Trust,   First  America  Capital  Trust,  First
                                                  Preferred  Capital Trust II and First  Preferred  Capital Trust III
                                                  since 1997, 1998, 2000 and 2001, respectively.

Donald W. Williams              55      2001      Senior  Executive  Vice President and Chief Credit Officer of First
                                                  Banks,  Inc. since 2000;  Executive Vice President and Chief Credit
                                                  Officer of First Banks,  Inc. since 1996;  Executive Vice President
                                                  and Chief  Credit  Officer of FBA until its merger with First Banks
                                                  on December 31,  2002;  Chairman of the Board of Directors of First
                                                  Bank  since  2000 and Chief  Executive  Officer  of First Bank from
                                                  2000 to January 2003.

Michael J. Dierberg (1)         31      2001      General Counsel of First Banks,  Inc. since June 2002;  Senior Vice
                                                  President  (Northern  California Region) of First Bank & Trust from
                                                  July 2001 to June 2002.  Prior to joining  First Banks,  Inc.,  Mr.
                                                  Dierberg  served as an attorney  for the Office of the  Comptroller
                                                  of the Currency in Washington, D.C. from 1998 to July 2001.

Gordon A. Gundaker (2)          69      2001      President and Chief Executive  Officer of Coldwell Banker Gundaker,
                                                  a  full-service  real  estate  brokerage  company,  in  St.  Louis,
                                                  Missouri.

David L. Steward (2)            51      2000      Chairman of the Board of Directors,  President and Chief  Executive
                                                  Officer of World Wide Technology,  Inc., an electronic  procurement
                                                  and logistics company in the information  technology  industry,  in
                                                  St.  Louis,  Missouri;  Chairman  of  the  Board  of  Directors  of
                                                  Telcobuy.com  (an  affiliate  of  World  Wide  Technology,   Inc.);
                                                  Director of the 21st Century  Workforce,  Civic  Progress,  the St.
                                                  Louis   Regional   Commerce   and  Growth   Association,   Missouri
                                                  Technology  Corporation,  Webster  University,  BJC Health  System,
                                                  Union  Memorial  Outreach  Center,  St. Louis Science  Center,  the
                                                  United Way of Greater St.  Louis,  Greater St. Louis Area Council -
                                                  Boy Scouts of America, INROADS and New Cornerstone.


<PAGE>



Hal J. Upbin (2)                64      2001      Director  of  Kellwood  Company,  a  manufacturer  and  marketer of
                                                  apparel and related soft goods, in St. Louis,  Missouri since 1995;
                                                  Chairman of the Board of Directors,  President and Chief  Executive
                                                  Officer  of  Kellwood  Company  since  1997;  President  and  Chief
                                                  Operating   Officer  of  Kellwood   Company   from  1994  to  1997;
                                                  Executive Vice President  Corporate  Development from 1992 to 1994;
                                                  Vice President Corporate Development from 1990 to 1992.

Douglas H. Yaeger (2)           54      2000      Chairman of the Board of Directors,  President and Chief  Executive
                                                  Officer of The  Laclede  Group,  Inc.,  a provider  of natural  gas
                                                  service  through  its  regulated  core  utility  operations  in St.
                                                  Louis,  Missouri  since 2001;  Chairman of the Board of  Directors,
                                                  President and Chief Executive  Officer of Laclede Gas Company since
                                                  1999;  President  of Laclede Gas Company  since 1997;  Director and
                                                  Chief  Operating  Officer of Laclede Gas Company from 1997 to 1999;
                                                  Executive  Vice President - Operations and Marketing of Laclede Gas
                                                  Company  from 1995 to 1997;  Chairman of the Board of  Directors of
                                                  the St. Louis Regional  Commerce and Growth  Association;  Director
                                                  of Southern Gas Association,  the St. Louis Science  Center,  Civic
                                                  Progress,  Greater St. Louis Area  Council - Boy Scouts of America,
                                                  the  United  Way  of  Greater  St. Louis,   The  Municipal  Theatre
                                                  Association  of  St.  Louis  and  Webster University.

----------------------------------
(1)  Mr. Michael J. Dierberg is the son of Mr. James F. Dierberg. See Item 12. Security Ownership of Certain Beneficial
     Owners and Management.
(2)  Member of the Audit Committee.
</TABLE>
Executive Officers
<TABLE>
<CAPTION>

         Our  executive  officers,  each of whom was  elected  to the  office(s)
indicated by the Board of Directors, as of March 25, 2003, were as follows:

                                            Current First Banks                     Principal Occupation(s)
          Name                Age              Office(s) Held                       During Last Five Years
          ----                ---              --------------                       ----------------------

<S>                            <C>  <C>                                     <C>
James F. Dierberg              65   Chairman  of the Board of  Directors    See Item 10 -  "Directors  and Executive
                                    and Chief Executive Officer.            Officers  of the  Registrant - Board  of
                                                                            Directors."

Allen H. Blake                 60   President,  Chief Financial Officer,    See Item 10 - "Directors  and  Executive
                                    Secretary and Director.                 Officers  of the  Registrant  - Board of
                                                                            Directors."

Donald W. Williams             55   Senior   Executive  Vice  President,    See Item 10 - "Directors  and  Executive
                                    Chief Credit Officer and Director.      Officers  of the  Registrant  - Board of
                                                                            Directors."


Terrance M. McCarthy           48   Senior  Executive Vice President and    Mr.   McCarthy  has  been   employed  in
                                    Chief  Operating  Officer;  Chairman    various executive  capacities with First
                                    of   the    Board   of    Directors,    Banks, Inc. since 1995.
                                    President   and   Chief    Executive
                                    Officer  of  FB&T;   President   and
                                    Chief  Executive  Officer  of  First
                                    Bank.

Mark T. Turkcan                46   Executive  Vice President - Mortgage    Mr.   Turkcan   has  been   employed  in
                                    Banking; Director and Executive Vice    various executive  capacities with First
                                    Vice   President   of   First  Bank;    Banks, Inc. since 1990.
                                    Chairman of the Board of  Directors,
                                    President   and   Chief    Executive
                                    Officer of First Banc Mortgage, Inc.
</TABLE>


<PAGE>


Section 16(a) Beneficial Ownership Reporting Compliance

         To our knowledge,  our directors,  executive  officers or shareholders,
who are subject,  in their  capacity as such, to the reporting  obligations  set
forth in Section 16 of the Securities  Exchange Act of 1934, as amended,  or the
Exchange Act,  filed on a timely basis reports  required by Section 16(a) of the
Exchange Act during the year ended December 31, 2002.

Item 11.  Executive Compensation
<TABLE>
<CAPTION>

         The   following   table  sets  forth  certain   information   regarding
compensation earned by the named executive officers for the years ended December
31, 2002, 2001 and 2000:

                                       SUMMARY COMPENSATION TABLE
                                       --------------------------

                                                                                                      All Other
         Name and Principal Position(s)                     Year          Salary        Bonus     Compensation (1)
         ------------------------------                     ----          ------        -----     ----------------

<S>                                                         <C>         <C>              <C>            <C>
James F. Dierberg                                           2002        $  605,000       35,000         5,500
Chairman of the Board of Directors                          2001           585,000      100,000         2,850
and Chief Executive Officer                                 2000           560,000       90,000         5,250

Allen H. Blake                                              2002           360,500       45,000         5,500
President and Chief Financial Officer                       2001           343,700       58,000         2,590
                                                            2000           282,900       45,000         6,150

Donald W. Williams                                          2002           311,000       35,000         5,500
Senior Executive Vice President                             2001           297,000       48,000         5,250
and Chief Credit Officer                                    2000           241,250       40,000         6,450

Terrance M. McCarthy                                        2002           269,000       50,000         3,200
Senior Executive Vice President and                         2001           220,000       38,000         5,200
Chief Operating Officer;                                    2000           180,000       25,000         6,650
Chairman of the Board of Directors, President
and Chief Executive Officer of FB&T; and
President and Chief Executive Officer of First Bank

Mark T. Turkcan                                             2002           188,000       35,000         5,500
Executive Vice President - Mortgage Banking;                2001           177,500       22,500         5,250
Director and Executive Vice President of First Bank;        2000           167,500       15,000         6,570
and Chairman of the Board of Directors, President
and Chief Executive Officer of First Banc Mortgage, Inc.

-----------------------
(1)  All other compensation reported includes matching contributions to our 401(k) Plan for the year indicated
     and ownership interests granted in units of Star Lane Trust, our unit investment trust that was created on
     January 21, 2000.
</TABLE>

Employment  Agreement.  Mr. Williams is a party to an employment  agreement with
First Bank and us. The term of his contract is one year, and it is automatically
renewable  for  additional  one-year  periods.  As  part of the  annual  renewal
process,  the base salary payable under the employment agreement is reviewed and
may be adjusted at the  discretion  of our Board of  Directors.  The base salary
paid to Mr.  Williams  pursuant to his employment  agreement is set forth in the
salary column of the Summary Compensation Table.

         Mr. Williams'  employment contract provides for a bonus of up to twenty
percent  (20%) of his  annual  base  salary,  with the  exact  percentage  to be
determined by our Chairman of the Board if Mr.  Williams  meets the criteria set
by First Bank and us at the beginning of each contract year. The annual bonus is
payable within ninety (90) days after the close of the year to which it relates.
In addition,  Mr.  Williams is entitled to  participate  in our 401(k) Plan, our
health  insurance plan and in other  additional  benefit plans that we may adopt
for our employees.
<PAGE>

         Under  the  terms  of  his  employment  contract,  if Mr.  Williams  is
terminated  for a reason  other  than  retirement,  death,  "disability"  or for
"cause,"  as  those  terms  are  defined  in  the  employment  agreement,  or is
terminated  due to a change in our  control,  Mr.  Williams  will be entitled to
receive two years' base salary.  Should Mr. Williams  voluntarily  terminate his
employment  with First Bank and us, he would be  entitled to receive the balance
of his base  salary for that year or a minimum of six  months  salary,  provided
that he would  not be  permitted  to  accept a  position  with any bank or trust
company for the duration of that year. Finally, in the event of the death of Mr.
Williams, his employment agreement provides that his estate would be entitled to
receive compensation that would have been payable to him during the month of his
death, and his monthly salary for the twelve-month  period following the date of
his death.

Compensation  of Directors.  Only those  directors who are neither our employees
nor employees of any of our subsidiaries receive remuneration for their services
as directors.  Such non-employee  directors (currently Messrs.  Gordon Gundaker,
David Steward,  Hal Upbin and Douglas Yaeger)  received a fee of $3,000 for each
Board meeting  attended and $1,000 for each Audit Committee  meeting attended in
2002.  The Audit  Committee  is  currently  the only  committee  of our Board of
Directors.  Messrs.  Gundaker and Upbin each received $17,000 in director's fees
during  2002,  and Messrs.  Steward  and Yaeger  received  $16,000 and  $18,000,
respectively, in director's fees during 2002.

         Our  executive   officers  who  are  also   directors  do  not  receive
remuneration  other  than  salaries  and  bonuses  for  serving  on our Board of
Directors.

Compensation Committee Interlocks and Insider Participation.  Messrs.  Dierberg,
Blake,  Williams and McCarthy who are executive  officers,  were also members of
the Board of Directors and/or executive officers of FBA prior to its merger with
and into First  Banks on  December  31,  2002.  FBA did not have a  compensation
committee,  but  its  Board  of  Directors  performed  the  functions  of such a
committee.  Except for the  foregoing,  none of our  executive  officers  served
during 2002 as a member of the  compensation  committee,  or any other committee
performing similar  functions,  or as a director of another entity, any of whose
executive officers or directors served on our Board of Directors.

         See further information regarding  transactions with related parties in
Note 19 to our consolidated  financial  statements appearing on page 88 and page
89 of this report.


<PAGE>


Item 12. Security Ownership of Certain Beneficial Owners and Management

         The  following  table  sets  forth,  as  of  March  25,  2003,  certain
information  with  respect to the  beneficial  ownership  of all  classes of our
voting  capital stock by each person known to us to be the  beneficial  owner of
more than five percent of the  outstanding  shares of the respective  classes of
our stock:

<TABLE>
<CAPTION>
                                                                                                   Percent of
                                                                         Number of                    Total
                          Title of Class                                  Shares         Percent     Voting
                         and Name of Owner                                 Owned        of Class      Power
                         -----------------                                 -----        --------      -----

Common Stock ($250.00 par value)
--------------------------------

<S>                                    <C>                             <C>       <C>    <C>             <C>
     James F. Dierberg II Family Trust (1)........................     7,714.677 (2)    32.605%         *
     Ellen C. Dierberg Family Trust (1)...........................     7,714.676 (2)    32.605          *
     Michael J. Dierberg Family Trust (1).........................     4,255.319 (2)    17.985          *
     Michael J. Dierberg Irrevocable Trust (1)....................     3,459.358 (2)    14.621          *
     First Trust (Mary W. Dierberg and First Bank, Trustees) (1)..       516.830 (3)     2.184          *

Class A Convertible Adjustable Rate Preferred Stock
---------------------------------------------------
($20.00 par value)
------------------

     James F. Dierberg, Trustee of the James F. Dierberg
         Living Trust (1).........................................        641,082 (4)(5)    100%      77.7%

Class B Non-Convertible Adjustable Rate Preferred Stock
-------------------------------------------------------
($1.50 par value)
-----------------

     James F. Dierberg, Trustee of the James F. Dierberg
         Living Trust (1).........................................        160,505 (5)       100%      19.4%

All executive officers and directors
    other than Mr. James F. Dierberg
    and members of his immediate family...........................              0             0%       0.0%

--------------------

*    Represents less than 1.0%.
(1)  Each of the  above-named  trustees and beneficial  owners are United States
     citizens,  and the business  address for each such  individual is 135 North
     Meramec  Avenue,  Clayton,  Missouri  63105.  Mr.  James F.  Dierberg,  our
     Chairman  of the  Board  and  Chief  Executive  Officer,  and Mrs.  Mary W.
     Dierberg,  are husband and wife, and Messrs.  James F. Dierberg II, Michael
     J. Dierberg and Mrs. Ellen D. Schepman, formerly Ms. Ellen C. Dierberg, are
     their adult children.
(2)  Due to the relationship  between Mr. James F. Dierberg,  his wife and their
     children,  Mr. Dierberg is deemed to share voting and investment power over
     these shares.
(3)  Due to the relationship  between Mr. James F. Dierberg,  his wife and First
     Bank,  Mr.  Dierberg is deemed to share  voting and  investment  power over
     these shares.
(4)  Convertible  into common stock,  based on the appraised value of the common
     stock at the date of conversion.  Assuming an appraised value of the common
     stock  equal to the book value,  the number of shares of common  stock into
     which the Class A Preferred  Stock is  convertible  at December 31, 2002 is
     600, which shares are not included in the above table.
(5)  Sole voting and investment power.
</TABLE>

<PAGE>


Item 13. Certain Relationships and Related Transactions

         Outside  of normal  customer  relationships,  no  directors,  executive
officers  or  shareholders  holding  over 5% of our  voting  securities,  and no
corporations  or firms with  which such  persons  or  entities  are  associated,
currently  maintain  or have  maintained  since the  beginning  of the last full
fiscal  year,  any  significant  business  or  personal  relationship  with  our
subsidiaries  or us, other than that which arises by virtue of such  position or
ownership  interest in our  subsidiaries or us, except as set forth in Item 11 -
"Executive  Compensation  -  Compensation  of Directors," or as described in the
following paragraphs.

         Our subsidiary  banks have had in the past, and may have in the future,
loan  transactions  and  related  banking  services  in the  ordinary  course of
business with our directors or their  affiliates.  These loan  transactions have
been and will be on the same terms, including interest rates and collateral,  as
those  prevailing  at the time for  comparable  transactions  with  unaffiliated
persons  and did not  involve  more than the normal  risk of  collectibility  or
present other unfavorable features. Our subsidiary banks do not extend credit to
our officers or to officers of our subsidiary banks, except extensions of credit
secured by mortgages on personal  residences,  loans to purchase automobiles and
personal credit card accounts.

         Certain of our directors and officers and their  respective  affiliates
have deposit accounts and related banking services with our subsidiary banks. It
is the policy of our  subsidiary  banks not to permit any of their  officers  or
directors or their  affiliates to overdraw  their  respective  deposit  accounts
unless that person has been previously approved for overdraft protection under a
plan whereby a credit limit has been established in accordance with the standard
credit criteria of our subsidiary banks.


<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

              (a)   1.   Financial  Statements  and  Supplementary  Data  -  The
                         financial statements  and  supplementary  data filed as
                         part of this Report are included in Item 8.

                    2.   Financial  Statement  Schedules - These  schedules  are
                         omitted for the reason they are not required or are not
                         applicable.

                    3.   Exhibits  - The  exhibits  are  listed  in the index of
                         exhibits required by Item 601 of Regulation S-K at Item
                         (c) below and are incorporated herein by reference.

              (b)   Reports on Form 8-K.

                    We filed no reports on Form 8-K  during  the  quarter  ended
                    December 31, 2002.

              (c)   The index of required exhibits is included beginning on page
                    100 of this Report.

<PAGE>



                       THIS PAGE INTENTIONALLY LEFT BLANK

<PAGE>


                          INDEPENDENT AUDITORS' REPORT




                               [KPMG Letterhead]




The Board of Directors and Stockholders
First Banks, Inc.:

We have audited the  accompanying  consolidated  balance  sheets of First Banks,
Inc. and  subsidiaries  (the Company) as of December 31, 2002 and 2001,  and the
related consolidated  statements of income,  changes in stockholders' equity and
comprehensive  income  and cash  flows for each of the  years in the  three-year
period ended December 31, 2002. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above, present
fairly, in all material  respects,  the financial  position of First Banks, Inc.
and  subsidiaries  as of December  31,  2002 and 2001,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 2002, in conformity  with  accounting  principles  generally
accepted in the United States of America.

As  discussed  in note 1 to the  consolidated  financial  statements,  effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets."

As discussed in note 1 to the  consolidated  financial  statements,  the Company
changed  its  method  of  accounting  for  derivative  instruments  and  hedging
activities in 2001.

                                              /s/KPMG LLP
                                              --------------
                                                 KPMG LLP



St. Louis, Missouri
March 14, 2003



<PAGE>
<TABLE>
<CAPTION>

                                           CONSOLIDATED BALANCE SHEETS
                       (dollars expressed in thousands, except share and per share data)


                                                                                                December 31,
                                                                                            --------------------
                                                                                            2002            2001
                                                                                            ----            ----

                                                       ASSETS
                                                       ------
Cash and cash equivalents:
<S>                                                                                    <C>                 <C>
     Cash and due from banks.......................................................    $   194,519         181,522
     Interest-bearing deposits with other financial institutions
       with maturities of three months or less.....................................            832           4,664
     Federal funds sold............................................................          7,900          55,688
                                                                                       -----------      ----------
               Total cash and cash equivalents.....................................        203,251         241,874
                                                                                       -----------      ----------

Investment securities:
     Available for sale, at fair value.............................................      1,120,894         610,466
     Held to maturity, at amortized cost (fair value of $16,978 and
       $20,812 at December 31, 2002 and 2001, respectively)........................         16,426          20,602
                                                                                       -----------      ----------
               Total investment securities.........................................      1,137,320         631,068
                                                                                       -----------      ----------

Loans:
     Commercial, financial and agricultural........................................      1,443,016       1,532,875
     Real estate construction and development......................................        989,650         954,913
     Real estate mortgage..........................................................      2,444,122       2,445,847
     Lease financing...............................................................        126,738         148,971
     Consumer and installment......................................................         86,763         124,542
     Loans held for sale...........................................................        349,965         204,206
                                                                                       -----------      ----------
               Total loans.........................................................      5,440,254       5,411,354
     Unearned discount.............................................................         (7,666)         (2,485)
     Allowance for loan losses.....................................................        (99,439)        (97,164)
                                                                                       -----------      ----------
               Net loans...........................................................      5,333,149       5,311,705
                                                                                       -----------      ----------

Derivative instruments.............................................................         97,887          54,889
Bank premises and equipment, net of accumulated
     depreciation and amortization.................................................        152,418         149,604
Goodwill ..........................................................................        140,112         115,860
Bank-owned life insurance..........................................................         92,616          87,200
Accrued interest receivable........................................................         35,638          37,349
Deferred income taxes..............................................................         92,157          94,546
Other assets.......................................................................         58,252          54,356
                                                                                       -----------      ----------
               Total assets........................................................    $ 7,342,800       6,778,451
                                                                                       ===========      ==========

The  accompanying  notes  are an  integral  part of the  consolidated  financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                      CONSOLIDATED BALANCE SHEETS (CONTINUED)
                         (dollars expressed in thousands, except share and per share data)


                                                                                               December 31,
                                                                                        --------------------------
                                                                                           2002            2001
                                                                                           ----            ----

                                                   LIABILITIES
                                                   -----------
Deposits:
     Demand:
<S>                                                                                    <C>                 <C>
       Non-interest-bearing........................................................    $   986,674         921,455
       Interest-bearing............................................................        819,429         629,015
     Savings.......................................................................      2,176,616       1,832,939
     Time:
       Time deposits of $100 or more...............................................        469,904         484,201
       Other time deposits.........................................................      1,720,197       1,816,294
                                                                                       -----------      ----------
          Total deposits...........................................................      6,172,820       5,683,904
Short-term borrowings..............................................................        265,644         243,134
Note payable.......................................................................          7,000          27,500
Guaranteed preferred beneficial interests in
     subordinated debentures.......................................................        270,039         235,881
Accrued interest payable...........................................................         11,751          16,006
Deferred income taxes..............................................................         61,204          43,856
Accrued expenses and other liabilities.............................................         35,301          61,515
Minority interest in subsidiary....................................................             --          17,998
                                                                                       -----------      ----------
          Total liabilities........................................................      6,823,759       6,329,794
                                                                                       -----------      ----------


                                              STOCKHOLDERS' EQUITY
                                              --------------------

Preferred stock:
     $1.00 par value, 5,000,000 shares authorized, no shares issued
       and outstanding at December 31, 2002 and 2001...............................             --              --
     Class A convertible, adjustable rate, $20.00 par value, 750,000
       shares authorized, 641,082 shares issued and outstanding....................         12,822          12,822
     Class B adjustable rate, $1.50 par value, 200,000 shares authorized,
       160,505 shares issued and outstanding.......................................            241             241
Common stock, $250.00 par value, 25,000 shares authorized,
     23,661 shares issued and outstanding..........................................          5,915           5,915
Additional paid-in capital.........................................................          5,910           6,074
Retained earnings..................................................................        433,689         389,308
Accumulated other comprehensive income.............................................         60,464          34,297
                                                                                       -----------      ----------
          Total stockholders' equity...............................................        519,041         448,657
                                                                                       -----------      ----------
          Total liabilities and stockholders' equity...............................    $ 7,342,800       6,778,451
                                                                                       ===========      ==========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                        CONSOLIDATED STATEMENTS OF INCOME
             (dollars expressed in thousands, except per share data)

                                                                                     Years Ended December 31,
                                                                                 ---------------------------------
                                                                                   2002         2001        2000
                                                                                   ----         ----        ----
Interest income:
<S>                                                                            <C>            <C>          <C>
     Interest and fees on loans..............................................  $ 390,062      412,153      390,332
     Investment securities:
       Taxable...............................................................     31,034       26,244       27,331
       Nontaxable............................................................      1,865          888          961
     Federal funds sold and other............................................      1,949        5,458        4,202
                                                                               ---------      -------     --------
          Total interest income..............................................    424,910      444,743      422,826
                                                                               ---------      -------     --------
Interest expense:
     Deposits:
       Interest-bearing demand...............................................      7,551        7,019        5,909
       Savings...............................................................     35,668       50,388       51,656
       Time deposits of $100 or more.........................................     19,047       28,026       20,654
       Other time deposits...................................................     66,002       97,105       99,603
     Short-term borrowings...................................................      3,450        5,847        5,881
     Note payable............................................................      1,032        2,629        3,976
     Guaranteed preferred debentures.........................................     23,990       18,590       13,173
                                                                               ---------      -------     --------
          Total interest expense.............................................    156,740      209,604      200,852
                                                                               ---------      -------     --------
          Net interest income................................................    268,170      235,139      221,974
Provision for loan losses....................................................     55,500       23,510       14,127
                                                                               ---------      -------     --------
          Net interest income after provision for loan losses................    212,670      211,629      207,847
                                                                               ---------      -------     --------
Noninterest income:
     Service charges on deposit accounts and customer service fees...........     30,978       22,865       19,794
     Gain on mortgage loans sold and held for sale...........................     28,415       14,983        7,806
     Gain on sale of credit card portfolio, net of expenses..................         --        1,853           --
     Net gain on sales of available-for-sale investment securities...........         90       18,722          168
     Gain on sales of branches, net of expenses..............................         --           --        1,355
     Bank-owned life insurance investment income.............................      5,928        4,415        4,314
     Net gain on derivative instruments......................................      2,181       18,583           --
     Other...................................................................     21,863       17,188        9,341
                                                                               ---------      -------     --------
          Total noninterest income...........................................     89,455       98,609       42,778
                                                                               ---------      -------     --------
Noninterest expense:
     Salaries and employee benefits..........................................    111,513       93,452       73,391
     Occupancy, net of rental income.........................................     21,030       17,432       14,675
     Furniture and equipment.................................................     17,495       12,612       11,702
     Postage, printing and supplies..........................................      5,556        4,869        4,431
     Information technology fees.............................................     32,135       26,981       22,359
     Legal, examination and professional fees................................      9,284        6,988        4,523
     Amortization of intangibles associated with
        the purchase of subsidiaries.........................................      2,012        8,248        5,297
     Communications..........................................................      3,166        3,247        2,625
     Advertising and business development....................................      5,023        5,237        4,331
     Other...................................................................     25,542       32,605       14,656
                                                                               ---------      -------     --------
          Total noninterest expense..........................................    232,756      211,671      157,990
                                                                               ---------      -------     --------

<PAGE>

          Income before provision for income taxes,
            minority interest in income of subsidiary
            and cumulative effect of change in accounting principle..........     69,369       98,567       92,635
Provision for income taxes...................................................     22,771       30,048       34,482
                                                                               ---------      -------     --------
          Income before minority interest in income
           of subsidiary and cumulative
           effect of change in accounting principle..........................     46,598       68,519       58,153
Minority interest in income of subsidiary....................................      1,431        2,629        2,046
                                                                               ---------      -------     --------
          Income before cumulative effect of change in accounting principle..     45,167       65,890       56,107
Cumulative effect of change in accounting principle, net of tax..............         --       (1,376)          --
                                                                               ---------      -------     --------
          Net income.........................................................     45,167       64,514       56,107
Preferred stock dividends....................................................        786          786          786
                                                                               ---------      -------     --------
          Net income available to common stockholders........................  $  44,381       63,728       55,321
                                                                               =========      =======     ========
Basic earnings per common share:
     Income before cumulative effect of change in accounting principle.......  $1,875.69     2,751.54     2,338.04
     Cumulative effect of change in accounting principle, net of tax.........         --       (58.16)          --
                                                                                 -------     --------     --------
     Basic...................................................................  $1,875.69     2,693.38     2,338.04
                                                                               =========     ========     ========
Diluted earnings per common share:
     Income before cumulative effect of change in accounting principle.......  $1,853.64     2,684.93     2,267.41
     Cumulative effect of change in accounting principle, net of tax.........         --       (58.16)          --
                                                                               ---------     --------     --------
     Diluted.................................................................  $1,853.64     2,626.77     2,267.41
                                                                               =========     ========     ========

Weighted average shares of common stock outstanding..........................     23,661       23,661       23,661
                                                                               =========     ========     ========

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                                                    Three Years Ended December 31, 2002
                                           (dollars expressed in thousands, except per share data)

                                                      Adjustable Rate                                       Accu-
                                                      Preferred Stock                                       mulated
                                                      ---------------                                       Other     Total
                                                   Class A                     Additional Compre-           Compre-   Stock-
                                                   Conver-             Common    Paid-in  hensive Retained  hensive  holders'
                                                    tible    Class B    Stock    Capital  Income  Earnings  Income    Equity
                                                    -----    -------    -----    -------  ------- --------  ------    ------

<S>                                                <C>         <C>     <C>       <C>     <C>      <C>      <C>      <C>
Consolidated balances, January 1, 2000...........  $12,822     241     5,915     3,318            270,259  2,350    294,905
Year ended December 31, 2000:
    Comprehensive income:
      Net income.................................       --      --        --        --   56,107    56,107     --     56,107
      Other comprehensive income, net of tax -
        unrealized gains on securities, net of
        reclassification adjustment (1)..........       --      --        --        --    3,671        --  3,671      3,671
                                                                                        -------
      Comprehensive income.......................                                        59,778
                                                                                        =======
    Class A preferred stock dividends,
      $1.20 per share............................       --       --       --        --               (769)    --       (769)
    Class B preferred stock dividends,
      $0.11 per share............................       --       --       --        --                (17)    --        (17)
    Effect of capital stock transactions of
      majority-owned subsidiary..................       --      --        --    (1,051)                --     --     (1,051)
                                                   -------    ----     -----    ------            ------- ------    -------
Consolidated balances, December 31, 2000.........   12,822     241     5,915     2,267            325,580  6,021    352,846
Year ended December 31, 2001:
    Comprehensive income:
      Net income.................................       --      --        --        --   64,514    64,514     --     64,514
      Other comprehensive income, net of tax:
        Unrealized losses on securities, net of
          reclassification adjustment (1)........       --      --        --        --   (1,871)       -- (1,871)    (1,871)
        Derivative instruments:
          Cumulative effect of change in
             accounting principle, net...........       --      --        --        --    9,069        --  9,069      9,069
          Current period transactions............       --      --        --        --   27,021        -- 27,021     27,021
          Reclassification to earnings...........       --      --        --        --   (5,943)       -- (5,943)    (5,943)
                                                                                        -------
      Comprehensive income.......................                                        92,790
                                                                                        =======
    Class A preferred stock dividends,
      $1.20 per share............................       --      --        --        --               (769)    --       (769)
    Class B preferred stock dividends,
      $0.11 per share............................       --      --        --        --                (17)    --        (17)
    Effect of capital stock transactions of
      majority-owned subsidiary..................       --      --        --     3,807                 --     --      3,807
                                                   -------    ----     -----    ------            ------- ------    -------
Consolidated balances, December 31, 2001.........   12,822     241     5,915     6,074            389,308 34,297    448,657
Year ended December 31, 2002:
    Comprehensive income:
      Net income.................................       --      --        --        --   45,167    45,167     --     45,167
      Other comprehensive income, net of tax:
        Unrealized gains on securities, net of
          reclassification adjustment (1)........       --      --        --        --    8,909        --  8,909      8,909
        Derivative instruments:
          Current period transactions............       --      --        --        --   17,258        -- 17,258     17,258
                                                                                        -------
      Comprehensive income.......................                                        71,334
                                                                                        =======
    Class A preferred stock dividends,
      $1.20 per share............................       --      --        --        --               (769)    --       (769)
    Class B preferred stock dividends,
      $0.11 per share............................       --      --        --        --                (17)    --        (17)
    Effect of capital stock transactions of
      majority-owned subsidiary..................       --      --        --      (164)                --     --       (164)
                                                   -------    ----     -----    ------            ------- ------    -------
Consolidated balances, December 31, 2002.........  $12,822     241     5,915     5,910            433,689 60,464    519,041
                                                   =======    ====     =====    ======            ======= ======    =======
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

--------------------------------------
(1) Disclosure of reclassification adjustment:
                                                                                                Years Ended December 31,
                                                                                             -----------------------------
                                                                                               2002       2001       2000
                                                                                               ----       ----       ----

<S>                                                                                          <C>        <C>         <C>
     Unrealized gains arising during the year............................................    $8,968     10,298      3,780
     Less reclassification adjustment for gains included in net income...................        59     12,169        109
                                                                                             ------     ------      -----
     Unrealized gains (losses) on investment securities..................................    $8,909     (1,871)     3,671
                                                                                             ======     ======      =====

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (dollars expressed in thousands)
<TABLE>
<CAPTION>
                                                                                      Years ended December 31,
                                                                                  --------------------------------
                                                                                     2002       2001        2000
                                                                                     ----       ----        ----

Cash flows from operating activities:
<S>                                                                            <C>              <C>          <C>
     Net income............................................................... $    45,167      64,514       56,107
     Adjustments to reconcile net income to net cash
       used in operating activities:
          Cumulative effect of change in accounting principle, net of tax.....          --       1,376           --
          Depreciation and amortization of bank premises and equipment........      18,902      12,713        9,536
          Amortization, net of accretion......................................      17,769      11,203        8,370
          Originations and purchases of loans held for sale...................  (1,954,346) (1,524,156)    (532,178)
          Proceeds from sales of loans held for sale..........................   1,624,444   1,348,772      413,247
          Provision for loan losses...........................................      55,500      23,510       14,127
          Provision for income taxes..........................................      22,771      30,048       34,482
          Payments of income taxes............................................     (34,287)    (19,297)     (10,525)
          Decrease (increase) in accrued interest receivable..................       2,206      11,513       (7,338)
          Interest accrued on liabilities.....................................     156,740     209,604      200,852
          Payments of interest on liabilities.................................    (162,023)   (218,329)    (190,937)
          Gain on mortgage loans sold and held for sale.......................     (28,415)    (14,983)      (7,806)
          Gain on sale of credit card portfolio, net of expenses..............          --      (1,853)          --
          Net gain on sales of available-for-sale investment securities.......         (90)    (18,722)        (168)
          Gain on sales of branches, net of expenses..........................          --         --        (1,355)
          Net gain on derivative instruments..................................      (2,181)    (18,583)          --
          Other operating activities, net.....................................      (1,138)      4,690       (3,978)
          Minority interest in income of subsidiary...........................       1,431       2,629        2,046
                                                                               -----------  ----------     --------
               Net cash used in operating activities..........................    (237,550)    (95,351)     (15,518)
                                                                               -----------  ----------     --------

Cash flows from investing activities:
     Cash received (paid) for acquired entities, net of
       cash and cash equivalents received (paid)..............................      11,715       6,351      (86,106)
     Proceeds from sales of investment securities.............................      55,130      85,824       46,279
     Maturities of investment securities available for sale...................   1,085,993     762,548      347,642
     Maturities of investment securities held to maturity.....................       6,829       4,292        1,169
     Purchases of investment securities available for sale....................  (1,379,391)   (822,593)    (289,875)
     Purchases of investment securities held to maturity......................      (2,680)       (750)      (3,806)
     Proceeds from terminations of derivative instruments.....................          --      22,203           --
     Net decrease (increase) in loans.........................................     199,051      (6,252)    (339,575)
     Recoveries of loans previously charged-off...............................      15,933       9,469        9,842
     Purchases of bank premises and equipment.................................     (15,565)    (36,452)     (30,856)
     Other investing activities...............................................       9,672        (331)       5,052
                                                                               -----------  ----------     --------
               Net cash (used in) provided by investing activities............     (13,313)     24,309     (340,234)
                                                                               -----------  ----------     --------

Cash flows from financing activities:
     Increase in demand and savings deposits..................................     450,541     299,466      155,058
     (Decrease) increase in time deposits.....................................    (245,637)   (254,748)     129,008
     Repayments of Federal Home Loan Bank advances............................     (16,600)     (5,000)          --
     (Decrease) increase in federal funds purchased...........................     (26,000)     70,000      (27,100)
     Increase in securities sold under agreements to repurchase...............      46,989       8,438       52,015
     Advances drawn on note payable...........................................      43,500      69,500      137,000
     Repayments of note payable...............................................     (64,000)   (125,000)    (118,000)
     Proceeds from issuance of guaranteed preferred subordinated debentures...      24,233      52,767       55,050
     Sale of branch deposits..................................................          --          --          892
     Payment of preferred stock dividends.....................................        (786)       (786)        (786)
                                                                               -----------  ----------     --------
               Net cash provided by financing activities......................     212,240     114,637      383,137
                                                                               -----------  ----------     --------
               Net (decrease) increase in cash and cash equivalents...........     (38,623)     43,595       27,385
Cash and cash equivalents, beginning of year..................................     241,874     198,279      170,894
                                                                               -----------  ----------     --------
Cash and cash equivalents, end of year........................................ $   203,251     241,874      198,279
                                                                               ===========  ==========     ========

Noncash investing and financing activities:
     Reduction of deferred tax asset valuation reserve........................ $        --       4,971        1,267
     Loans transferred to other real estate...................................       7,607       3,493        1,761
     Loans exchanged for and transferred to
       available-for-sale investment securities...............................          --          --       37,634
     Loans held for sale exchanged for and transferred
       to available-for-sale investment securities............................          --          --       19,805
     Loans held for sale transferred to loans.................................       3,002      38,343       72,847
                                                                               ===========  ==========     ========

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


<PAGE>
                     Notes To Consolidated Financial Statements

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The  following  is a summary  of the  significant  accounting  policies
followed by First Banks, Inc. and subsidiaries (First Banks or the Company):

         Basis  of  Presentation.   The  accompanying   consolidated   financial
statements  of First Banks have been  prepared  in  accordance  with  accounting
principles  generally  accepted  in the United  States of America and conform to
predominant practices within the banking industry. Management of First Banks has
made a number of estimates and  assumptions  relating to the reporting of assets
and  liabilities  and the  disclosure of contingent  assets and  liabilities  to
prepare the  consolidated  financial  statements in conformity  with  accounting
principles  generally  accepted in the United States of America.  Actual results
could differ from those estimates.

         Principles of  Consolidation.  The  consolidated  financial  statements
include the accounts of the parent company and its subsidiaries, net of minority
interest,  as more fully described below. All significant  intercompany accounts
and transactions  have been eliminated.  Certain  reclassifications  of 2001 and
2000 amounts have been made to conform to the 2002 presentation.

         First Banks operates  through its subsidiary  bank holding  company and
subsidiary financial  institutions  (collectively  referred to as the Subsidiary
Banks) as follows:

         The  San Francisco Company, headquartered in San  Francisco, California
              (SFC), and its wholly owned subsidiaries:
                 First Bank, headquartered in St. Louis County, Missouri (First
                    Bank); and
                 First Bank & Trust, headquartered in San Francisco, California
                    (FB&T).

         The  Subsidiary  Banks  are  wholly  owned by their  respective  parent
companies.  At  December  31,  2001,  First  Banks  owned  93.69% of First Banks
America,  Inc., San Francisco,  California  (FBA).  On December 31, 2002,  First
Banks completed its  acquisition of all of the outstanding  capital stock of FBA
that it did not  already own for a price of $40.54 per share,  or  approximately
$32.4 million.  At December 31, 2002, prior to consummation of this transaction,
there were 798,753 shares, or approximately  6.22% of FBA's  outstanding  stock,
held  publicly.  First Banks owned the other 93.78%.  In  conjunction  with this
transaction, FBA became a wholly owned subsidiary of First Banks, and was merged
with and into First Banks, and FBA's  subsidiaries,  SFC and FB&T, became wholly
owned subsidiaries of First Banks.

         Cash and Cash Equivalents. Cash, due from banks, federal funds sold and
interest-bearing  deposits with original  maturities of three months or less are
considered  to be cash and cash  equivalents  for  purposes of the  consolidated
statements of cash flows.

         The  Subsidiary  Banks are required to maintain  certain  daily reserve
balances on hand in  accordance  with  regulatory  requirements.  These  reserve
balances  maintained in accordance with such requirements were $26.5 million and
$24.2 million at December 31, 2002 and 2001, respectively.

         Investment  Securities.  The  classification  of investment  securities
available  for sale or held to maturity is  determined  at the date of purchase.
First Banks does not engage in the trading of investment securities.

         Investment  securities  designated as available for sale, which include
any  security  that First Banks has no  immediate  plan to sell but which may be
sold in the future  under  different  circumstances,  are stated at fair  value.
Realized gains and losses are included in noninterest  income upon commitment to
sell,  based on the amortized cost of the individual  security sold.  Unrealized
gains and losses are recorded, net of related income tax effects, in accumulated
other comprehensive  income. All previous fair value adjustments included in the
separate component of accumulated other  comprehensive  income are reversed upon
sale.

         Investment securities designated as held to maturity, which include any
security  that  First  Banks has the  positive  intent  and  ability  to hold to
maturity,  are stated at cost, net of  amortization of premiums and accretion of
discounts computed on the level-yield method taking into consideration the level
of current and anticipated prepayments.



<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Loans Held for Portfolio. Loans held for portfolio are carried at cost,
adjusted  for  amortization  of premiums and  accretion  of discounts  using the
interest  method.  Interest and fees on loans are recognized as income using the
interest  method.  Loan  origination  fees are deferred and accreted to interest
income over the  estimated  life of the loans using the interest  method.  Loans
held for  portfolio  are stated at cost as First Banks has the ability and it is
management's intention to hold them to maturity.

         The accrual of interest on loans is  discontinued  when it appears that
interest or principal may not be paid in a timely manner in the normal course of
business.  Generally,  payments  received on nonaccrual  and impaired  loans are
recorded  as  principal  reductions.  Interest  income is  recognized  after all
principal  has been repaid or an  improvement  in the  condition of the loan has
occurred which would warrant resumption of interest accruals.

         A loan is considered impaired when it is probable that First Banks will
be unable to collect all amounts due, both principal and interest,  according to
the contractual  terms of the loan  agreement.  When measuring  impairment,  the
expected  future cash flows of an impaired  loan or lease are  discounted at the
loan's  effective  interest  rate.  Alternatively,  impairment  is  measured  by
reference to an observable market price, if one exists, or the fair value of the
collateral  for  a  collateral-dependent  loan.  Regardless  of  the  historical
measurement method used, First Banks measures impairment based on the fair value
of the collateral when  foreclosure is probable.  Additionally,  impairment of a
restructured  loan is measured by  discounting  the total  expected  future cash
flows at the loan's  effective  rate of interest as stated in the original  loan
agreement.

         In  addition,  First Banks  monitors  the fair value of the  underlying
collateral  on its lease  portfolio to identify any  impairment as a result of a
decline in the residual  value of the  underlying  collateral,  which may not be
apparent from the payment performance of the lease.

         Loans Held for Sale.  Loans  held for sale are  carried at the lower of
cost or market  value,  which is determined  on an  individual  loan basis.  The
amount by which cost exceeds  market value is recorded in a valuation  allowance
as a reduction of loans held for sale.  Changes in the  valuation  allowance are
reflected  as part of the gain on  mortgage  loans sold and held for sale in the
statements of income in the periods in which the changes occur.  Gains or losses
on the sale of loans held for sale are  determined on a specific  identification
method.  Loans  held  for  sale  transferred  to loans  held  for  portfolio  or
available-for-sale investment securities are transferred at fair value.

         Loan Servicing Income. Loan servicing income represents fees earned for
servicing real estate  mortgage loans owned by investors,  net of federal agency
guarantee  fees,  interest  shortfall  and  amortization  of mortgage  servicing
rights. Such fees are generally calculated on the outstanding  principal balance
of the loans serviced and are recorded as income when earned.

         Allowance for Loan Losses.  The allowance for loan losses is maintained
at a level considered adequate to provide for probable losses. The provision for
loan losses is based on a periodic  analysis of the loans held for portfolio and
held for sale,  considering,  among other factors,  current economic conditions,
loan portfolio composition,  past loan loss experience,  independent appraisals,
loan  collateral,  payment  experience  and selected key  financial  ratios.  As
adjustments become necessary, they are reflected in the results of operations in
the  periods  in which  they  become  known.  In  addition,  various  regulatory
agencies, as an integral part of their examination process,  periodically review
the allowance for loan losses. Such agencies may require First Banks to increase
its  allowance  for  loan  losses  based  on their  judgment  about  information
available to them at the time of their examination.

         Derivative  Instruments  and  Hedging  Activities.  On January 1, 2001,
First Banks implemented  Statement of Financial  Accounting Standards (SFAS) No.
133 -- Accounting for Derivative Instruments and Hedging Activities,  as amended
by SFAS No. 137 - Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective  Date of FASB  Statement No. 133, an Amendment of FASB
Statement No. 133, and SFAS No. 138 - Accounting for Derivative  Instruments and
Hedging  Activities,  an Amendment of FASB  Statement  No. 133. SFAS No. 133, as
amended,   establishes   accounting  and  reporting   standards  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts,  and for hedging  activities.  SFAS No. 133, as amended,  requires an
entity to recognize  all  derivatives  as either  assets or  liabilities  in the
statement of financial  position and measure those instruments at fair value. If
certain  conditions  are met, a derivative may be  specifically  designated as a
hedge in one of three  categories.  The accounting for changes in the fair value
of a derivative  (that is, gains and losses)  depends on the intended use of the
derivative  and the resulting  designation.  Under SFAS No. 133, as amended,  an
entity that elects to apply hedge  accounting is required to  establish,  at the
inception  of  the hedge, the method it will use for assessing the effectiveness

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of the hedging  derivative  and the  measurement  approach for  determining  the
ineffective  aspect of the hedge.  Those  methods  must be  consistent  with the
entity's approach to managing risk.

         The implementation of SFAS No. 133, as amended, resulted in an increase
in  derivative  instruments  of $12.5  million,  an  increase  in  deferred  tax
liabilities  of $5.1  million and an increase in other  comprehensive  income of
$9.1 million. In addition, First Banks recorded a cumulative effect of change in
accounting principle of $1.4 million,  net of taxes of $741,000,  as a reduction
of net income.

         First Banks utilizes  derivative  instruments and hedging activities to
assist  in the  management  of  interest  rate  sensitivity  and to  modify  the
repricing,   maturity  and  option   characteristics   of  certain   assets  and
liabilities.  First Banks uses such derivative  instruments solely to reduce its
interest rate risk  exposure.  First Banks'  accounting  policies for derivative
instruments  and hedging  activities  under SFAS No.  133,  as  amended,  are as
follows:

         >>    Interest Rate Swap  Agreements - Cash Flow Hedges.  Interest rate
               swap agreements  designated as cash flow hedges are accounted for
               at fair value.  The  effective  portion of the change in the cash
               flow hedge's gain or loss is initially reported as a component of
               other  comprehensive  income and subsequently  reclassified  into
               noninterest  income  when  the  underlying   transaction  affects
               earnings.  The ineffective portion of the change in the cash flow
               hedge's  gain or loss is recorded in  noninterest  income on each
               monthly  measurement  date.  The  net  interest  differential  is
               recognized  as an  adjustment  to  interest  income  or  interest
               expense of the related asset or liability  being  hedged.  In the
               event of early termination,  the net proceeds received or paid on
               the interest rate swap  agreements are recognized  immediately in
               noninterest income.

         >>    Interest Rate Swap Agreements - Fair Value Hedges.  Interest rate
               swap agreements designated as fair value hedges are accounted for
               at fair value.  Changes in the fair value of the swap  agreements
               are recognized currently in noninterest income. The change in the
               fair value of the  underlying  hedged  item  attributable  to the
               hedged risk adjusts the carrying amount of the underlying  hedged
               item and is also recognized  currently in noninterest income. All
               changes in fair value are  measured on a monthly  basis.  The net
               interest  differential is recognized as an adjustment to interest
               income or interest expense of the related asset or liability.  In
               the event of early termination, the net proceeds received or paid
               are recognized  immediately in noninterest income. The cumulative
               change  in the  fair  value  of the  underlying  hedged  item  is
               deferred and amortized or accreted to noninterest income over the
               weighted  average  life of the related  asset or  liability.  If,
               however,  the  underlying  hedged item is repaid,  the cumulative
               change  in the  fair  value  of the  underlying  hedged  item  is
               recognized immediately in noninterest income.

         >>    Interest  Rate Cap and Floor  Agreements.  Interest  rate cap and
               floor agreements are accounted for at fair value.  Changes in the
               fair  value  of  interest  rate  cap  and  floor  agreements  are
               recognized  in  noninterest  income on each  monthly  measurement
               date.

         >>    Interest Rate Lock  Commitments.  Commitments to originate  loans
               (interest  rate lock  commitments),  which  primarily  consist of
               commitments to originate fixed rate  residential  mortgage loans,
               are  recorded  at fair  value.  Changes  in the  fair  value  are
               recognized in noninterest income on a monthly basis.

         >>    Forward  Contracts to Sell  Mortgage-Backed  Securities.  Forward
               commitments  to sell  mortgage-backed  securities are recorded at
               fair  value.  Changes in the fair value of forward  contracts  to
               sell  mortgage-backed  securities  are  recognized in noninterest
               income on a monthly basis.

         Prior to the  implementation of SFAS No. 133, interest rate swap, floor
and cap agreements  were accounted for on an accrual basis with the net interest
differential  being  recognized as an adjustment to interest  income or interest
expense  of the  related  asset or  liability.  Premiums  and fees paid upon the
purchase of interest rate swap, floor and cap agreements were amortized over the
life of the agreements  using the  straight-line  method.  In the event of early
termination of the derivative financial  instruments,  the net proceeds received
or paid were deferred and amortized  over the shorter of the remaining  contract
life of the derivative financial instrument or the maturity of the related asset
or liability.  If, however,  the amount of the underlying asset or liability was
repaid,  then the gains or losses on the agreements were recognized  immediately
in the consolidated statements of income. The unamortized premiums and fees paid
were included in derivative instruments in the accompanying consolidated balance
sheets.
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         In   addition,    interest    rate   lock    commitments    represented
off-balance-sheet  items and, therefore,  were not reflected in the consolidated
balance sheets.  Gains and losses on forward  contracts to sell  mortgage-backed
securities,  which  qualified  as hedges,  were  deferred.  The net  unamortized
balance of such deferred  gains and losses was applied to the carrying  value of
the loans held for sale as part of the lower of cost or market valuation.

         Bank Premises and Equipment.  Bank premises and equipment are stated at
cost less accumulated  depreciation and  amortization.  Depreciation is computed
using the  straight-line  method over the estimated  useful lives of the related
assets.   Amortization  of  leasehold   improvements  is  calculated  using  the
straight-line  method over the shorter of the useful life of the  improvement or
term of the lease.  Bank premises and  improvements are depreciated over five to
40 years and equipment over three to seven years.

         Intangibles  Associated With the Purchase of Subsidiaries.  Intangibles
associated with the purchase of subsidiaries  include  goodwill and core deposit
intangibles.

         On January 1, 2002,  First Banks  adopted  SFAS No. 142 -- Goodwill and
Other  Intangible  Assets,  and SFAS No 144 -- Accounting  for the Impairment or
Disposal of Long-Lived  Assets.  SFAS No. 142 requires  goodwill and  intangible
assets with indefinite  useful lives no longer be amortized,  but instead tested
for impairment at lease  annually in accordance  with the provisions of SFAS No.
142.  SFAS No. 142 also  requires that  intangible  assets with definite  useful
lives  be  amortized  over  their  respective  estimated  useful  lives to their
estimated  residual values,  and reviewed for impairment in accordance with SFAS
No 144. The  amortization of goodwill ceased upon adoption of SFAS No. 142. SFAS
No. 144  supersedes  SFAS No. 121 -- Accounting for the Impairment of Long-Lived
Assets and for  Long-Lived  Assets to be  Disposed  Of.  SFAS No. 144  addresses
financial  accounting and reporting for the impairment or disposal of long-lived
assets and requires that one accounting  model be used for long-lived  assets to
be disposed of by sale, whether previously held and used or newly acquired. SFAS
No. 144 broadens the  presentation  of  discontinued  operations to include more
disposal  transactions.   Therefore,  the  accounting  for  similar  events  and
circumstances will be the same.

         At the date of adoption, First Banks had unamortized goodwill of $115.9
million and core deposit intangibles of $9.6 million,  which were subject to the
transition provisions of SFAS No. 142. Under SFAS No. 142, First Banks continues
to amortize, on a straight-line basis, its core deposit intangibles and goodwill
associated  with the purchase of branch  offices.  Core deposit  intangibles are
amortized over the estimated  periods to be benefited,  which has been estimated
at seven years,  and goodwill  associated with the purchase of branch offices is
amortized over the estimated  periods to be benefited,  which has been estimated
at 15 years.  Goodwill associated with the purchase of subsidiaries is no longer
amortized, but instead, is tested annually for impairment following First Banks'
existing  methods of measuring and  recording  impairment  losses,  as described
below. Prior to January 1, 2002,  goodwill was amortized using the straight-line
method over the estimated  periods to be  benefited,  which ranged from 10 to 15
years.

         First  Banks  completed  the  transitional   goodwill  impairment  test
required under SFAS No. 142, to determine the potential  impact,  if any, on the
consolidated  financial  statements.  The results of the  transitional  goodwill
impairment testing did not identify any goodwill impairment losses.

         First Banks reviews intangible assets for impairment whenever events or
changes in circumstances  indicate the carrying value of an underlying asset may
not be recoverable.  First Banks measures  recoverability  based upon the future
cash  flows  expected  to result  from the use of the  underlying  asset and its
eventual disposition. If the sum of the expected future cash flows (undiscounted
and without interest  charges) is less than the carrying value of the underlying
asset, First Banks recognizes an impairment loss. The impairment loss recognized
represents the mount by which the carrying value of the underlying asset exceeds
the  fair  value  of  the  underlying  asset.  If  an  asset  being  tested  for
recoverability  was acquired in a business  combination  accounted for using the
purchase  method,  goodwill that arose in the transaction is included as part of
the asset  grouping in  determining  recoverability.  If some but not all of the
assets acquired in that  transaction are being tested,  goodwill is allocated to
the  assets  being  tested  for  recoverability  on a pro rata  basis  using the
relative  fair  values of the  long-lived  assets and  identifiable  intangibles
acquired at the  acquisition  dates.  In instances  where goodwill is identified
with assets that are subject to an impairment  loss, the carrying  amount of the
identified  goodwill is  eliminated  before  reducing  the  carrying  amounts of
impaired  long-lived  assets and identifiable  intangibles.  As such adjustments
become necessary, they are reflected in the results of operations in the periods
in which they become known.

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Mortgage  Servicing Rights.  Mortgage servicing rights are amortized in
proportion to the related  estimated net  servicing  income on a  disaggregated,
discounted basis over the estimated lives of the related  mortgages  considering
the level of current and  anticipated  repayments,  which range from five to ten
years.  The value of  mortgage  servicing  rights  is  adversely  affected  when
mortgage interest rates decline and/or mortgage loan prepayments increase. First
Banks assesses  impairment using  stratifications  based on the predominant risk
characteristics of the underlying mortgage loans, including size, interest rate,
weighted  average original term,  weighted average  remaining term and estimated
prepayment  speeds.  The  amount by which  the  carrying  value of the  mortgage
servicing  rights  for each  stratum  exceeds  the fair value is  recorded  in a
valuation allowance as a reduction of mortgage servicing rights.  Changes in the
valuation  allowance are reflected in the statements of income in the periods in
which the change occurs.

         Other  Real  Estate.  Other  real  estate,  consisting  of real  estate
acquired  through  foreclosure or deed in lieu of foreclosure,  is stated at the
lower of cost or fair value less  applicable  selling costs.  The excess of cost
over fair value of the  property  at the date of  acquisition  is charged to the
allowance for loan losses.  Subsequent  reductions in carrying value, to reflect
current fair value or costs incurred in maintaining the properties,  are charged
to expense as incurred.

         Income  Taxes.  Deferred tax assets and  liabilities  are  reflected at
currently  enacted  income  tax  rates  applicable  to the  period  in which the
deferred tax assets or  liabilities  are expected to be realized or settled.  As
changes  in the  tax  laws  or  rates  are  enacted,  deferred  tax  assets  and
liabilities are adjusted through the provision for income taxes.

         First Banks,  Inc. and its eligible  subsidiaries  file a  consolidated
federal income tax return and unitary or  consolidated  state income tax returns
in all applicable states.

         Financial  Instruments.  A  financial  instrument  is  defined as cash,
evidence of an ownership  interest in an entity,  or a contract  that conveys or
imposes on an entity the  contractual  right or obligation to either  receive or
deliver cash or another financial instrument.

         Financial Instruments With Off-Balance-Sheet Risk. First Banks utilizes
financial  instruments  to  reduce  the  interest  rate  risk  arising  from its
financial assets and liabilities. These instruments involve, in varying degrees,
elements  of  interest  rate  risk  and  credit  risk in  excess  of the  amount
recognized in the consolidated  balance sheets.  "Interest rate risk" is defined
as the possibility that interest rates may move unfavorably from the perspective
of First Banks.  The risk that a  counterparty  to an agreement  entered into by
First Banks may default is defined as "credit risk."

         First Banks is party to commitments to extend credit and commercial and
standby letters of credit in the normal course of business to meet the financing
needs of its customers.  These commitments involve, in varying degrees, elements
of interest rate risk and credit risk in excess of the amount  recognized in the
consolidated balance sheets.

         Earnings Per Common Share.  Basic earnings per share (EPS) are computed
by dividing the income available to common  stockholders  (the numerator) by the
weighted average number of common shares  outstanding (the  denominator)  during
the year. The  computation of dilutive EPS is similar except the  denominator is
increased to include the number of additional common shares that would have been
outstanding if the dilutive  potential shares had been issued.  In addition,  in
computing  the  dilutive  effect of  convertible  securities,  the  numerator is
adjusted  to add  back:  (a) any  convertible  preferred  dividends  and (b) the
after-tax  amount of  interest  recognized  in the  period  associated  with any
convertible debt.



<PAGE>

<TABLE>
<CAPTION>

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2)      ACQUISITIONS AND DIVESTITURES

         During the three years ended December 31, 2002, First Banks completed
the following acquisitions:

                                                                                Total       Purchase
           Entity                                    Date                      Assets         Price       Goodwill
           ------                                    ----                      ------         -----       --------
                                                                                 (dollars expressed in thousands)

   2002
   ----

     Union Planters Bank N.A.
     Denton and Garland, Texas
<S>                                                   <C>                   <C>              <C>               <C>
     branch offices                              June 22, 2002              $  63,700        65,100             --

     Plains Financial Corporation
     Des Plaines, Illinois                     January 15, 2002               256,300        36,500          12,600
                                                                            ---------       -------        --------
                                                                            $ 320,000       101,600          12,600
                                                                            =========       =======        ========

   2001
   ----

     Union Financial Group, Ltd.
     Swansea, Illinois                         December 31, 2001            $ 360,000        26,700          11,500

     BYL Bancorp
     Orange, California                        October 31, 2001               281,500        49,000          19,000

     Charter Pacific Bank
     Agoura Hills, California                  October 16, 2001               101,500        18,900           6,300
                                                                            ---------       -------        --------
                                                                            $ 743,000        94,600          36,800
                                                                            =========       =======        ========
   2000
   ----

     The San Francisco Company
     San Francisco, California                 December 31, 2000            $ 183,800        62,200          16,300

     Millennium Bank
     San Francisco, California                 December 29, 2000              117,000        20,700           8,700

     Commercial Bank of San Francisco
     San Francisco, California                 October 31, 2000               155,600        26,400           9,300

     Bank of Ventura
     Ventura, California                        August 31, 2000                63,800        14,200           7,200

     First Capital Group, Inc.
     Albuquerque, New Mexico                   February 29, 2000               64,600        66,100           1,500

     Lippo Bank
     San Francisco, California                 February 29, 2000               85,300        17,200           4,800
                                                                            ---------       -------        --------
                                                                            $ 670,100       206,800          47,800
                                                                            =========       =======        ========
</TABLE>

         Goodwill  associated with the acquisitions  included in the table above
is not  expected to be  deductible  for tax  purposes.  For 2002,  2001 and 2000
acquisitions,  goodwill in the amounts of $12.6 million,  $11.5 million and $1.5
million, respectively, was assigned to First Bank. In 2001 and 2000, goodwill in
the amounts of $25.3 million and $46.3  million,  respectively,  was assigned to
FB&T.

         The  aforementioned  transactions were accounted for using the purchase
method of accounting and,  accordingly,  the consolidated  financial  statements
include  the  financial  position  and  results of  operations  for the  periods
subsequent to the  respective  acquisition  dates,  and the assets  acquired and
liabilities  assumed were recorded at fair value at the acquisition dates. These
acquisitions  were funded from available cash reserves,  proceeds from sales and
maturities of available-for-sale  investment securities,  borrowings under First
Banks'  revolving  credit  agreement  and  proceeds  from the  issuance of trust
preferred  securities.  Due to the  immaterial  effect  on  previously  reported
financial  information,  pro forma  disclosures  have not been  prepared for the
aforementioned transactions.


<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         In addition, as previously discussed, on December 31, 2002, First Banks
completed its acquisition of all of the outstanding capital stock of FBA that it
did not already  own.  This  transaction  was  accounted  for using the purchase
method of  accounting,  and goodwill in the amount of $12.4 million was recorded
and  assigned to FB&T.  The goodwill is not  expected to be  deductible  for tax
purposes.

(3)      INVESTMENTS IN DEBT AND EQUITY SECURITIES
<TABLE>
<CAPTION>

         Securities   Available  for  Sale.  The  amortized  cost,   contractual
maturity,  gross  unrealized  gains  and  losses  and fair  value of  investment
securities available for sale at December 31, 2002 and 2001 were as follows:


                                                        Maturity
                                        ----------------------------------------   Total         Gross
                                                                        After      Amor-       Unrealized              Weighted
                                         1 Year       1-5     5-10        10       tized    ---------------     Fair    Average
                                         or Less     Years    Years     Years      Cost     Gains    Losses    Value     Yield
                                         -------     -----    -----     -----      ----     -----    ------    -----     -----
                                                                     (dollars expressed in thousands)

 December 31, 2002:
    Carrying value:
<S>                                    <C>              <C>        <C>        <C>  <C>         <C>      <C>    <C>       <C>
       U.S. Treasury.................. $149,963         --         --         --   149,963      --      (65)   149,898   1.12%
       U.S. Government agencies
          and corporations:
             Mortgage-backed..........      797     10,841     37,617    494,832   544,087   8,632     (145)   552,574   4.55
             Other....................  223,106     81,774      2,340         --   307,220   3,509      (37)   310,692   2.45
       State and political
           subdivisions...............    1,605      7,946     17,487      5,655    32,693     592      (38)    33,247   3.78
       Corporate debt securities......    5,012     20,847         --         --    25,859     514       (8)    26,365   5.76
       Equity investments in other
          financial institutions
          (no stated maturity) .......   15,434         --         --      5,000    20,434   7,880     (307)    28,007   3.89
       Federal Home Loan Bank and
          Federal Reserve Bank stock
          (no stated maturity)........   20,111         --         --         --    20,111      --       --     20,111   4.45
                                       --------    -------     ------    ------- ---------  ------    -----  ---------
              Total................... $416,028    121,408     57,444    505,487 1,100,367  21,127     (600) 1,120,894   3.49
                                       ========    =======     ======    ======= =========  ======    =====  =========  =====

    Fair value:
       Debt securities................ $381,224    125,038     58,291    508,223
       Equity securities..............   42,952         --         --      5,166
                                       --------    -------     ------    -------
              Total................... $424,176    125,038     58,291    513,389
                                       ========    =======     ======    =======

    Weighted average yield............     1.77%      4.58%      4.17%      4.57%
                                       ========    =======     ======    =======

 December 31, 2001:
    Carrying value:
       U.S. Treasury.................. $136,326         --         --         --   136,326       3      (39)   136,290   1.76%
       U.S. Government agencies
          and corporations:
             Mortgage-backed..........       88     21,650     18,224    262,846   302,808   2,422       --    305,230   6.00
             Other....................   22,284     99,353      6,612        974   129,223   2,235      (16)   131,442   4.58
       State and political
          subdivisions................      317      1,191         46         --     1,554      --       --      1,554   3.92
       Corporate debt securities......       --      1,985         --         --     1,985     107       --      2,092   6.76
       Equity investments in other
          financial institutions
          (no stated maturity)........   15,916         --         --         --    15,916   2,171     (272)    17,815   8.55
       Federal Home Loan Bank and
          Federal Reserve Bank stock
          (no stated maturity)........   16,043         --         --         --    16,043      --       --     16,043   6.49
                                       --------    -------     ------    ------- ---------  ------    -----  ---------
              Total................... $190,974    124,179     24,882    263,820   603,855   6,938     (327)   610,466   4.75
                                       ========    =======     ======    ======= =========  ======    =====  =========  =====

    Fair value:
       Debt securities................ $159,303    126,673     25,378    265,254
       Equity securities..............   33,858         --         --         --
                                       --------    -------     ------    -------
              Total................... $193,161    126,673     25,378    265,254
                                       ========    =======     ======    =======

    Weighted average yield............     3.25%      4.67%      5.76%      5.92%
                                       ========    =======     ======    =======
</TABLE>



<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Securities Held to Maturity.  The amortized cost, contractual maturity,
gross unrealized  gains and losses and fair value of investment  securities held
to maturity at December 31, 2002 and 2001 were as follows:
<TABLE>
<CAPTION>

                                                        Maturity
                                        ----------------------------------------    Total       Gross
                                                                          After     Amor-     Unrealized            Weighted
                                        1 Year        1-5       5-10       10       tized   --------------   Fair    Average
                                        or Less      Years      Years     Years     Cost    Gains   Losses   Value    Yield
                                        -------      -----      -----     -----     ----    -----   ------   -----    -----
                                                                     (dollars expressed in thousands)

 December 31, 2002:
    Carrying value:
<S>                                    <C>         <C>         <C>         <C>      <C>        <C>   <C>      <C>     <C>
       Mortgage-backed securities..... $     --         --         --      2,203    2,203       66      --    2,269   6.69%
       State and political
         subdivisions.................    2,472      6,313      5,438        --    14,223      487      (1)  14,709   4.88
                                       --------    -------     ------    -------   ------    -----   -----  -------
           Total...................... $  2,472      6,313      5,438      2,203   16,426      553      (1)  16,978   5.12
                                       ========    =======     ======    =======   ======    =====   =====  =======  =====

    Fair value:
       Debt securities................ $  2,517      6,581      5,611      2,269
                                       ========    =======     ======    =======

    Weighted average yield............     4.76%      4.93%      4.88%      6.69%
                                       ========    =======     ======    =======

 December 31, 2001:
    Carrying value:
       Mortgage-backed securities..... $     --         --         --      4,051    4,051       67     (10)   4,108   6.83%
       State and political
         subdivisions.................    1,943      8,802      5,806        --    16,551      300    (147)  16,704   4.93
                                       --------    -------     ------    -------   ------    -----   -----  -------
           Total...................... $  1,943      8,802      5,806      4,051   20,602      367    (157)  20,812   5.25
                                       ========    =======     ======    =======   ======    =====   =====  =======  =====

    Fair value:
       Debt securities................ $  1,930      9,071      5,703      4,108
                                       ========    =======     ======    =======

    Weighted average yield............     4.58%      4.98%      4.98%      6.83%
                                       ========    =======     ======    =======
</TABLE>


         Proceeds from sales of  available-for-sale  investment  securities were
$55.1 million,  $85.8 million and $46.3 million for the years ended December 31,
2002,  2001 and 2000,  respectively.  Gross gains of $91,000,  $19.1 million and
$565,000 were realized on these sales during the years ended  December 31, 2002,
2001 and 2000, respectively.  Gross losses of $1,600, $384,000 and $396,000 were
realized on these sales during the years ended December 31, 2002, 2001 and 2000,
respectively.

         Proceeds from calls of investment securities were $64.0 million, $121.8
million and  $111,000  for the years ended  December  31,  2002,  2001 and 2000,
respectively.  Gross  gains of $6,800  and $300 were  realized  on these  called
securities  during the years ended  December  31,  2001 and 2000,  respectively.
There were no gross gains on called  securities in 2002.  Gross losses of $1,400
and $1,800  were  realized  on these  called  securities  during the years ended
December 31, 2001 and 2000,  respectively.  There were no gross losses on called
securities in 2002.

         The Subsidiary Banks maintain investments in the Federal Home Loan Bank
(FHLB) and/or the Federal Reserve Bank (FRB).  These investments are recorded at
cost,  which  represents  redemption  value.  The  investment  in FHLB  stock is
maintained  at a minimum  amount  equal to the  greater  of 1% of the  aggregate
outstanding  balance  of the  applicable  Subsidiary  Bank's  loans  secured  by
residential  real  estate,  or 5% of advances  from the FHLB to each  Subsidiary
Bank. First Bank and FB&T are members of the FHLB system.  The investment in FRB
stock is  maintained  at a minimum  of 6% of the  applicable  Subsidiary  Bank's
capital stock and capital surplus. First Bank is a member of the FRB system.

         Investment  securities  with a carrying value of  approximately  $313.0
million and $300.0  million at December  31, 2002 and 2001,  respectively,  were
pledged in connection  with deposits of public and trust funds,  securities sold
under agreements to repurchase and for other purposes as required by law.



<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4)      LOANS AND ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>

         Changes in the allowance  for loan losses for the years ended  December
31 were as follows:

                                                                                    2002        2001        2000
                                                                                    ----        ----        ----
                                                                                  (dollars expressed in thousands)

<S>                                                                              <C>           <C>          <C>
               Balance, beginning of year.....................................   $ 97,164      81,592       68,611
               Acquired allowances for loan losses............................      1,366      14,046        6,062
                                                                                 --------    --------     --------
                                                                                   98,530      95,638       74,673
                                                                                 --------    --------     --------
               Loans charged-off..............................................    (70,524)    (31,453)     (17,050)
               Recoveries of loans previously charged-off.....................     15,933       9,469        9,842
                                                                                 --------    --------     --------
                  Net loans charged-off.......................................    (54,591)    (21,984)      (7,208)
                                                                                 --------    --------     --------
               Provision charged to operations................................     55,500      23,510       14,127
                                                                                 --------    --------     --------
               Balance, end of year...........................................   $ 99,439      97,164       81,592
                                                                                 ========    ========     ========
</TABLE>

         At December 31, 2002 and 2001,  First Banks had $75.2 million and $67.3
million  of  impaired   loans,   including  $73.2  million  and  $65.3  million,
respectively,  of loans on  nonaccrual  status.  At December  31, 2002 and 2001,
impaired  loans also  include $2.0 million of  restructured  loans.  Interest on
nonaccrual loans, which would have been recorded under the original terms of the
loans,  was $7.1  million,  $8.2  million  and $5.8  million for the years ended
December 31, 2002, 2001 and 2000, respectively.  Of these amounts, $2.2 million,
$2.9 million and $1.9 million was actually  recorded as interest  income on such
loans in 2002,  2001 and  2000,  respectively.  The  allowance  for loan  losses
includes an allocation for each impaired  loan. The aggregate  allocation of the
allowance  for loan losses  related to impaired  loans was  approximately  $14.8
million and $16.5  million at  December  31,  2002 and 2001,  respectively.  The
average recorded  investment in impaired loans was $78.1 million,  $62.4 million
and  $45.1  million  for the  years  ended  December  31,  2002,  2001 and 2000,
respectively. The amount of interest income recognized using a cash basis method
of accounting  during the time these loans were impaired was $4.6 million,  $5.8
million and $2.2 million in 2002, 2001 and 2000,  respectively.  At December 31,
2002 and 2001, First Banks had $4.6 million and $15.2 million,  respectively, of
loans past due 90 days or more and still accruing interest.

         First Banks' primary market areas are the states of Missouri, Illinois,
Texas and California.  At December 31, 2002 and 2001,  approximately  92% of the
total  loan  portfolio  and  78%  and  80%  of  the  commercial,  financial  and
agricultural loan portfolio,  respectively,  were made to borrowers within these
states.

         Real estate lending  constituted the only significant  concentration of
credit risk. Real estate loans comprised  approximately  70% and 67% of the loan
portfolio at December 31, 2002 and 2001, respectively,  of which 28% was made to
consumers in the form of residential real estate mortgages and home equity lines
of credit.

         First Banks is, in general,  a secured lender. At December 31, 2002 and
2001, 98% and 96%, respectively,  of the loan portfolio was secured.  Collateral
is required in accordance with the normal credit  evaluation  process based upon
the  creditworthiness  of the customer and the credit risk  associated  with the
particular transaction.
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5)      DERIVATIVE INSTRUMENTS

         First Banks utilizes derivative financial  instruments to assist in the
management of interest rate sensitivity by modifying the repricing, maturity and
option  characteristics of certain assets and liabilities.  Derivative financial
instruments held by First Banks are summarized as follows:
<TABLE>
<CAPTION>

                                                                            December 31,
                                                          ------------------------------------------------
                                                                 2002                        2001
                                                          ----------------------    ----------------------
                                                          Notional      Credit      Notional      Credit
                                                           Amount      Exposure      Amount      Exposure
                                                           ------      --------      ------      --------
                                                                  (dollars expressed in thousands)

<S>                                                     <C>             <C>          <C>           <C>
         Cash flow hedges.............................. $1,050,000      2,179        900,000       1,764
         Fair value hedges.............................    301,200     11,449        200,000       6,962
         Interest rate cap agreements..................    450,000         94        450,000       2,063
         Interest rate lock commitments................     89,000         --         88,000          --
         Forward commitments to sell
           mortgage-backed securities..................    235,000         --        209,000          --
                                                        ==========     ======       ========      ======

</TABLE>

         The  notional  amounts  of  derivative  financial  instruments  do  not
represent amounts exchanged by the parties and, therefore,  are not a measure of
First Banks' credit exposure  through its use of these  instruments.  The credit
exposure represents the accounting loss First Banks would incur in the event the
counterparties  failed  completely  to  perform  according  to the  terms of the
derivative  financial  instruments and the collateral held to support the credit
exposure was of no value.

         During  2002 and 2001,  First Banks  realized  net  interest  income on
derivative   financial   instruments   of  $53.0  million  and  $23.4   million,
respectively,  in comparison to net interest expense of $4.7 million in 2000. In
addition,  First Banks recorded a net gain on derivative  instruments,  which is
included in noninterest income in the consolidated statements of income, of $2.2
million  and $18.6  million  for the years  ended  December  31,  2002 and 2001,
respectively.

         Cash Flow Hedges

         First Banks entered into the following  interest rate swap  agreements,
designated  as  cash  flow  hedges,   to  effectively   lengthen  the  repricing
characteristics  of certain  interest-earning  assets to correspond more closely
with their  funding  source with the  objective of  stabilizing  cash flow,  and
accordingly, net interest income over time:


         >>    During 1998,  First Banks  entered into $280.0  million  notional
               amount of interest rate swap  agreements  that provided for First
               Banks to receive a fixed rate of interest  and pay an  adjustable
               rate of interest  equivalent to the daily weighted  average prime
               lending  rate  minus  2.705%.  The  terms of the swap  agreements
               provided  for First Banks to pay  quarterly  and receive  payment
               semiannually.  In  June  2001  and  November  2001,  First  Banks
               terminated  $205.0  million and $75.0  million  notional  amount,
               respectively,  of these swap agreements, which would have expired
               in 2002,  in order to  appropriately  modify  its  overall  hedge
               position in  accordance  with its interest  rate risk  management
               program.  In  conjunction  with these  terminations,  First Banks
               recorded gains of $2.8 million and $1.7 million, respectively.
<PAGE>

         >>    During  September  1999,  First Banks entered into $175.0 million
               notional  amount of interest rate swap  agreements  that provided
               for First  Banks to receive a fixed rate of  interest  and pay an
               adjustable  rate of interest  equivalent to the weighted  average
               prime lending rate minus 2.70%.  The terms of the swap agreements
               provided  for  First  Banks  to pay  and  receive  interest  on a
               quarterly basis. In April 2001, First Banks terminated these swap
               agreements,  which  would have  expired in  September  2001,  and
               replaced  them  with  similar  swap   agreements   with  extended
               maturities in order to lengthen the period  covered by the swaps.
               In conjunction  with the  termination  of these swap  agreements,
               First Banks recorded a gain of $985,000.

         >>    During  September  2000,  March 2001,  April 2001 and March 2002,
               First Banks entered into $600.0 million,  $200.0 million,  $175.0
               million and $150.0  million  notional  amount,  respectively,  of
               interest rate swap agreements.  The underlying  hedged assets are
               certain  loans within the  commercial  loan  portfolio.  The swap
               agreements  provide  for First  Banks to  receive a fixed rate of
               interest and pay an adjustable rate of interest equivalent to the
               weighted average prime lending rate minus 2.70%, 2.82%, 2.82% and
               2.80%, respectively. The terms of the swap agreements provide for
               First Banks to pay and receive  interest on a quarterly basis. In
               November  2001,  First Banks  terminated  $75.0 million  notional
               amount of the swap  agreements  originally  entered into in April
               2001,  which  would  have  expired  in  April  2006,  in order to
               appropriately  modify its overall  hedge  position in  accordance
               with its  interest  rate risk  management  program.  First  Banks
               recorded  a  gain  of  $2.6  million  in  conjunction   with  the
               termination of these swap agreements. The amount receivable under
               the swap agreements was $3.1 million and $2.9 million at December
               31,  2002 and 2001,  respectively,  and the  amount  payable  was
               $888,000  and  $1.1  million  at  December  31,  2002  and  2001,
               respectively.





<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         The maturity dates, notional amounts,  interest rates paid and received
and fair value of First Banks' interest rate swap agreements  designated as cash
flow hedges as of December 31, 2002 and 2001 were as follows:
<TABLE>
<CAPTION>

                                                        Notional       Interest Rate     Interest Rate      Fair
                  Maturity Date                          Amount            Paid            Received         Value
                  -------------                       -----------      -------------     -------------      -----
                                                                       (dollars expressed in thousands)

         December 31, 2002:
<S>                                                   <C>                   <C>               <C>          <C>
             March 14, 2004........................   $  150,000            1.45%             3.93%        $  4,130
             September 20, 2004....................      600,000            1.55              6.78           48,891
             March 21, 2005........................      200,000            1.43              5.24           13,843
             April 2, 2006.........................      100,000            1.43              5.45            9,040
                                                      ----------                                           --------
                                                      $1,050,000            1.50              5.95         $ 75,904
                                                      ==========           =====             =====         ========


         December 31, 2001:
             September 20, 2004....................   $  600,000            2.05%             6.78%        $ 40,980
             March 21, 2005........................      200,000            1.93              5.24            4,951
             April 2, 2006.........................      100,000            1.93              5.45            2,305
                                                      ----------                                           --------
                                                      $  900,000            2.01              6.29         $ 48,236
                                                      ==========           =====             =====         ========
</TABLE>

         Fair Value Hedges
         First Banks entered into the following  interest rate swap  agreements,
designated  as  fair  value  hedges,   to  effectively   shorten  the  repricing
characteristics  of certain  interest-bearing  liabilities  to  correspond  more
closely with their funding source with the objective of stabilizing net interest
income over time:

         >>    During  September  2000,  First Banks  entered into $25.0 million
               notional  amount of one-year  interest rate swap  agreements  and
               $25.0 million  notional amount of five and one-half year interest
               rate swap  agreements  that  provided  for First Banks to receive
               fixed  rates of interest  ranging  from 6.60% to 7.25% and pay an
               adjustable rate equivalent to the  three-month  London  Interbank
               Offering Rate minus rates ranging from 0.02% to 0.11%.  The terms
               of the swap  agreements  provided for First Banks to pay interest
               on a quarterly basis and receive  interest on either a semiannual
               basis  or an  annual  basis.  In  September  2001,  the  one-year
               interest rate swap agreements matured, and First Banks terminated
               the five and one-half year interest rate swap agreements  because
               the underlying interest-bearing liabilities had either matured or
               been called by their respective counterparties. There was no gain
               or loss recorded as a result of the terminations.

         >>    During  January  2001,  First Banks  entered  into $50.0  million
               notional  amount of three-year  interest rate swap agreements and
               $150.0 million  notional  amount of five-year  interest rate swap
               agreements  that  provide for First Banks to receive a fixed rate
               of interest and pay an adjustable rate of interest  equivalent to
               the three-month  London  Interbank  Offering Rate. The underlying
               hedged liabilities are a portion of our other time deposits.  The
               terms of the  swap  agreements  provide  for  First  Banks to pay
               interest  on  a  quarterly  basis  and  receive   interest  on  a
               semiannual basis. The amount receivable under the swap agreements
               was $5.2  million at December  31, 2002 and 2001,  and the amount
               payable under the swap  agreements  was $821,000 and $1.2 million
               at December 31, 2002 and 2001, respectively.

         >>    During May 2002 and June 2002,  First  Banks  entered  into $55.2
               million  and $86.3  million  notional  amount,  respectively,  of
               interest  rate swap  agreements  that  provide for First Banks to
               receive a fixed rate of interest  and pay an  adjustable  rate of
               interest  equivalent to the three-month London Interbank Offering
               Rate plus 2.30% and 2.75%, respectively. In addition, during June
               2002,  First Banks entered into $46.0 million  notional amount of
               interest  rate swap  agreements  that  provide for First Banks to
               receive a fixed rate of interest  and pay an  adjustable  rate of
               interest  equivalent to the three-month London Interbank Offering
               Rate plus 1.97%.  The  underlying  hedged  liabilities  are First
               Banks'   guaranteed   preferred   beneficial   interests  in  its
               subordinated debentures. The terms of the swap agreements provide



<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

               for First Banks to pay and receive interest on a quarterly basis.
               The $86.3 million  notional  amount  interest rate swap agreement
               was called by its  counterparty  on November 8, 2002 resulting in
               final settlement of this interest rate swap agreement on December
               18, 2002.  There was no gain or loss recorded as a result of this
               transaction.  There were no amounts  receivable  or payable under
               the remaining swap agreements at December 31, 2002.

         The maturity dates, notional amounts,  interest rates paid and received
and fair value of First Banks' interest rate swap agreements  designated as fair
value hedges as of December 31, 2002 and 2001 were as follows:
<TABLE>
<CAPTION>

                                                          Notional     Interest Rate     Interest Rate      Fair
                  Maturity Date                            Amount          Paid            Received         Value
                  -------------                            ------          ----            --------         -----
                                                                       (dollars expressed in thousands)

         December 31, 2002:
<S>                                                       <C>               <C>               <C>         <C>
             January 9, 2004..........................    $ 50,000          1.76%             5.37%       $  1,972
             January 9, 2006..........................     150,000          1.76              5.51          13,476
             June 30, 2028............................      46,000          3.77              8.50             495
             December 31, 2031........................      55,200          4.10              9.00           4,688
                                                          --------                                        --------
                                                          $301,200          2.49              6.58         $20,631
                                                          ========         =====             =====        ========

         December 31, 2001:
             January 9, 2004..........................    $ 50,000          2.48%             5.37%       $  1,761
             January 9, 2006..........................     150,000          2.48              5.51           3,876
                                                          --------                                        --------
                                                          $200,000          2.48              5.47        $  5,637
                                                          ========         =====             =====        ========
</TABLE>

         Interest Rate Floor Agreements
         During  January  2001 and March 2001,  First Banks  entered into $200.0
million and $75.0 million notional amount,  respectively,  of four-year interest
rate floor agreements to further stabilize net interest income in the event of a
falling rate  scenario.  The interest rate floor  agreements  provided for First
Banks to receive a  quarterly  adjustable  rate of  interest  equivalent  to the
differential  between the  three-month  London  Interbank  Offering Rate and the
strike prices of 5.50% or 5.00%,  respectively,  should the  three-month  London
Interbank  Offering Rate fall below the respective  strike  prices.  In November
2001,  First Banks  terminated  these interest rate floor agreements in order to
appropriately  modify its overall hedge position in accordance with its interest
rate risk management program.  In conjunction with the termination,  First Banks
recorded an adjustment of $4.0 million  representing a decline in the fair value
from the previous  month-end  measurement  date. These  agreements  provided net
interest income of $2.1 million for the year ended December 31, 2001.

         Interest Rate Cap Agreements
         In  conjunction  with the interest rate swap  agreements  designated as
cash flow hedges that mature on  September  2004,  First Banks also entered into
$450.0  million  notional  amount of four-year  interest rate cap  agreements to
limit the net interest expense associated with the interest rate swap agreements
in the event of a rising rate scenario. The interest rate cap agreements provide
for First Banks to receive a quarterly adjustable rate of interest equivalent to
the differential  between the three-month London Interbank Offering Rate and the
strike price of 7.50% should the  three-month  London  Interbank  Offering  Rate
exceed the strike price.  At December 31, 2002 and 2001,  the carrying  value of
these interest rate cap agreements,  which is included in derivative instruments
in the consolidated balance sheets, was $94,000 and $2.1 million, respectively.

         Pledged Collateral
         At  December  31, 2002 and 2001,  First  Banks had  pledged  investment
securities  available  for sale with a carrying  value of $5.8 and $1.1 million,
respectively, in connection with the interest rate swap agreements. In addition,
at  December  31, 2002 and 2001,  First Banks had  accepted,  as  collateral  in
connection  with the interest  rate swap  agreements,  cash of $99.1 million and
$4.9 million,  respectively. At December 31, 2001, First Banks had also accepted
investment  securities  with a fair  value of $53.9  million  as  collateral  in
connection with the interest rate swap  agreements.  First Banks is permitted by
contract  to sell or  repledge  the  collateral  accepted  from  counterparties;
however, at December 31, 2002 and 2001, First Banks had not done so.


<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Interest  Rate  Lock   Commitments  /  Forward   Commitments   to  Sell
Mortgage-Backed Securities
         Derivative  financial  instruments  issued by First  Banks  consist  of
interest rate lock  commitments to originate  fixed-rate  loans.  Commitments to
originate  fixed-rate loans consist  primarily of residential real estate loans.
These net loan  commitments  and loans  held for sale are  hedged  with  forward
contracts to sell mortgage-backed securities.

(6)      MORTGAGE BANKING ACTIVITIES

         At December 31, 2002 and 2001,  First Banks  serviced  loans for others
amounting to $1.29 billion and $1.07  billion  respectively.  Borrowers'  escrow
balances  held by First  Banks on such  loans  were  $517,000  and  $485,000  at
December 31, 2002 and 2001, respectively.

         Changes in mortgage  servicing  rights,  net of  amortization,  for the
years ended December 31 were as follows:
<TABLE>
<CAPTION>

                                                                                           2002         2001
                                                                                           ----         ----
                                                                                   (dollars expressed in thousands)

<S>                                                                                    <C>             <C>
              Balance, beginning of year...........................................    $  10,125       7,048
              Originated mortgage servicing rights.................................        8,566       6,802
              Amortization.........................................................       (3,809)     (3,725)
                                                                                       ---------    --------
              Balance, end of year.................................................    $  14,882      10,125
                                                                                       =========    ========
</TABLE>

         The fair value of mortgage servicing rights was $17.2 million and $15.8
million at  December  31,  2002 and 2001,  respectively.  The  predominant  risk
characteristics  of the  underlying  mortgage  loans used to  stratify  mortgage
servicing  rights for purposes of measuring  impairment  include size,  interest
rate,  weighted  average  original  term,  weighted  average  remaining term and
estimated prepayment speeds.

         First Banks did not incur any impairment of mortgage  servicing  rights
during the years ended  December 31, 2002,  2001 and 2000,  respectively.  First
Banks capitalizes its mortgage  servicing rights by allocating the total cost of
the mortgage loans to mortgage  servicing rights and the loans (without mortgage
servicing rights) based on the relative fair values of the two components.  Upon
capitalizing the mortgage servicing rights, they are amortized, in proportion to
the related estimated net servicing income on a disaggregated, discounted basis,
over the expected lives of the related loans, which averages approximately seven
years. When loans are prepaid or refinanced,  the related unamortized balance of
the  mortgage  servicing  rights  is  charged  to  amortization   expense.   The
determination  of the fair value of the mortgage  servicing  rights is performed
internally each quarter, with an independent valuation completed annually. Based
on these  analyses,  a comparison  of the fair value of the  mortgage  servicing
rights  with  the  carrying  value  of the  mortgage  servicing  rights  is made
quarterly,  with impairment,  if any,  recognized at that time. The internal and
external impairment analyses are prepared using  stratifications of the mortgage
servicing rights based on the predominant risk characteristics of the underlying
mortgage loans,  including size,  interest rate,  weighed average original term,
weighted  average  term  and  estimated  prepayment  speeds.  As part  of  these
analyses,  the fair value of the mortgage  servicing  rights for each stratum is
compared  to the  carrying  value  of the  mortgage  servicing  rights  for each
stratum.  To the extent the carrying  value of the mortgaging  servicing  rights
exceeds the fair value of the  mortgage  servicing  rights for a stratum,  First
Banks  recognizes  impairment equal to the amount by which the carrying value of
the mortgage servicing rights for a stratum exceeds their fair value. Impairment
is recognized  through a valuation  allowance that is recorded as a reduction of
mortgage servicing rights.  Changes in the valuation  allowance are reflected in
the statements of income in the periods in which the change occurs.  First Banks
does not,  however,  recognize  fair value of the mortgage  servicing  rights in
excess of the carrying value of mortgage servicing rights for any stratum.
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         At December 31, 2002 and 2001, the excess of the fair value of mortgage
servicing  rights over the  carrying  value was $2.3  million and $5.7  million,
respectively.  The decline in the fair value  represents the declining  mortgage
interest rate environment in 2001 that resulted in a significant increase in the
number of mortgages  being  prepaid or  refinanced.  In addition,  the increased
prepayment experience that occurred as a result of the reduced mortgage interest
rate environment during 2002 and 2001 resulted in a decline in the fair value of
the remaining mortgage servicing rights.  However, the decline in the fair value
of the mortgage  servicing rights did not result in the fair value being reduced
below the carrying value.

         Amortization of mortgage servicing rights, as it relates to the balance
at December 31, 2002 of $14.9 million,  has been  estimated  through 2006 in the
following table:

                                                             (dollars expressed
                                                                in thousands)

            Year ending December 31:
                2003...........................................  $   3,946
                2004...........................................      3,746
                2005...........................................      3,677
                2006...........................................      3,513
                                                                 ---------
                   Total.......................................  $  14,882
                                                                 =========

(7)      BANK PREMISES AND EQUIPMENT

         Bank premises and equipment were comprised of the following at December
31:
<TABLE>
<CAPTION>

                                                                                          2002         2001
                                                                                          ----         ----
                                                                                  (dollars expressed in thousands)

<S>                                                                                  <C>               <C>
              Land................................................................    $  23,175        22,063
              Buildings and improvements...........................................     100,787        87,372
              Furniture, fixtures and equipment....................................     114,910        95,626
              Leasehold improvements...............................................      28,006        28,400
              Construction in progress.............................................       4,134        13,865
                                                                                      ---------     ---------
                  Total............................................................     271,012       247,326
              Less accumulated depreciation and amortization.......................     118,594        97,722
                                                                                      ---------     ---------
                  Bank premises and equipment, net.................................   $ 152,418       149,604
                                                                                      =========     =========
</TABLE>
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Depreciation and amortization  expense for the years ended December 31,
2002,  2001 and 2000 totaled  $18.9  million,  $12.7  million and $9.5  million,
respectively.

         First  Banks  leases  land,   office  properties  and  equipment  under
operating  leases.  Certain of the leases contain renewal options and escalation
clauses.  Total rent expense was $13.9 million,  $12.9 million and $10.7 million
for the years ended  December  31,  2002,  2001 and 2000,  respectively.  Future
minimum lease payments under noncancellable operating leases extend through 2084
as follows:
<TABLE>
<CAPTION>

                                                                                 (dollars expressed in thousands)
              Year ending December 31:
<S>               <C>                                                                        <C>
                  2003..................................................................     $  8,913
                  2004...................................................................       7,223
                  2005...................................................................       6,148
                  2006...................................................................       5,055
                  2007...................................................................       3,700
                  Thereafter.............................................................      21,708
                                                                                             --------
                      Total future minimum lease payments................................    $ 52,747
                                                                                             ========
</TABLE>

         First  Banks  leases to  unrelated  parties a  portion  of its  banking
facilities.  Total rental income was $5.8 million, $4.8 million and $2.6 million
for the years ended December 31, 2002, 2001 and 2000, respectively.

(8)      INTANGIBLE ASSETS ASSOCIATED WITH THE PURCHASE OF  SUBSIDIARIES, NET OF
         AMORTIZATION

         Intangible assets associated with the purchase of subsidiaries,  net of
amortization, were comprised of the following at December 31, 2002 and 2001:
<TABLE>
<CAPTION>

                                                            2002                           2001
                                                ----------------------------  ----------------------------
                                                  Gross                          Gross
                                                 Carrying       Accumulated     Carrying      Accumulated
                                                  Amount       Amortization      Amount      Amortization
                                                  ------       ------------      ------      ------------
                                                             (dollars expressed in thousands)

     Amortized intangible assets:
<S>                                              <C>               <C>             <C>                <C>
         Core deposit intangibles..............  $  13,871         (1,869)         9,580               --
         Goodwill associated with
           purchases of branch offices.........      2,210           (718)         2,210             (576)
                                                 ---------        -------        -------          -------
              Total............................  $  16,081         (2,587)        11,790             (576)
                                                 =========        =======        =======          =======

     Unamortized intangible assets:
         Goodwill associated with the
           purchase of subsidiaries............  $ 138,620                       114,226
                                                 =========                       =======
</TABLE>



<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Amortization   of   intangibles   associated   with  the   purchase  of
subsidiaries and branch offices was $2.0 million,  $8.3 million and $5.3 million
for the years ended December 31, 2002, 2001 and 2000, respectively. Amortization
of  intangibles   associated  with  the  purchase  of  subsidiaries,   including
amortization  of  core  deposit  intangibles  and  branch  purchases,  has  been
estimated  through  2007  in  the  following  table,  and  does  not  take  into
consideration any potential future acquisitions or branch purchases.

                                                            (dollars expressed
                                                               in thousands)

                    Year ending December 31:
                         2003...............................   $  2,129
                         2004...............................      2,129
                         2005...............................      2,129
                         2006...............................      2,129
                         2007...............................      2,129
                                                               --------
                           Total............................   $ 10,645
                                                               ========

         Changes in the carrying  amount of goodwill for the year ended December
31, 2002 were as follows:
<TABLE>
<CAPTION>

                                                             Year Ended December 31, 2002
                                                       ---------------------------------------
                                                       First Bank        FB&T            Total
                                                       ----------        ----            -----
                                                          (dollars expressed in thousands)

<S>                                                     <C>             <C>            <C>
     Balance, beginning of year......................   $ 19,165        96,695         115,860
     Goodwill acquired during year...................     12,577        12,386          24,963
     Acquisition-related adjustments.................       (569)           --            (569)
     Amortization - purchases of branch offices......         --          (142)           (142)
                                                        --------       -------        --------
     Balance, end of year............................   $ 31,173       108,939         140,112
                                                        ========       =======        ========
</TABLE>

         The following is a reconciliation  of reported net income to net income
adjusted to reflect the adoption of SFAS No. 142, as if it had been  implemented
on January 1, 2001:
<TABLE>
<CAPTION>


                                                                                Year Ended December 31,
                                                                       -----------------------------------------
                                                                         2002             2001             2000
                                                                         ----             ----             ----
                                                                             (dollars expressed in thousands)
       Net income:
<S>                                                                    <C>                <C>             <C>
         Reported net income......................................     $  45,167          64,514          56,107
         Add back - goodwill amortization.........................            --           8,078           4,957
                                                                       ---------        --------        --------
           Adjusted net income....................................     $  45,167          72,592          61,064
                                                                       =========        ========        ========

       Basic earnings per share:
         Reported net income......................................     $1,875.69        2,693.38        2,338.04
         Add back - goodwill amortization.........................            --          341.14          209.51
                                                                       ---------        --------        --------
           Adjusted net income....................................     $1,875.69        3,034.52        2,547.55
                                                                       =========        ========        ========

       Diluted earnings per share:
         Reported net income......................................     $1,853.64        2,626.77        2,267.41
         Add back - goodwill amortization.........................            --          328.99          200.39
                                                                       ---------        --------        --------
           Adjusted net income....................................     $1,853.64        2,955.76        2,467.80
                                                                       =========        ========        ========

</TABLE>



<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(9)      MATURITIES OF TIME DEPOSITS

         A summary of  maturities of time deposits of $100,000 or more and other
time deposits as of December 31, 2002 is as follows:
<TABLE>
<CAPTION>
                                                                   Time deposits of       Other time
                                                                   $100,000 or more        deposits         Total
                                                                   ----------------        --------         -----
                                                                          (dollars expressed in thousands)

         Year ending December 31:

<S>                                                                    <C>                <C>             <C>
               2003...............................................     $ 335,983          1,136,418       1,472,401
               2004...............................................        54,117            271,764         325,881
               2005...............................................        43,018            187,989         231,007
               2006...............................................         9,792             40,083          49,875
               2007...............................................        26,994             83,544         110,538
               Thereafter.........................................            --                399             399
                                                                       ---------          ---------       ---------
                  Total...........................................     $ 469,904          1,720,197       2,190,101
                                                                       =========          =========       =========
</TABLE>

(10)     SHORT-TERM BORROWINGS

         Short-term borrowings were comprised of the following at December 31:
<TABLE>
<CAPTION>
                                                                                           2002        2001
                                                                                           ----        ----
                                                                                  (dollars expressed in thousands)

<S>                                                                                    <C>           <C>
              Securities sold under agreements to repurchase.......................    $ 196,644     142,534
              Federal funds purchased..............................................       55,000      70,000
              FHLB borrowings......................................................       14,000      30,600
                                                                                       ---------    --------
                  Total short-term borrowings......................................    $ 265,644     243,134
                                                                                       =========    ========
</TABLE>

         The average  balance of short-term  borrowings  was $194.1  million and
$158.0 million,  respectively,  and the maximum  month-end balance of short-term
borrowings was $265.6 million and $243.1  million,  respectively,  for the years
ended  December  31,  2002  and  2001.  The  average  rates  paid on  short-term
borrowings  during the years ended December 31, 2002,  2001 and 2000 were 1.78%,
3.70% and 5.54%,  respectively.  The assets underlying the securities sold under
agreements to repurchase  and FHLB  borrowings  are under First Banks'  physical
control.

(11)     NOTE PAYABLE

         First  Banks has a revolving  credit line with a group of  unaffiliated
financial  institutions (Credit Agreement) that initially provided a $90 million
revolving credit line and a $20 million letter of credit.  The Credit Agreement,
dated August 22,  2002,  replaced a similar  revolving  credit  agreement  dated
August 23, 2001. On December 31, 2002, the Credit Agreement was amended,  at the
request of First Banks, to provide a $45 million revolving credit line and a $20
million  letter of credit.  Additionally,  the Credit  Agreement  was amended to
reduce from 0.70% to 0.60% the minimum return on average assets ratio that First
Banks is  required  to meet for the year ended  December  31,  2002 and to add a
covenant  providing  that for the  quarter  ending  December  31,  2002 and each
following  quarter,  First Banks is  required  to  maintain a minimum  return on
average assets ratio,  computed with respect to the current quarter  annualized,
of at least 0.80%. The Credit Agreement  defines return on average assets as the
percentage  determined by dividing  First Banks' net income for the  immediately
preceding  four calendar  quarters by total average assets as reflected on First
Banks' balance sheet at the end of the most recently completed calendar quarter.
Interest is payable,  on outstanding  principal loan balances at a floating rate
equal to,  either  the  lender's  prime  rate or, at First  Banks'  option,  the
Eurodollar rate plus a margin  determined by the  outstanding  loan balances and
First Banks' net income, for the preceding four calendar  quarters.  If the loan
balances  outstanding  under the revolving credit line are accruing at the prime
rate, interest is to be paid monthly. If the loan balances outstanding under the
revolving  credit  line are  accruing  at the London  InterBank  Offering  Rate,
interest is payable based on the one, two, three or six-month  London  Interbank
Offering  Rate,  as selected by First Banks.  The interest  rate for  borrowings
under the Credit  Agreement was 2.44% at December 31, 2002, and was based on the
applicable Eurodollar Rate plus a margin of 1.00%. Amounts may be borrowed under
the Credit  Agreement  until August 21, 2003,  at which time the  principal  and
interest is due and payable.




<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         The Credit  Agreement  requires  maintenance of certain minimum capital
ratios  for  First  Banks  and each of the  Subsidiary  Banks,  certain  maximum
nonperforming assets ratios for First Banks and each of the Subsidiary Banks and
a minimum  return on assets ratio for First Banks and the Subsidiary  Banks.  In
addition, it prohibits the payment of dividends on First Banks' common stock. At
December  31,  2002 and 2001,  First  Banks  and the  Subsidiary  Banks  were in
compliance  with all  restrictions  and  requirements  of the respective  credit
agreements.

         Loans under the Credit  Agreement are secured by First Banks' ownership
interest  in the  capital  stock  of its  Subsidiary  Banks.  Under  the  Credit
Agreement,  there were  outstanding  borrowings  of $7.0 million at December 31,
2002. At December 31, 2001, there were  outstanding  borrowings of $27.5 million
under the previous credit agreement.

         The  average  balance  and  maximum  month-end  balance  of  borrowings
outstanding  under the Credit  Agreement during the years ended December 31 were
as follows:

                                                       2002          2001
                                                       ----          ----
                                                (dollars expressed in thousands)

        Average balance...........................  $ 17,947       41,590
        Maximum month-end balance.................    64,000       66,500
                                                    ========      =======

         The average rates paid on the outstanding  borrowings  during the years
ended  December  31,  2002,   2001  and  2000  were  5.75%,   6.32%  and  7.66%,
respectively.

(12)     GUARANTEED PREFERRED BENEFICIAL INTERESTS IN SUBORDINATED DEBENTURES

         In February 1997, First Preferred  Capital Trust (First Preferred I), a
newly formed  Delaware  business  trust  subsidiary of First Banks,  issued 3.45
million shares of 9.25% cumulative  trust preferred  securities at $25 per share
in an  underwritten  public  offering,  and  issued  106,702  shares  of  common
securities  to  First  Banks at $25 per  share.  First  Banks  owns all of First
Preferred I's common securities. The gross proceeds of the offering were used by
First  Preferred I to purchase  $88.9 million of 9.25%  subordinated  debentures
from First Banks, maturing on March 31, 2027. The maturity date may be shortened
to a date not  earlier  than March 31, 2002 or extended to a date not later than
March 31, 2046 if certain  conditions are met. The  subordinated  debentures are
the sole asset of First  Preferred  I. In  connection  with the  issuance of the
preferred securities,  First Banks made certain guarantees and commitments that,
in the aggregate,  constitute a full and unconditional  guarantee by First Banks
of the  obligations of First  Preferred I under the First  Preferred I preferred
securities.  First  Banks'  proceeds  from  the  issuance  of  the  subordinated
debentures to First Preferred I, net of underwriting fees and offering expenses,
were $83.1 million.  Distributions on First Preferred I's preferred  securities,
which are payable  quarterly  in arrears,  were $8.0 million for the years ended
December 31, 2002, 2001 and 2000.

         In July 1998,  First  America  Capital  Trust  (FACT),  a newly  formed
Delaware business trust subsidiary of First Banks, issued 1.84 million shares of
8.50% cumulative trust preferred  securities at $25 per share in an underwritten
public offering, and issued 56,908 shares of common securities to First Banks at
$25 per share.  First  Banks  owns all of FACT's  common  securities.  The gross
proceeds of the offering  were used by FACT to purchase  $47.4  million of 8.50%
subordinated  debentures  from  First  Banks,  maturing  on June 30,  2028.  The
maturity  date may be  shortened  to a date not  earlier  than June 30,  2003 or
extended to a date not later than June 30, 2037 if certain  conditions  are met.
The  subordinated  debentures are the sole asset of FACT. In connection with the
issuance of the FACT preferred  securities,  First Banks made certain guarantees
and  commitments  that, in the  aggregate,  constitute a full and  unconditional
guarantee  by First Banks of the  obligations  of FACT under the FACT  preferred
securities.  First  Banks'  proceeds  from  the  issuance  of  the  subordinated
debentures to FACT, net of underwriting fees and offering  expenses,  were $44.0
million.  Distributions  payable  on the FACT  preferred  securities,  which are
payable  quarterly in arrears,  were $3.9  million for years ended  December 31,
2002, 2001 and 2000.

         In October 2000, First Preferred Capital Trust II (First Preferred II),
a newly formed  Delaware  business trust  subsidiary of First Banks,  issued 2.3
million shares of 10.24% cumulative trust preferred  securities at $25 per share
in  an  underwritten  public  offering,  and  issued  71,135  shares  of  common
securities  to  First  Banks at $25 per  share.  First  Banks  owns all of First
Preferred II's common  securities.  The gross proceeds of the offering were used


<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

by  First  Preferred  II  to  purchase  $59.3  million  of  10.24%  subordinated
debentures  from First Banks,  maturing on September 30, 2030. The maturity date
may be  shortened  to a date not earlier than  September  30,  2005,  if certain
conditions  are met.  The  subordinated  debentures  are the sole asset of First
Preferred II. In connection with the issuance of the preferred securities, First
Banks made certain guarantees and commitments that, in the aggregate, constitute
a full and  unconditional  guarantee by First Banks of the  obligations of First
Preferred II under the First  Preferred II  preferred  securities.  First Banks'
proceeds from the issuance of the subordinated debentures to First Preferred II,
net  of   underwriting   fees  and  offering   expenses,   were  $55.1  million.
Distributions  on First Preferred II's preferred  securities,  which are payable
quarterly in arrears,  were $5.9 million,  $5.9 million and $1.2 million for the
years ended December 31, 2002, 2001 and 2000, respectively.

         In November,  2001, First Preferred  Capital Trust III (First Preferred
III), a newly formed Delaware  business trust subsidiary of First Banks,  issued
2.2 million shares of 9.00%  cumulative  trust  preferred  securities at $25 per
share in an  underwritten  public  offering,  and issued 68,290 shares of common
securities  to  First  Banks at $25 per  share.  First  Banks  owns all of First
Preferred III's common securities.  The gross proceeds of the offering were used
by  First  Preferred  III  to  purchase  $56.9  million  of  9.00%  subordinated
debentures  from First Banks,  maturing on September 30, 2031. The maturity date
may be  shortened  to a date not earlier than  September  30,  2006,  if certain
conditions  are met.  The  subordinated  debentures  are the sole asset of First
Preferred  III. In  connection  with the issuance of the  preferred  securities,
First Banks made certain  guarantees  and  commitments  that, in the  aggregate,
constitute a full and unconditional  guarantee by First Banks of the obligations
of First Preferred III under the First Preferred III preferred securities. First
Banks'  proceeds  from the  issuance  of the  subordinated  debentures  to First
Preferred  III,  net of  underwriting  fees and  offering  expenses,  were $52.9
million.  Distributions on First Preferred III's preferred securities, which are
payable quarterly in arrears, were $5.0 million and $634,000 for the years ended
December 31, 2002 and 2001, respectively.

         On April 10, 2002,  First Bank  Capital  Trust  (FBCT),  a newly formed
Delaware  business  trust  subsidiary  of First Banks,  issued  25,000 shares of
variable rate  cumulative  trust  preferred  securities at $1,000 per share in a
private placement,  and issued 774 shares of common securities to First Banks at
$1,000 per share.  First Banks owns all of the common  securities  of FBCT.  The
gross  proceeds of the offering  were used by FBCT to purchase  $25.8 million of
variable rate junior subordinated debentures from First Banks, maturing on April
22, 2032. The maturity date of the subordinated debentures may be shortened to a
date not  earlier  than April 22,  2007,  if  certain  conditions  are met.  The
subordinated  debentures  are the sole  asset of FBCT.  In  connection  with the
issuance of the FBCT preferred  securities,  First Banks made certain guarantees
and  commitments  that, in the  aggregate,  constitute a full and  unconditional
guarantee  by First Banks of the  obligations  of FBCT under the FBCT  preferred
securities.  First  Banks'  proceeds  from  the  issuance  of  the  subordinated
debentures  to  FBCT,  net  of  offering  expenses,   were  $24.2  million.  The
distribution  rate on the FBCT securities is equivalent to the six-month  London
Interbank Offering Rate plus 387.5 basis points, and is payable semi-annually in
arrears on April 22 and October 22, beginning on October 22, 2002. Distributions
on FBCT's preferred securities were $1.1 million for the year ended December 31,
2002.

         The distributions payable on all issues of First Banks' trust preferred
securities are included in interest  expense in the  consolidated  statements of
income.

         First Banks has  followed  the  practice  of  amortizing  its  deferred
issuance costs associated with its guaranteed  preferred beneficial interests in
its  subordinated  debentures  over the 30-year  period  through the  respective
maturity  date of each  issue.  In 2002,  First  Banks  reviewed  this  practice
relative to the significant  decline in prevailing interest rates experienced in
2001 and continuing in 2002 and determined that it was probable that some or all
of the  existing  issues  would be called by First Banks  prior to their  stated
maturity  date.  Therefore,  First Banks decided to change the period over which
its deferred  issuance costs are amortized to the five-year period ending on the
respective dates the issues become callable.


<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         A summary of the effect of this  change in  accounting  estimate on the
results of operations for the year ended December 31, 2002 with what the results
would have been without the change is as follows:
<TABLE>
<CAPTION>

                                                                                  Year Ended December 31, 2002
                                                                                --------------------------------
                                                                                (dollars expressed in thousands,
                                                                                     except per share data)

<S>                                                                                      <C>
         Net income, as reported......................................................   $     45,167
         Change in accounting estimate - amortization period..........................          4,363
         Change in accounting estimate - tax effect...................................         (1,527)
                                                                                         ------------
         Net income, as adjusted......................................................   $     48,003
                                                                                         ============

         Earnings per common share:
             Basic....................................................................   $   1,875.69
             Change in accounting estimate............................................         119.86
                                                                                         ------------
             Basic, as adjusted.......................................................   $   1,995.55
                                                                                         ============

             Diluted..................................................................   $   1,853.64
             Change in accounting estimate............................................         116.44
                                                                                         ------------
             Diluted, as adjusted.....................................................   $   1,970.08
                                                                                         ============
</TABLE>


(13)     INCOME TAXES

         Income tax expense  attributable to income from  continuing  operations
for the years ended December 31 consists of:
<TABLE>
<CAPTION>

                                                                                   2002        2001      2000
                                                                                   ----        ----      ----
                                                                                (dollars expressed in thousands)
              Current income tax expense:
<S>                                                                               <C>         <C>       <C>
                  Federal....................................................     $15,210     22,252    28,215
                  State......................................................       3,510      1,583     2,731
                                                                                  -------     ------    ------
                                                                                   18,720     23,835    30,946
                                                                                  -------     ------    ------
              Deferred income tax expense:
                  Federal....................................................       4,020     13,691     4,001
                  State......................................................          31        626       (60)
                                                                                  -------     ------    ------
                                                                                    4,051     14,317     3,941
                                                                                  -------     ------    ------
              Reduction in deferred valuation allowance......................          --     (8,104)     (405)
                                                                                  -------     ------    ------
                      Total..................................................     $22,771     30,048    34,482
                                                                                  =======     ======    ======
</TABLE>
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>

         The  effective  rates of  federal  income  taxes  for the  years  ended
December 31 differ from statutory rates of taxation as follows:
                                                                             Years Ended December 31,
                                                            -----------------------------------------------------------
                                                                   2002                2001                2000
                                                            -----------------    ----------------   -------------------
                                                            Amount    Percent    Amount   Percent    Amount     Percent
                                                            ------    -------    ------   -------    ------     -------
                                                                         (dollars expressed in thousands)

         Income before provision for income taxes,
            minority interest in income
           of subsidiary and cumulative effect of
<S>                                                         <C>                  <C>                <C>
           change inaccounting principle................    $69,369              $98,567            $ 92,635
                                                            =======              =======            ========
         Provision for income taxes calculated
           at federal statutory income tax rates........    $24,279     35.0%    $34,498    35.0%   $ 32,422     35.0%
         Effects of differences in tax reporting:
           Tax-exempt interest income, net of
               tax preference adjustment................       (972)    (1.4)       (539)   (0.5)       (587)    (0.6)
           State income taxes...........................      2,302      3.3       1,436     1.5       1,736      1.8
           Amortization of intangibles associated
               with the purchase of subsidiaries........         --       --       2,827     2.9       1,567      1.7
           Reduction in deferred valuation allowance....         --       --      (8,104)   (8.2)       (405)    (0.4)
           Bank owned life insurance, net of premium....     (1,957)    (2.8)     (1,431)   (1.5)     (1,410)    (1.5)
           Other, net...................................       (881)    (1.3)      1,361     1.3       1,159      1.2
                                                            -------    -----     -------  ------    --------   ------
                 Provision for income taxes.............    $22,771     32.8%    $30,048    30.5%   $ 34,482     37.2%
                                                            =======    =====     =======  ======    ========   ======
</TABLE>


<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         The tax effects of temporary  differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                    ---------------------------
                                                                                        2002         2001
                                                                                        ----         ----
                                                                                 (dollars expressed in thousands)

              Deferred tax assets:
<S>                                                                                   <C>           <C>
                  Net operating loss carryforwards................................    $ 38,666      44,100
                  Allowance for loan losses.......................................      37,730      36,000
                  Alternative minimum tax credits.................................       2,773       2,841
                  Disallowed losses on investment securities......................          --       1,287
                  Quasi-reorganization adjustment of bank premises................       1,126       1,176
                  Interest on non-accrual loans...................................       3,354       2,084
                  Mortgage servicing rights.......................................       5,549       4,161
                  Deferred compensation...........................................       2,112       2,418
                  Other real estate...............................................         118         184
                  Other...........................................................         729         295
                                                                                      --------    --------
                      Deferred tax assets.........................................      92,157      94,546
                                                                                      --------    --------
              Deferred tax liabilities:
                  Depreciation on bank premises and equipment.....................       7,457       6,936
                  Net fair value adjustment for investment securities
                    available for sale............................................       7,184       2,314
                  Net fair value adjustment for derivative instruments............      26,566      16,883
                  Unrealized gains on investment securities.......................       2,276          --
                  Operating leases................................................       6,808       6,424
                  Core deposit intangibles........................................       3,460       2,777
                  Discount on loans...............................................       1,654       2,900
                  Equity investments in other financial institutions..............       3,656       3,656
                  FHLB stock dividends............................................         407         462
                  State taxes.....................................................         797         766
                  Other...........................................................         939         738
                                                                                      --------    --------
                      Deferred tax liabilities....................................      61,204      43,856
                                                                                      --------    --------
                      Net deferred tax assets.....................................    $ 30,953      50,690
                                                                                      ========    ========
</TABLE>

         The realization of First Banks' net deferred tax assets is based on the
availability of carrybacks to prior taxable  periods,  the expectation of future
taxable income and the  utilization of tax planning  strategies.  Based on these
factors,  management  believes  it is more likely than not that First Banks will
realize the recognized net deferred tax assets of $30.9 million.

         Changes to the deferred  tax asset  valuation  allowance  for the years
ended December 31 were as follows:
<TABLE>
<CAPTION>

                                                                                       2002       2001       2000
                                                                                       ----       ----       ----
                                                                                    (dollars expressed in thousands)

<S>                                                                                  <C>          <C>        <C>
              Balance, beginning of year.........................................    $     --     13,075     14,746
              Current year deferred provision, change in
                  deferred tax valuation allowance...............................          --     (8,104)      (405)
              Reduction attributable to utilization of deferred tax assets:
                 Adjustment to additional paid-in capital........................          --     (4,971)        --
                 Adjustment to intangibles associated with the
                    purchase of subsidiaries.....................................          --         --     (1,266)
                                                                                     --------    -------    -------
              Balance, end of year...............................................    $     --         --     13,075
                                                                                     ========    =======    =======
</TABLE>

         The valuation  allowances were established by First Banks in connection
with three  separate  acquisitions  that occurred in 1994 and 1995.  First Banks
acquired  BancTEXAS  Group,  Inc.  in  1994  and CCB  Bancorp,  Inc.  and  First
Commercial Bancorp, Inc. in 1995.


<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         The ability to utilize the deferred tax assets  recorded in  connection
with these  acquisitions  was  subject to a number of  limitations.  Among these
limitations was the restriction  that net operating  losses and other attributes
can only be used against  income  generated by the  acquired  subsidiaries  and,
also,  limitations  were placed on the amount of net operating  losses  utilized
during a specified  period.  The  requirement  that BancTEXAS  Group,  Inc. file
separate Federal income tax returns placed further limitations on the ability to
utilize  the  deferred  tax  assets.  The prior  operating  history of the three
acquired  entities  did not provide  First  Banks with  adequate  assurances  to
conclude  at the time of the  acquisition  that it was more likely than not that
the deferred tax assets would be realized.

         During the years 1995  through  2000 to the extent that  certain of the
deferred  tax assets  were  realized,  the  valuation  allowances  were  reduced
accordingly.

         During 2001, based on management's analysis, it was determined that the
remaining  valuation  allowances  were no longer  needed.  The  reversal  of the
valuation allowances that were established in connection with the acquisition of
BancTEXAS  Group,  Inc. and First  Commercial  Bancorp,  Inc.  were  credited to
additional  paid-in  capital  as a result  of the  entities'  implementation  of
quasi-reorganizations  in 1994 and 1996. The reversal of the valuation allowance
established as a result of the acquisition of CCB Bancorp,  Inc. was credited to
the  provision  for  income  taxes as there was no  positive  goodwill  or other
intangibles associated with the purchase of CCB Bancorp, Inc.

         The  valuation  allowance  for deferred tax assets at December 31, 1999
included $1.3 million that was  recognized  in 2000 and credited to  intangibles
associated  with the  purchase  of  subsidiaries.  In  addition,  the  valuation
allowance  for deferred tax assets at December 31, 2000  included  $5.0 million,
which was credited to additional  paid-in capital in 2001 under the terms of the
quasi-reorganizations implemented for BancTEXAS Group, Inc. and First Commercial
Bancorp, Inc. as of December 31, 1994 and 1996, respectively.

         At  December  31,  2002 and  2001,  the  accumulation  of prior  years'
earnings  representing tax bad debt deductions were approximately $30.8 million.
If these tax bad debt  reserves  were  charged  for  losses  other than bad debt
losses, First Bank and FB&T would be required to recognize taxable income in the
amount of the charge. It is not contemplated that such  tax-restricted  retained
earnings  will be  used  in a  manner  that  would  create  federal  income  tax
liabilities.

         At December 31, 2002 and 2001, for federal income taxes purposes, First
Banks had net operating loss  carryforwards of approximately  $110.5 million and
$126.0 million,  respectively.  The net operating loss  carryforwards  for First
Banks expire as follows:

                                                             (dollars expressed
                                                                in thousands)

              Year ending December 31:
                  2003.........................................   $   1,362
                  2004.........................................         856
                  2005.........................................      13,303
                  2006.........................................       3,412
                  2007.........................................      10,289
                  2008 - 2020..................................      81,253
                                                                  ---------
                      Total....................................   $ 110,475
                                                                  =========



<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 (14)    EARNINGS PER COMMON SHARE

         The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations for the periods indicated:
<TABLE>
<CAPTION>

                                                                               Income        Shares       Per Share
                                                                            (numerator)   denominator)      Amount
                                                                            -----------   ------------      ------
                                                                          (dollars in thousands, except per share data)
     Year ended December 31, 2002:
<S>                                                                          <C>             <C>         <C>
         Basic EPS - income available to common stockholders.............    $  44,381       23,661      $1,875.69
         Effect of dilutive securities:
           Class A convertible preferred stock...........................          769          696         (22.05)
                                                                             ---------      -------      ---------
         Diluted EPS - income available to common stockholders...........    $  45,150       24,357      $1,853.64
                                                                             =========      =======      =========

     Year ended December 31, 2001:
         Basic EPS - income before cumulative effect.....................    $  65,104       23,661      $2,751.54
         Cumulative effect of change in accounting principle, net of tax.       (1,376)          --         (58.16)
                                                                             ---------      -------      ---------
         Basic EPS - income available to common stockholders.............       63,728       23,661       2,693.38
         Effect of dilutive securities:
           Class A convertible preferred stock...........................          769          893         (66.61)
                                                                             ---------      -------      ---------
         Diluted EPS - income available to common stockholders...........    $  64,497       24,554      $2,626.77
                                                                             =========      =======      =========

     Year ended December 31, 2000:
         Basic EPS - income available to common stockholders.............    $  55,321       23,661      $2,338.04
         Effect of dilutive securities:
           Class A convertible preferred stock...........................          769        1,076         (70.63)
                                                                             ---------      -------      ---------
         Diluted EPS - income available to common stockholders...........    $  56,090       24,737      $2,267.41
                                                                             =========      =======      =========
</TABLE>

(15)     CREDIT COMMITMENTS

         First Banks is a party to  commitments  to extend credit and commercial
and  standby  letters in credit in the  normal  course of  business  to meet the
financing needs of its customers. These instruments involve, in varying degrees,
elements  of  credit  risk  and  interest  rate  risk in  excess  of the  amount
recognized in the consolidated balance sheets. The interest rate risk associated
with these credit commitments  relates primarily to the commitments to originate
fixed-rate  loans.  As  more  fully  discussed  in  Note 5 to  the  accompanying
consolidated financial statements,  the interest rate risk of the commitments to
originate  fixed-rate  loans has been  hedged  with  forward  contracts  to sell
mortgage-backed securities. The credit risk amounts are equal to the contractual
amounts,  assuming the amounts are fully  advanced and the  collateral  or other
security is of no value.  First Banks uses the same credit  policies in granting
commitments and conditional  obligations as it does for on-balance-sheet  items.
At December 31, 2002, no amounts have been accrued for any estimated  losses for
these financial instruments.
<TABLE>
<CAPTION>

         Commitments to extend credit at December 31 were as follows:

                                                                                         December 31,
                                                                                  -------------------------
                                                                                       2002         2001
                                                                                       ----         ----
                                                                               (dollars expressed in thousands)

<S>                                                                               <C>             <C>
         Commitments to extend credit..........................................   $ 1,921,896     1,723,568
         Commercial and standby letters of credit..............................       188,567       137,345
                                                                                  -----------     ---------
                                                                                  $ 2,110,463     1,860,913
                                                                                  ===========     =========
</TABLE>
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Commitments  to extend  credit are  agreements to lend to a customer as
long as there is no  violation of any  condition  established  in the  contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. The standby  letters of credit at Decembr 31,
2002  expire  within 14 years.  Since many of the  commitments  are  expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent  future  cash  requirements.   Each  customer's   creditworthiness  is
evaluated on a case-by-case basis. The amount of collateral obtained,  if deemed
necessary upon extension of credit,  is based on management's  credit evaluation
of the counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant, equipment, income-producing commercial properties or
single family  residential  properties.  In the event of  nonperformance,  First
Banks may obtain and liquidate the collateral to recover  amounts paid under its
guarantees on these financial instruments.

         Commercial and standby  letters of credit are  conditional  commitments
issued to guarantee the performance of a customer to a third party.  The letters
of  credit  are  primarily  issued  to  support  public  and  private  borrowing
arrangements,   including   commercial   paper,   bond   financing  and  similar
transactions.  Most letters of credit extend for less than one year.  The credit
risk  involved  in  issuing  letters of credit is  essentially  the same as that
involved  in  extending  loan  facilities  to  customers.  Upon  issuance of the
commitments, First Banks typically holds marketable securities,  certificates of
deposit, inventory, real property or other assets as collateral supporting those
commitments for which collateral is deemed necessary.

(16)     FAIR VALUE OF FINANCIAL INSTRUMENTS

         The fair value of financial instruments is management's estimate of the
values at which the  instruments  could be  exchanged in a  transaction  between
willing parties.  These estimates are subjective and may vary significantly from
amounts  that would be  realized  in actual  transactions.  In  addition,  other
significant  assets are not considered  financial  assets including the mortgage
banking  operation,  deferred  tax  assets,  bank  premises  and  equipment  and
intangibles  associated  with the  purchase of  subsidiaries.  Further,  the tax
ramifications  related to the realization of the unrealized gains and losses can
have a  significant  effect  on the  fair  value  estimates  and  have  not been
considered in any of the estimates.

         The  estimated  fair value of First  Banks'  financial  instruments  at
December 31 were as follows:
<TABLE>
<CAPTION>

                                                                        2002                          2001
                                                              -------------------------    --------------------------
                                                              Carrying        Estimated     Carrying       Estimated
                                                                Value        Fair Value       Value       Fair Value
                                                                -----        ----------       -----       ----------
                                                                            (dollars expressed in thousands)
     Financial Assets:
<S>                                                          <C>               <C>           <C>             <C>
       Cash and cash equivalents..........................   $  203,251        203,251       241,874         241,874
       Investment securities:
         Available for sale...............................    1,120,894      1,120,894       610,466         610,466
         Held to maturity.................................       16,426         16,978        20,602          20,812
       Net loans..........................................    5,333,149      5,355,838     5,311,705       5,346,853
       Derivative instruments.............................       97,887         97,887        54,889          54,889
       Accrued interest receivable........................       35,638         35,638        37,349          37,349
       Interest rate lock commitments.....................        1,258          1,258        (1,048)         (1,048)
       Forward contracts to sell mortgage-backed
         securities.......................................       (2,752)        (2,752)          545             545
                                                             ==========     ==========    ==========      ==========

     Financial Liabilities:
       Deposits:
         Demand:
           Non-interest-bearing...........................   $  986,674        986,674       921,455         921,455
           Interest-bearing...............................      819,429        819,429       629,015         629,015
         Savings and money market.........................    2,176,616      2,176,616     1,832,939       1,832,939
         Time deposits....................................    2,190,101      2,239,882     2,300,495       2,342,892
         Short-term borrowings............................      265,644        265,644       243,134         243,134
         Note payable.....................................        7,000          7,000        27,500          27,500
         Accrued interest payable.........................       11,751         11,751        16,006          16,006
         Guaranteed preferred beneficial interests
           in subordinated debentures.....................      270,039        284,696       235,881         256,278
                                                             ==========     ==========    ==========      ==========

     Off-Balance Sheet - Credit commitments...............   $       --             --            --              --
                                                             ==========     ==========    ==========      ==========
</TABLE>



<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         The following  methods and assumptions were used in estimating the fair
value of financial instruments:

Financial Assets:

         Cash and cash equivalents and accrued interest receivable: The carrying
values reported in the consolidated balance sheets approximate fair value.

         Investment   securities:   The  fair  value  of  investment  securities
available for sale is the amount  reported in the  consolidated  balance sheets.
The fair value of  investment  securities  held to  maturity  is based on quoted
market prices where available.  If quoted market prices were not available,  the
fair value was based upon quoted market prices of comparable instruments.

         Net  loans:  The  fair  value of most  loans  held  for  portfolio  was
estimated  utilizing  discounted cash flow  calculations  that applied  interest
rates  currently  being offered for similar loans to borrowers with similar risk
profiles. The fair value of loans held for sale, which is the amount reported in
the  consolidated  balance  sheets,  is  based on  quoted  market  prices  where
available. If quoted market prices were not available,  the fair value was based
upon quoted market prices of comparable instruments. The carrying value of loans
is net of the allowance for loan losses and unearned discount.

         Derivative  instruments:  The fair value of derivative  instruments  is
based on quoted market prices where available.  If quoted market prices were not
available,  the fair value was based upon  quoted  market  prices of  comparable
instruments.

         Forward contracts to sell mortgage-backed securities: The fair value of
forward contracts to sell mortgage-backed securities is based upon quoted market
prices. The fair value of these contracts has been reflected in the consolidated
balance sheets in the carrying value of the loans held for sale portfolio.

Financial Liabilities:

         Deposits:  The fair value disclosed for deposits  generally  payable on
demand (i.e.,  non-interest-bearing  and  interest-bearing  demand,  savings and
money market accounts) is considered equal to their respective  carrying amounts
as reported in the  consolidated  balance  sheets.  The fair value disclosed for
demand  deposits  does not include the benefit  that  results  from the low-cost
funding provided by deposit liabilities  compared to the cost of borrowing funds
in the  market.  The fair  value  disclosed  for  certificates  of  deposit  was
estimated  utilizing a discounted cash flow  calculation  that applied  interest
rates  currently  being  offered  on  similar  certificates  to  a  schedule  of
aggregated monthly maturities of time deposits.

         Short-term  borrowings,  note  payable,  accrued  interest  payable and
interest rate lock commitments: The carrying values reported in the consolidated
balance sheets approximate fair value.

         Guaranteed preferred  beneficial interests in subordinated  debentures:
The fair value is based on quoted market prices.

Off-Balance-Sheet:

         Credit  commitments:  The majority of the  commitments to extend credit
and commercial and standby letters of credit contain variable interest rates and
credit deterioration clauses and, therefore,  the carrying value of these credit
commitments reported in the consolidated balance sheets approximates fair value.





<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(17)     EMPLOYEE BENEFITS

         First Banks' 401(k) plan is a  self-administered  savings and incentive
plan covering  substantially  all employees.  Under the plan,  employer-matching
contributions  are  determined  annually  by First  Banks'  Board of  Directors.
Employee contributions are limited to 15% of the employee's annual compensation,
not to exceed $12,000 for 2002. Total employer contributions under the plan were
$1.7  million,  $1.3 million and $1.1  million for the years ended  December 31,
2002, 2001 and 2000, respectively.  The plan assets are held and managed under a
trust agreement with First Bank's trust department.

(18)     PREFERRED STOCK

         First Banks has two classes of preferred stock outstanding. The Class A
preferred  stock is  convertible  into shares of common stock at a rate based on
the ratio of the par value of the preferred stock to the current market value of
the common stock at the date of  conversion,  to be  determined  by  independent
appraisal at the time of  conversion.  Shares of Class A preferred  stock may be
redeemed  by  First  Banks at any  time at  105.0%  of par  value.  The  Class B
preferred stock may not be redeemed or converted. The redemption of any issue of
preferred stock requires the prior approval of the Federal Reserve Board.

         The holders of the Class A and Class B preferred stock have full voting
rights.  Dividends  on the Class A and Class B  preferred  stock are  adjustable
quarterly  based  on the  highest  of the  Treasury  Bill  Rate or the Ten  Year
Constant  Maturity  Rate  for the  two-week  period  immediately  preceding  the
beginning  of the  quarter.  This rate shall not be less than 6.0% nor more than
12.0% on the Class A preferred  stock,  or less than 7.0% nor more than 15.0% on
the Class B preferred stock. The annual dividend rates for the Class A and Class
B preferred stock were 6.0% and 7.0%, respectively, for the years ended December
31, 2002, 2001 and 2000.

         In addition to the Class A and Class B preferred stock, First Banks has
five issues of trust  preferred  securities  outstanding.  The  structure of the
trust  preferred  securities,  as further  described in Note 12,  satisfies  the
regulatory requirements for inclusion,  subject to certain limitation,  in First
Banks' capital base.

(19)     TRANSACTIONS WITH RELATED PARTIES

         Outside of normal customer  relationships,  no directors or officers of
First Banks, no shareholders  holding over 5% of First Banks' voting  securities
and no  corporations or firms with which such persons or entities are associated
currently  maintain or have  maintained,  since the  beginning  of the last full
fiscal year, any significant business or personal relationships with First Banks
or its subsidiaries,  other than that which arises by virtue of such position or
ownership  interest in First Banks or its  subsidiaries,  except as described in
the following paragraphs.

         During  2001  and  2000,  Tidal  Insurance  Limited  (Tidal),  a former
corporation  owned  indirectly  by First  Banks'  Chairman  and  members  of his
immediate family, received approximately $132,000 and $212,000, respectively, in
insurance premiums for accident, health and life insurance policies purchased by
loan  customers  of First  Banks.  The  insurance  policies  were  issued  by an
unaffiliated  company and subsequently  ceded to Tidal. First Banks believes the
premiums paid by the loan customers of First Banks were comparable to those that
such loan customers would have paid if the premiums were  subsequently  ceded to
an unaffiliated third-party insurer.

         During 2002, 2001 and 2000,  First Title Guarantee LLC (First Title), a
corporation  established and administered by and for the benefit of First Banks'
Chairman and members of his immediate family,  received approximately  $412,000,
$316,000 and $235,000,  respectively,  in commissions for policies  purchased by
First Banks or customers of the Subsidiary Banks from unaffiliated,  third-party
insurors.  The insurance premiums on which the  aforementioned  commissions were
earned were competitively bid, and First Banks deems the commissions First Title
earned from  unaffiliated  third-party  companies to be comparable to those that
would have been earned by an unaffiliated third-party agent.


<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         First Brokerage America,  L.L.C., a limited liability corporation which
is  indirectly  owned by First  Banks'  Chairman  and  members of his  immediate
family,  received  approximately $3.3 million, $3.0 million and $2.1 million for
the years ended December 31, 2002, 2001 and 2000,  respectively,  in commissions
paid by  unaffiliated  third-party  companies.  The  commissions  received  were
primarily  in  connection  with the  sales of  annuities,  securities  and other
insurance products to customers of the Subsidiary Banks.

         First Services,  L.P., a limited partnership  indirectly owned by First
Banks'  Chairman  and  members of his  immediate  family,  provides  information
technology and various related services to First Banks,  Inc. and its Subsidiary
Banks. Fees paid under agreements with First Services, L.P., were $26.8 million,
$23.1 million and $19.3 million for the years ended December 31, 2002,  2001 and
2000, respectively.  During 2002, 2001 and 2000, First Services, L.P. paid First
Banks $3.9 million, $2.0 million and $1.8 million,  respectively, in rental fees
for the use of data processing and other equipment owned by First Banks.

         During 2002, First Capital America,  Inc., a corporation owned by First
Banks' Chairman and members of his immediate family, received approximately $1.0
million of origination  and servicing fees  associated  with  commercial  leases
originated  and  serviced  for the  Subsidiary  Banks by the  employees of First
Capital America, Inc.

         First Banks' subsidiary banks have had in the past, and may have in the
future,  loan  transactions  in the  ordinary  course  of  business  with  their
directors or their affiliates.  These loan transactions have been and will be on
the same terms, including interest rates and collateral,  as those prevailing at
the time for  comparable  transactions  with  unaffiliated  persons  and did not
involve more than the normal risk of collectibility or present other unfavorable
features.  Loans to directors,  their affiliates and executive officers of First
Banks,  Inc.,  were  approximately  $12.8  million at December 31,  2002.  First
Banks', susidiary banks do not extend credit to their officers or to officers of
First Banks,  Inc., except extensions of credit secured by mortgages on personal
residences, loans to purchase automobiles and personal credit accounts


<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(20)     BUSINESS SEGMENT RESULTS

         First Banks' business segments are its Subsidiary Banks. The reportable
business  segments are consistent with the management  structure of First Banks,
the  Subsidiary   Banks  and  the  internal   reporting   system  that  monitors
performance.

         Through the respective  branch  networks,  the Subsidiary Banks provide
similar  products and services in their defined  geographic  areas. The products
and services  offered  include a broad range of commercial and personal  deposit
products,  including demand, savings, money market and time deposit accounts. In
addition,  the  Subsidiary  Banks  market  combined  basic  services for various
customer groups,  including packaged accounts for more affluent  customers,  and
sweep accounts,  lock-box  deposits and cash management  products for commercial
customers.  The Subsidiary Banks also offer both consumer and commercial  loans.
Consumer lending includes  residential real estate,  home equity and installment
lending.  Commercial  lending  includes  commercial,  financial and agricultural
loans, real estate  construction and development  loans,  commercial real estate
loans, asset-based loans, commercial leasing and trade financing.
<TABLE>
<CAPTION>

                                                         First Bank                                FB&T
                                            ---------------------------------       ----------------------------------
                                             2002           2001        2000          2002         2001         2000
                                             ----           ----        ----          ----         ----         ----
                                                              (dollars expressed in thousands)
Balance sheet information:

<S>                                       <C>              <C>         <C>            <C>         <C>          <C>
Investment securities...................  $  648,732       245,365     214,005        465,747     368,207      330,478
Loans, net of unearned discount.........   3,128,677     3,086,023   2,694,005      2,303,912   2,323,263    2,058,628
Goodwill................................      31,173        19,165       9,281        108,939      96,695       74,609
Total assets............................   4,187,958     3,707,081   3,152,885      3,169,197   3,057,920    2,733,545
Deposits................................   3,551,533     3,142,676   2,729,489      2,638,395   2,555,396    2,306,469
Note payable............................          --            --          --             --          --           --
Stockholders' equity....................     375,521       321,336     273,848        402,027     398,713      333,186
                                          ==========    ==========   =========      =========   =========    =========

Income statement information:

Interest income.........................  $  235,727       236,889     247,290        188,631     208,291      176,902
Interest expense........................      82,033       111,410     115,421         50,007      78,547       71,167
                                          ----------    ----------   ---------      ---------   ---------    ---------
     Net interest income................     153,694       125,479     131,869        138,624     129,744      105,735
Provision for loan losses...............      23,900        18,500      12,250         31,600       5,010        1,877
                                          ----------    ----------   ---------      ---------   ---------    ---------
     Net interest income after
       provision for loan losses........     129,794       106,979     119,619        107,024     124,734      103,858
Noninterest income......................      67,806        53,623      32,152         23,493      27,469       12,343
Noninterest expense.....................     143,416       105,550      90,746         86,104      89,112       65,567
                                          ----------    ----------   ---------      ---------   ---------    ---------
     Income before provision for
       income taxes, minority
       interest in income of
       subsidiary and cumulative
       effect of change in
       accounting principle.............      54,184        55,052      61,025         44,413      63,091       50,634
Provision for income taxes..............      18,056        19,246      20,889         17,276      16,972       20,064
                                          ----------    ----------   ---------      ---------   ---------    ---------
     Income before minority interest
       in income of subsidiary
       cumulative effect of change
       in accounting principle..........      36,128        35,806      40,136         27,137      46,119       30,570
Minority interest in
       income of subsidiary.............          --            --          --             --          --           --
                                          ----------    ----------   ---------      ---------   ---------    ---------
     Income before cumulative
        effect of change in
        accounting principle............      36,128        35,806      40,136         27,137      46,119       30,570
Cumulative effect of change in
   accounting principle, net of tax.....          --          (917)         --             --        (459)          --
                                          ----------    ----------   ---------      ---------   ---------    ---------
     Net income.........................  $   36,128        34,889      40,136         27,137      45,660       30,570
                                          ==========    ==========   =========      =========   =========    =========
------------------------
(1)  Corporate and other includes $15.6 million, $12.1 million and $8.6 million of guaranteed preferred debentures expense,
     after applicable income tax benefit of $8.4 million, $6.5 million and $4.6 million, for the years ended December 31,
     2002, 2001 and 2000, respectively.
</TABLE>



<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         Other  financial  services  include  mortgage  banking,   debit  cards,
brokerage  services,   credit-related  insurance,   automated  teller  machines,
telephone banking,  safe deposit boxes,  escrow and bankruptcy deposit services,
stock  option  services,  and trust,  private  banking and  institutional  money
management  services.  The revenues  generated by each business  segment consist
primarily of interest  income,  generated from the loan and investment  security
portfolios,  and service charges and fees,  generated from the deposit  products
and services.  The geographic  areas include  Missouri,  Illinois,  southern and
northern  California  and  Houston,  Dallas,  Irving and  McKinney,  Texas.  The
products and services are offered to customers primarily within their respective
geographic areas, with the exception of loan participations executed between the
Subsidiary Banks.

         The business  segment results are consistent with First Banks' internal
reporting  system  and,  in  all  material  respects,  with  generally  accepted
accounting  principles and practices  predominant in the banking industry.  Such
principles and practices are summarized in Note 1 to the consolidated  financial
statements.
<TABLE>
<CAPTION>

                                                     Corporate, Other and
               Total Segments                 Intercompany Reclassifications (1)           Consolidated Totals
   --------------------------------------   -------------------------------------  ----------------------------------
       2002         2001          2000         2002         2001         2000         2002        2001        2000
       ----         ----          ----         ----         ----         ----         ----        ----        ----
                                                         (dollars expressed in thousands)


<C>                 <C>          <C>           <C>         <C>          <C>         <C>           <C>         <C>
    1,114,479       613,572      544,483       22,841      17,496       19,051      1,137,320     631,068     563,534
    5,432,589     5,409,286    4,752,633           (1)       (417)        (368)     5,432,588   5,408,869   4,752,265
      140,112       115,860       83,890           --          --        1,131        140,112     115,860      85,021
    7,357,155     6,765,001    5,886,430      (14,355)     13,450       (9,739)     7,342,800   6,778,451   5,876,691
    6,189,928     5,698,072    5,035,958      (17,108)    (14,168)     (23,543)     6,172,820   5,683,904   5,012,415
           --            --           --        7,000      27,500       83,000          7,000      27,500      83,000
      777,548       720,049      607,034     (258,507)   (271,392)    (254,188)       519,041     448,657     352,846
   ==========    ==========   ==========    =========    ========     ========     ==========   =========   =========


      424,358       445,180      424,192          552        (437)      (1,366)       424,910     444,743     422,826
      132,040       189,957      186,588       24,700      19,647       14,264        156,740     209,604     200,852
   ----------    ----------   ----------    ---------    --------     --------     ----------   ---------   ---------
      292,318       255,223      237,604      (24,148)    (20,084)     (15,630)       268,170     235,139     221,974
       55,500        23,510       14,127           --          --           --         55,500      23,510      14,127
   ----------    ----------   ----------    ---------    --------     --------     ----------   ---------   ---------

      236,818       231,713      223,477      (24,148)    (20,084)     (15,630)       212,670     211,629     207,847
       91,299        81,092       44,495       (1,844)     17,517       (1,717)        89,455      98,609      42,778
      229,520       194,662      156,313        3,236      17,009        1,677        232,756     211,671     157,990
   ----------    ----------   ----------    ---------    --------     --------     ----------   ---------   ---------



       98,597       118,143      111,659      (29,228)    (19,576)     (19,024)        69,369      98,567      92,635
       35,332        36,218       40,953      (12,561)     (6,170)      (6,471)        22,771      30,048      34,482
   ----------    ----------   ----------    ---------    --------     --------     ----------   ---------   ---------



       63,265        81,925       70,706      (16,667)    (13,406)     (12,553)        46,598      68,519      58,153
           --            --           --        1,431       2,629        2,046          1,431       2,629       2,046
   ----------    ----------   ----------    ---------    --------     --------     ----------   ---------   ---------

       63,265        81,925       70,706      (18,098)    (16,035)     (14,599)        45,167      65,890      56,107

           --        (1,376)          --           --          --           --             --      (1,376)         --
   ----------    ----------   ----------    ---------    --------     --------     ----------   ---------   ---------
       63,265        80,549       70,706      (18,098)    (16,035)     (14,599)        45,167      64,514      56,107
   ==========    ==========   ==========    =========    ========     ========     ==========   =========   =========

</TABLE>



<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(21)     REGULATORY CAPITAL

         First Banks and the Subsidiary Banks are subject to various  regulatory
capital  requirements  administered  by the federal and state banking  agencies.
Failure to meet minimum capital  requirements can initiate certain mandatory and
possibly  additional  discretionary  actions by regulators  that, if undertaken,
could have a direct material effect on First Banks' financial statements.  Under
capital adequacy  guidelines and the regulatory  framework for prompt corrective
action,  First  Banks  and the  Subsidiary  Banks  must  meet  specific  capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance-sheet  items as calculated  under regulatory  accounting  practices.
Capital amounts and classifications are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy  require  First  Banks and the  Subsidiary  Banks to  maintain  minimum
amounts and ratios of total and Tier 1 capital  (as defined in the  regulations)
to  risk-weighted  assets,  and of Tier 1 capital to average assets.  Management
believes,  as of December 31, 2002,  First Banks and the  Subsidiary  Banks were
each well capitalized.

         As of December 31, 2002, the most recent notification from First Banks'
primary  regulator  categorized  First  Banks and the  Subsidiary  Banks as well
capitalized under the regulatory  framework for prompt corrective  action. To be
categorized  as well  capitalized,  First  Banks and the  Subsidiary  Banks must
maintain minimum total risk-based,  Tier 1 risk-based and Tier 1 leverage ratios
as set forth in the table below.

         At December 31, 2002 and 2001,  First Banks' and the Subsidiary  Banks'
required and actual capital ratios were as follows:
<TABLE>
<CAPTION>

                                                                                                         To be Well
                                                                 Actual                               Capitalized Under
                                                          ------------------       For Capital        Prompt Corrective
                                                          2002         2001     Adequacy Purposes     Action Provisions
                                                          ----         ----     -----------------     -----------------

     Total capital (to risk-weighted assets):
<S>                                                       <C>          <C>             <C>                  <C>
              First Banks.............................    10.68%       10.53%          8.0%                 10.0%
              First Bank..............................    10.75        10.14           8.0                  10.0
              FB&T....................................    10.18        11.27           8.0                  10.0

     Tier 1 capital (to risk-weighted assets):
              First Banks.............................     7.47         7.57           4.0                   6.0
              First Bank..............................     9.49         8.89           4.0                   6.0
              FB&T....................................     8.93        10.02           4.0                   6.0

     Tier 1 capital (to average assets):
              First Banks.............................     6.45         7.24           3.0                   5.0
              First Bank..............................     7.79         8.67           3.0                   5.0
              FB&T....................................     8.26         9.47           3.0                   5.0
</TABLE>

(22)     DISTRIBUTION OF EARNINGS OF THE SUBSIDIARY BANKS

         The  Subsidiary  Banks are  restricted  by  various  state and  federal
regulations,  as well as by the terms of the Credit Agreement  described in Note
11, as to the amount of dividends that are available for payment to First Banks,
Inc.  Under the most  restrictive of these  requirements,  the future payment of
dividends from the Subsidiary Banks is limited to approximately $31.3 million at
December 31, 2002, unless prior permission of the regulatory  authorities and/or
the lending banks is obtained.



<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(23)     PARENT COMPANY ONLY FINANCIAL INFORMATION

         Following  are  condensed  balance  sheets of First  Banks,  Inc. as of
December 31, 2002 and 2001,  and  condensed  statements of income and cash flows
for the years ended December 31, 2002, 2001 and 2000:
<TABLE>
<CAPTION>


                            CONDENSED BALANCE SHEETS

                                                                                           December 31,
                                                                                           ------------
                                                                                        2002         2001
                                                                                        ----         ----
                                                                                 (dollars expressed in thousands)
                                   Assets
                                   ------

<S>                                                                                  <C>              <C>
     Cash deposited in subsidiary banks...........................................   $    4,469       4,894
     Investment securities........................................................       22,841      17,497
     Investment in subsidiaries...................................................      786,870     594,152
     Advances to subsidiaries.....................................................           --      71,000
     Other assets.................................................................       12,321      10,232
                                                                                     ----------    --------
           Total assets...........................................................   $  826,501     697,775
                                                                                     ==========    ========

                    Liabilities and Stockholders' Equity
                    ------------------------------------

     Note payable................................................................    $    7,000      27,500
     Subordinated debentures.....................................................       283,483     205,103
     Accrued expenses and other liabilities......................................        16,977      16,515
                                                                                     ----------    --------
           Total liabilities.....................................................       307,460     249,118
     Stockholders' equity........................................................       519,041     448,657
                                                                                     ----------    --------
           Total liabilities and stockholders' equity............................    $  826,501     697,775
                                                                                     ==========    ========
</TABLE>

<TABLE>
<CAPTION>


                         CONDENSED STATEMENTS OF INCOME

                                                                                    Years Ended December 31,
                                                                              ---------------------------------
                                                                                  2002        2001        2000
                                                                                  ----        ----        ----
                                                                                (dollars expressed in thousands)

     Income:
<S>                                                                           <C>            <C>         <C>
       Dividends from subsidiaries........................................    $  28,000      53,500      43,000
       Management fees from subsidiaries..................................       21,754      20,443      17,325
       Gain on sale of securities.........................................           97      19,134          --
       Other..............................................................        3,383       6,008       1,956
                                                                              ---------      ------      ------
           Total income...................................................       53,234      99,085      62,281
                                                                              ---------      ------      ------
     Expense:
       Interest...........................................................       21,855      17,759      13,511
       Salaries and employee benefits.....................................       15,726      13,309      12,180
       Legal, examination and professional fees...........................        2,824       2,895       2,031
       Other..............................................................        7,917      20,339       4,422
                                                                              ---------      ------      ------
           Total expense..................................................       48,322      54,302      32,144
                                                                              ---------      ------      ------
           Income before income tax benefit and equity
              in undistributed earnings of subsidiary.....................        4,912      44,783      30,137
     Income tax benefit...................................................      (10,502)     (2,418)     (3,922)
                                                                              ---------      ------      ------
           Income before equity in undistributed earnings of subsidiary...       15,414      47,201      34,059
     Equity in undistributed earnings of subsidiary.......................       29,753      17,313      22,048
                                                                              ---------      ------      ------
           Net income.....................................................    $  45,167      64,514      56,107
                                                                              =========      ======      ======


</TABLE>

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                   Years Ended December 31,
                                                                           ------------------------------------
                                                                              2002          2001           2000
                                                                              ----          ----           ----
                                                                               (dollars expressed in thousands)

     Cash flows from operating activities:
<S>                                                                        <C>             <C>            <C>
       Net income......................................................    $ 45,167        64,514         56,107
       Adjustments to reconcile net income to net cash provided by
         operating activities:
           Net income of subsidiaries..................................     (57,753)      (70,730)       (64,937)
           Dividends from subsidiaries.................................      28,000        53,500         43,000
           Other, net..................................................       2,599        (3,875)           272
                                                                           --------      --------       --------
              Net cash provided by operating activities................      18,013        43,409         34,442
                                                                           --------      --------        -------

     Cash flows from investing activities:
       (Increase) decrease in investment securities....................         261        (9,382)          (860)
       Investment in common securities of FBCT,
         First Preferred III and First Preferred II....................        (774)       (1,707)        (1,778)
       Acquisitions of subsidiaries....................................     (56,334)      (63,767)            --
       Capital contributions to subsidiaries...........................         (70)       (5,900)        (6,100)
       Decrease (increase) in advances to subsidiary...................      34,000        27,000        (98,000)
       Other, net......................................................          (9)        6,540         (1,464)
                                                                           --------      --------       --------
              Net cash used in investing activities....................     (22,926)      (47,216)      (108,202)
                                                                           --------      --------       --------

     Cash flows from financing activities:
       Advances drawn on note payable..................................      43,500        69,500        137,000
       Repayments of note payable......................................     (64,000)     (125,000)      (118,000)
       Proceeds from issuance of FBCT, First Preferred III and
         First Preferred II subordinated debentures....................      25,774        56,908         59,278
       Payment of preferred stock dividends............................        (786)         (786)          (786)
                                                                           --------      --------       --------
              Net cash provided by financing activities................       4,488           622         77,492
                                                                           --------      --------       --------
              Net (decrease) increase in cash
                deposited in subsidiary banks..........................        (425)       (3,185)         3,732
     Cash deposited in subsidiary banks, beginning of year.............       4,894         8,079          4,347
                                                                           --------      --------       --------
     Cash deposited in subsidiary banks, end of year...................    $  4,469         4,894          8,079
                                                                           ========      ========       ========

     Noncash investing activities:
       Cash paid for interest..........................................    $ 21,855        21,068         10,410
       Reduction of deferred tax valuation reserve.....................          --           636             --
                                                                           ========      ========       ========
</TABLE>

(24)     CONTINGENT LIABILITIES

         In October  2000,  First Banks  entered  into two  continuing  guaranty
contracts.  For value  received,  and for the purpose of inducing a pension fund
and its  trustees  and a welfare  fund and its  trustees  (the Funds) to conduct
business with Missouri Valley Partners,  Inc. (MVP), First Bank's  institutional
investment  management  subsidiary,  First Banks irrevocably and unconditionally
guaranteed payment of and promised to pay to each of the Funds any amounts up to
the sum of  $5,000,000  to the extent MVP is liable to the Funds for a breach of
the Investment  Management Agreements (including the Investment Policy Statement
and  Investment  Guidelines),  by and  between  MVP and  the  Funds  and/or  any
violation of the Employee  Retirement  Income  Security Act by MVP  resulting in
liability  to  the  Funds.  The  guaranties  are  continuing  guaranties  of all
obligations  that may arise for  transactions  occurring prior to termination of
the Investment  Management  Agreements and are co-existent  with the term of the
Investment Management  Agreements.  The Investment Management Agreements have no
specified  term but may be  terminated  at any time upon  written  notice by the
Trustees or, at First  Banks'  option,  upon thirty days  written  notice to the
Trustees. In the event of termination of the Investment  Management  Agreements,
such  termination  shall  have no effect on the  liability  of First  Banks with
respect to obligations  incurred  before such  termination.  The  obligations of
First Banks are joint and several  with those of MVP.  First Banks does not have

<PAGE>

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

any recourse  provisions  that would enable it to recover from third parties any
amounts  paid  under the  contracts  nor does  First  Banks  hold any  assets as
collateral that, upon occurrence of a required payment under the contract, could
be liquidated to recover all or a portion of the amount(s) paid. At December 31,
2002,  First Banks had not recorded a liability for the  obligations  associated
with  these  guaranty  contracts  as the  likelihood  that  First  Banks will be
required to make payments under the contracts is remote.

         In the ordinary  course of business,  First Banks and its  subsidiaries
become involved in legal  proceedings.  Management,  in consultation  with legal
counsel,  believes the ultimate  resolution of these proceedings will not have a
material  adverse effect on the financial  condition or results of operations of
First Banks and/or its subsidiaries.

(25)     SUBSEQUENT EVENTS

         On January 16, 2003, First Banks filed a Registration Statement on Form
S-2 (Registration Statement) with the Securities and Exchange Commission for the
registration of additional  trust preferred  securities.  Under the terms of the
Registration  Statement,  First Banks formed First  Preferred  Capital  Trust IV
(First Preferred IV), a Delaware business trust  subsidiary.  FPCT IV will issue
1.6 million shares (prior to the underwriters' over-allotment,  which allows for
the issuance of up to 240,000  additional shares) of fixed rate cumulative trust
preferred  securities at $25 per share in an underwritten  public offering,  and
will  issue  approximately  49,485  shares  of common  securities  (prior to the
underwriters'  over-allotment,  which  allows  for the  issuance  of up to 7,423
additional common  securities) to First Banks at $25 per share. First Banks will
own all of First  Preferred  IV's common  securities.  The gross proceeds of the
offering  will be used by First  Preferred  IV to purchase  approximately  $41.2
million  of fixed  rate  subordinated  debentures  (prior  to the  underwriters'
over-allotment,  which  allows  for  the  purchase  of up  to  $6.2  million  of
additional subordinated debentures) from First Banks, maturing on June 30, 2033.
The maturity  date may be shortened to a date not earlier than June 30, 2033, if
certain  conditions are met. The subordinated  debentures will be the sole asset
of First  Preferred  IV.  In  connection  with  the  issuance  of the  preferred
securities,  First Banks will make certain  guarantees and commitments  that, in
the aggregate,  constitute a full and unconditional  guarantee by First Banks of
the  obligations  of First  Preferred IV under the First  Preferred IV preferred
securities.  First  Banks'  proceeds  from  the  issuance  of  the  subordinated
debentures  to  First  Preferred  IV,  net of  underwriting  fees  and  offering
expenses, are expected to be approximately $38.4 million. Distributions on First
Preferred  IV's  preferred  securities  will be payable  quarterly  in  arrears,
beginning  on June 30,  2003,  and will be included  in interest  expense in the
consolidated  statements  of income.  First Banks  expects to use the entire net
proceeds of the offering to redeem the subordinated  debentures  associated with
the 9.25% trust preferred securities issued by First Preferred Capital Trust, in
1997.  Currently,  there is  approximately  $88.9 million in principal amount of
such  subordinated  debentures.  The remaining  funds necessary to complete this
redemption  of  $50.5  million  will  be  provided   from   available   cash  of
approximately  $10.4 million,  the issuance of $25.0 million of additional trust
preferred securities in a private placement to qualified  institutional  buyers,
as described below, and borrowings under First Banks' revolving credit line with
a group of unaffiliated financial  institutions,  as described in Note 11. First
Banks  expects this  transaction  to be completed  during the second  quarter of
2003.

         On March 20, 2003,  First Bank Statutory  Trust (FBST),  a newly formed
Connecticut  statutory trust subsidiary of First Banks,  issued 25,000 shares of
8.10%  cumulative  trust  preferred  securities at $1,000 per share in a private
placement,  and issued 774 shares of common  securities to First Banks at $1,000
per share.  First  Banks owns all of the common  securities  of FBST.  The gross
proceeds of the offering  were used by FBST to purchase  $25.0  million of 8.10%
junior subordinated debentures from First Banks, maturing on March 20, 2033. The
maturity  date of the  subordinated  debentures  may be  shortened to a date not
earlier than March 20, 2008,  if certain  conditions  are met. The  subordinated
debentures  are the sole asset of FBST. In  connection  with the issuance of the
FBST preferred  securities,  First Banks made certain guarantees and commitments
that, in the aggregate,  constitute a full and unconditional  guarantee by First
Banks of the  obligations  of FBST under the FBST  preferred  securities.  First
Banks' proceeds from the issuance of the subordinated debentures to FBST, net of
offering  expenses,  were  $24.5  million.  Distributions  on  FBST's  preferred
securities are payable quarterly in arrears,  beginning March 31, 2003, and will
be included in interest expense in the consolidated statements of income.


<PAGE>
                  QUARTERLY CONDENSED FINANCIAL DATA -- UNAUDITED
<TABLE>
<CAPTION>
                                                                                 2002 Quarter Ended
                                                                ----------------------------------------------------
                                                                 March 31     June 30    September 30    December 31
                                                                 --------     -------    ------------    -----------
                                                                          (dollars expressed in thousands)

<S>                                                             <C>           <C>           <C>             <C>
Interest income..............................................   $ 106,612     107,303       105,811         105,184
Interest expense.............................................      42,490      41,615        37,630          35,005
                                                                ---------    --------       -------        --------
    Net interest income......................................      64,122      65,688        68,181          70,179
Provision for loan losses....................................      13,000      12,000        13,700          16,800
                                                                ---------    --------       -------        --------
    Net interest income after provision for loan losses......      51,122      53,688        54,481          53,379
Noninterest income...........................................      18,835      20,529        25,476          24,615
Noninterest expense..........................................      56,858      59,220        59,154          57,524
                                                                ---------    --------       -------        --------
    Income before provision for income taxes and
      minority interest in income of subsidiary..............      13,099      14,997        20,803          20,470
Provision for income taxes...................................       4,771       5,328         7,372           5,300
                                                                ---------    --------       -------        --------
    Income before minority interest in
      income of subsidiary...................................       8,328       9,669        13,431          15,170
Minority interest in income of subsidiary....................         328         301           437             365
                                                                ---------    --------       -------        --------
    Net income...............................................   $   8,000       9,368        12,994          14,805
                                                                =========    ========       =======        ========
Earnings per common share:
    Basic....................................................   $  329.84      390.35        540.87          614.64
                                                                =========    ========       =======        ========

    Diluted..................................................   $  328.30      384.48        534.32          609.63
                                                                =========    ========       =======        ========

                                                                                 2001 Quarter Ended
                                                                ----------------------------------------------------
                                                                 March 31     June 30    September 30    December 31
                                                                ---------     -------    ------------    -----------
                                                                          (dollars expressed in thousands)

Interest income..............................................   $ 116,037     113,356       110,724         104,626
Interest expense.............................................      58,629      55,261        50,950          44,764
                                                                ---------    --------       -------        --------
    Net interest income......................................      57,408      58,095        59,774          59,862
Provision for loan losses....................................       3,390       3,720         6,800           9,600
                                                                ---------    --------       -------        --------
    Net interest income after provision for loan losses......      54,018      54,375        52,974          50,262
Noninterest income...........................................      16,474      19,424        21,846          40,865
Noninterest expense..........................................      47,129      59,909        50,323          54,310
                                                                ---------    --------       -------        --------
    Income before provision for income taxes, minority
      interest in income of subsidiary and cumulative
     effect of change in accounting principle................      23,363      13,890        24,497          36,817
Provision for income taxes...................................       9,124       5,457         9,539           5,928
                                                                ---------    --------       -------        --------
    Income before minority interest in income
      of subsidiary and cumulative effect
      of change in accounting principle......................      14,239       8,433        14,958          30,889
Minority interest in income of subsidiary....................         511         534           577           1,007
                                                                ---------    --------       -------        --------
    Income before cumulative effect of change in
      accounting principle...................................      13,728       7,899        14,381          29,882
Cumulative effect of change in accounting
    principle, net of tax....................................      (1,376)         --            --              --
                                                                ---------    --------       -------        --------
    Net income...............................................   $  12,352       7,899        14,381          29,882
                                                                =========    ========       =======        ========
Earnings per common share:
    Basic:
      Income before cumulative effect of change in
        accounting principle.................................   $  571.94      328.27        599.47        1,251.86
      Cumulative effect of change in accounting principle....      (58.16)         --            --              --
                                                                ---------    --------       -------        --------
      Basic..................................................   $  513.78      328.27        599.47        1,251.86
                                                                =========    ========       =======        ========
    Diluted:
      Income before cumulative effect of change in
        accounting principle.................................   $  561.09      322.78        587.93        1,225.79
      Cumulative effect of change in accounting principle....      (58.16)         --            --              --
                                                                ---------    --------       -------        --------
      Diluted................................................   $  502.93      322.78        587.93        1,225.79
                                                                =========    ========       =======        ========
</TABLE>




<PAGE>

                              INVESTOR INFORMATION

FIRST BANKS, INC. PREFERRED SECURITIES
--------------------------------------

         The  preferred  securities  of First  Preferred  Capital  Trust,  First
Preferred  Capital Trust II and First Preferred  Capital Trust III are traded on
the Nasdaq National Market System with the ticker symbols  "FBNKO,"  "FBNKN" and
"FBNKM," respectively. As of March 25, 2003, there were approximately 370 record
holders of First  Preferred  Capital  Trust.  This  number  does not include any
persons or entities that hold their preferred  securities in nominee or "street"
name  through  various  brokerage  firms.  The  preferred  securities  of  First
Preferred Capital Trust II and First Preferred Capital Trust III are represented
by a global  security that has been deposited with and registered in the name of
The Depository Trust Company, New York, New York (DTC). The beneficial ownership
interests of these preferred  securities are recorded through the DTC book-entry
system. The high and low preferred  securities prices and the dividends declared
for 2002 and 2001 are summarized as follows:
<TABLE>
<CAPTION>

                  FIRST PREFERRED CAPITAL TRUST (ISSUE DATE - FEBRUARY 1997) - FBNKO

                                                                       2002                  2001         Dividend
                                                                  --------------       --------------
                                                                   High     Low        High       Low     Declared
                                                                   ----     ---        ----       ---     --------
<S>                                                               <C>      <C>         <C>       <C>      <C>
     First quarter............................................    $26.25   25.20       26.25     24.38    $ 0.578125
     Second quarter...........................................     27.24   25.15       27.35     25.00      0.578125
     Third quarter............................................     26.49   25.00       27.25     25.00      0.578125
     Fourth quarter...........................................     26.50   25.20       26.90     25.02      0.578125

                  FIRST PREFERRED CAPITAL TRUST II (ISSUE DATE - OCTOBER 2000) - FBNKN

                                                                       2002                  2001          Dividend
                                                                  --------------      -----------------
                                                                   High     Low        High       Low      Declared
                                                                   ----     ---        ----       ---      ---------
     First quarter............................................    $28.50   27.55       27.75     26.38    $ 0.640000
     Second quarter...........................................     28.40   26.85       27.40     26.25      0.640000
     Third quarter............................................     28.65   27.85       28.50     26.95      0.640000
     Fourth quarter...........................................     28.25   27.30       28.30     27.00      0.640000
</TABLE>
<TABLE>
<CAPTION>
                  FIRST PREFERRED CAPITAL TRUST III (ISSUE DATE - NOVEMBER 2001) - FBNKM


                                                            2002         Dividend            2001          Dividend
                                                      ---------------                 ---------------
                                                      High       Low     Declared      High       Low      Declared
                                                      ----       ---     ---------     ----       ---      ---------
<S>                                                  <C>        <C>     <C>                               <C>
     First quarter.................................  $26.75     25.90   $ 0.562500        --       --     $       --
     Second quarter................................   27.22     26.25     0.562500        --       --             --
     Third quarter.................................   27.00     26.50     0.562500        --       --             --
     Fourth quarter................................   27.05     26.50     0.562500     26.10    25.25       0.281250
</TABLE>

         The preferred  securities of First America  Capital Trust are traded on
the New York Stock  Exchange  with the ticker  symbol  "FBAPrT." As of March 25,
2003, there were approximately 180 record holders of preferred securities.  This
number  does not  include  any  persons or  entities  that hold their  preferred
securities in nominee or "street" name through various brokerage firms. The high
and low preferred securities prices and the dividends declared for 2002 and 2001
are summarized as follows:

                  FIRST AMERICA CAPITAL TRUST (ISSUE DATE - JULY 1998) - FBAPRT
<TABLE>
<CAPTION>

                                                                       2002                  2001          Dividend
                                                                  --------------      -----------------
                                                                   High     Low        High       Low      Declared
                                                                   ----     ---        ----       ---      --------
<S>                                                               <C>      <C>         <C>       <C>      <C>
     First quarter............................................    $25.90   24.70       25.00     21.63    $ 0.531250
     Second quarter...........................................     25.38   24.75       25.05     23.95      0.531250
     Third quarter............................................     25.65   24.85       25.80     24.80      0.531250
     Fourth quarter...........................................     25.75   24.80       25.67     24.75      0.531250

</TABLE>

<PAGE>


                        INVESTOR INFORMATION (CONTINUED)

FOR INFORMATION CONCERNING FIRST BANKS, PLEASE CONTACT:
<TABLE>
<CAPTION>

<S>           <C>                                                       <C>
              Allen H. Blake                                            Lisa K. Vansickle
              President and Chief Financial Officer                     Senior Vice President and Controller
              600 James S. McDonnell Boulevard                          600 James S. McDonnell Boulevard
              Mail Code - M1-199-014                                    Mail Code - M1-199-014
              Hazelwood, Missouri 63042                                 Hazelwood, Missouri 63042
              Telephone - (314) 592-5000                                Telephone - (314) 592-5000
              www.firstbanks.com                                        www.firstbanks.com


TRANSFER AGENT:

              U. S. Bank Corporate Trust Services
              One Federal Street, Third Floor
              Boston, Massachusetts 02110
              Telephone - (800) 934-6802
              www.usbank.com

</TABLE>

<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                FIRST BANKS, INC.


                                By: /s/ James F. Dierberg
                                   ------------------------------------------
                                        James F. Dierberg
                                        Chairman of the Board of Directors
                                        and Chief Executive Officer
                                        (Principal Executive Officer)

Date:    March 28, 2003


                                By: /s/ Allen H. Blake
                                   -------------------------------------------
                                        Allen H. Blake
                                        President and
                                        Chief Financial Officer
                                        (Principal Financial and
                                        Accounting Officer)

Date:    March 28, 2003

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the date indicated.
<TABLE>
<CAPTION>

            Signatures                                          Title                              Date
-------------------------------------------------------------------------------------------------------------------

<S>    <C>                                                     <C>                              <C>
       /s/ James F. Dierberg                                   Director                         March 28, 2003
       ------------------------------------------
           James F. Dierberg

       /s/ Allen H. Blake                                      Director                         March 28, 2003
       ------------------------------------------
           Allen H. Blake

       /s/ Donald W. Williams                                  Director                         March 28, 2003
       ------------------------------------------
           Donald W. Williams

       /s/ Michael J. Dierberg                                 Director                         March 28, 2003
       ------------------------------------------
           Michael J. Dierberg

       /s/ Gordon A. Gundaker                                  Director                         March 28, 2003
       ------------------------------------------
           Gordon A. Gundaker

       /s/ David L. Steward                                    Director                         March 28, 2003
       ------------------------------------------
           David L. Steward

       /s/ Hal J. Upbin                                        Director                         March 28, 2003
       ------------------------------------------
           Hal J. Upbin

       /s/ Douglas H. Yaeger                                   Director                         March 28, 2003
       ------------------------------------------
           Douglas H. Yaeger
</TABLE>


<PAGE>



                                INDEX TO EXHIBITS


  Exhibit
  Number                           Description
  ------                           -----------

   3.1    Restated  Articles  of  Incorporation  of  the  Company,   as  amended
          (incorporated  herein by reference  to Exhibit  3(i) to the  Company's
          Annual Report on Form 10-K for the year ended December 31, 1993).

   3.2    Bylaws of the Company (incorporated herein by reference to Exhibit 3.2
          to Amendment  No. 2 to the  Company's  Registration  Statement on Form
          S-1, File No. 33-50576, dated September 15, 1992).

   4.1    Reference is made to Article III of the Company's Restated Articles of
          Incorporation  (incorporated herein by reference to Exhibit 3.1 of the
          Company's  Annual Report on Form 10-K for the year ended  December 31,
          1997).

   4.2    The  Company   agrees  to  furnish  to  the  Securities  and  Exchange
          Commission upon request pursuant to Item  601(b)(4)(iii) of Regulation
          S-K, copies of instruments defining the rights of holders of long term
          debt of the Company and its subsidiaries.

   4.3    Agreement as to Expenses and Liabilities  (relating to First Preferred
          Capital Trust ("First Preferred I") (incorporated  herein by reference
          to Exhibit 4(a) to the  Company's  Report on Form 10-Q for the quarter
          ended March 31, 1997).

   4.4    Agreement  as to  Expenses  and  Liabilities  dated  October  19, 2000
          (relating to First Preferred  Capital Trust II ("First  Preferred II")
          (filed as Exhibit 4.8 to the Company's  Registration Statement on Form
          S-2, File No. 333-46270, dated September 20, 2000).

   4.5    Agreement as to Expenses and Liabilities between First Banks, Inc. and
          First  Preferred  Capital Trust III, dated November 15, 2001 (relating
          to First Preferred Capital Trust III ("First Preferred III") (filed as
          Exhibit 4.8 to the Company's  Registration Statement on Form S-2, File
          No. 333-71652, dated October 15, 2001).

   4.6    Preferred  Securities Guarantee Agreement (relating to First Preferred
          I) (incorporated  herein by reference to Exhibit 4(b) to the Company's
          Report on Form 10-Q for the quarter ended March 31, 1997).

   4.7    Preferred  Securities  Guarantee Agreement by and between First Banks,
          Inc. and State Street Bank and Trust Company of Connecticut,  National
          Association,  dated October 19, 2000 (relating to First  Preferred II)
          (filed as Exhibit 4.7 to the Company's  Registration Statement on Form
          S-2, File No. 333-46270, dated September 20, 2000).

   4.8    Preferred  Securities  Guarantee Agreement by and between First Banks,
          Inc. and State Street Bank and Trust Company of Connecticut,  National
          Association, dated November 15, 2001 (relating to First Preferred III)
          (filed as Exhibit 4.7 to the Company's  Registration Statement on Form
          S-2, File No. 333-71652, dated October 15, 2001).

   4.9    Indenture  (relating  to First  Preferred I)  (incorporated  herein by
          reference to Exhibit 4(c) to the Company's Report on Form 10-Q for the
          quarter ended March 31, 1997).

   4.10   Indenture  between  First Banks,  Inc. and State Street Bank and Trust
          Company  of  Connecticut,  National  Association,  as  Trustee,  dated
          October 19, 2000  (relating to First  Preferred  II) (filed as Exhibit
          4.1 to the  Company's  Registration  Statement  on Form S-2,  File No.
          333-46270, dated September 20, 2000).

   4.11   Indenture  between  First Banks,  Inc. and State Street Bank and Trust
          Company  of  Connecticut,  National  Association,  as  Trustee,  dated
          November 15, 2001 (relating to First  Preferred III) (filed as Exhibit
          4.1 to the  Company's  Registration  Statement  on Form S-2,  File No.
          333-71652, dated October 15, 2001).
<PAGE>

   4.12   Amended and Restated Trust  Agreement  (relating to First Preferred I)
          (incorporated  herein by reference  to Exhibit  4(d) to the  Company's
          Report on Form 10-Q for the quarter ended March 31, 1997).

   4.13   Amended and  Restated  Trust  Agreement  among First Banks,  Inc.,  as
          Depositor,  State  Street  Bank  and  Trust  Company  of  Connecticut,
          National Association,  as Property Trustee,  Wilmington Trust Company,
          as Delaware Trustee,  and the Administrative  Trustees,  dated October
          19, 2000 (relating to First Preferred II) (filed as Exhibit 4.5 to the
          Company's  Registration  Statement  on Form S-2,  File No.  333-46270,
          dated September 20, 2000).

   4.14   Amended and  Restated  Trust  Agreement  among First Banks,  Inc.,  as
          Depositor,  State  Street  Bank  and  Trust  Company  of  Connecticut,
          National Association,  as Property Trustee,  Wilmington Trust Company,
          as Delaware Trustee, and the Administrative  Trustees,  dated November
          15, 2001  (relating to First  Preferred  III) (filed as Exhibit 4.5 to
          the Company's  Registration Statement on Form S-2, File No. 333-71652,
          dated October 15, 2001).

   4.15   Indenture  between First Banks,  Inc. as Issuer,  and Wilmington Trust
          Company, as Trustee,  dated as of April 10, 2002 (incorporated  herein
          by reference to Exhibit 4.15 to the Company's Quarterly Report on Form
          10-Q for the quarter ended June 30, 2002).

   4.16   Guarantee  Agreement for First Bank Capital  Trust,  dated as of April
          10, 2002  (incorporated  herein by  reference  to Exhibit  4.16 to the
          Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2002).

   4.17   Amended and Restated Declaration of Trust of First Bank Capital Trust,
          dated as of April  10,  2002  (incorporated  herein  by  reference  to
          Exhibit 4.17 to the  Company's  Quarterly  Report on Form 10-Q for the
          quarter ended June 30, 2002).

   4.18   Floating Rate Junior  Subordinated Debt Security  Certificate of First
          Banks, Inc., dated April 10, 2002 (incorporated herein by reference to
          Exhibit 4.18 to the  Company's  Quarterly  Report on Form 10-Q for the
          quarter ended June 30, 2002).

   4.19   Capital Security  Certificate of First Bank Capital Trust, dated as of
          April 10, 2002  (incorporated  herein by  reference to Exhibit 4.19 to
          the Company's Quarterly Report on Form 10-Q for the quarter ended June
          30, 2002).

   10.1   Shareholders'  Agreement by and among James F. Dierberg II and Mary W.
          Dierberg,  Trustees  under the Living  Trust of James F.  Dierberg II,
          dated July 24, 1989,  Michael  James  Dierberg  and Mary W.  Dierberg,
          Trustees under the Living Trust of Michael James Dierberg,  dated July
          24, 1989;  Ellen C. Dierberg and Mary W. Dierberg,  Trustees under the
          Living  Trust of Ellen C.  Dierberg  dated  July 17,  1992,  and First
          Banks, Inc.  (incorporated  herein by reference to Exhibit 10.3 to the
          Company's Registration Statement on Form S-1, File No 33-50576,  dated
          August 6, 1992).

   10.2   Comprehensive Banking System License and Service Agreement dated as of
          July 24,  1991,  by and  between  the  Company  and FiServ  CIR,  Inc.
          (incorporated  herein by reference  to Exhibit  10.4 to the  Company's
          Registration Statement on Form S-1, File No. 33-50576, dated August 6,
          1992).

   10.3*  Employment  Agreement by and among the Company,  First Bank and Donald
          W. Williams, dated March 22, 1993 (incorporated herein by reference to
          Exhibit 10(iii)(A) to the Company's Annual Report on Form 10-K for the
          year ended December 31, 1993).

   10.4   $110,000,000  Secured Credit  Agreement,  dated as of August 22, 2002,
          among First  Banks,  Inc. and Wells Fargo Bank  Minneapolis,  National
          Association,  American  National Bank & Trust Company of Chicago,  The
          Northern Trust Company,  Union Bank of California N.A., SunTrust Bank,
          Nashville  and Fifth Third Bank  (incorporated  herein by reference to
          Exhibit B to the Company's Schedule 13-E, dated October 8, 2002).

   10.5   First Amendment to Secured Credit Agreement,  dated as of December 31,
          2002, by and among First Banks, Inc. and Wells Fargo Bank Minneapolis,
          National  Association,  American  National  Bank &  Trust  Company  of
          Chicago,  The Northern Trust Company,  Union Bank of California  N.A.,
          SunTrust Bank,  Nashville and Fifth Third Bank (incorporated herein by
          reference to Exhibit 10.7 to the Company's  Registration  Statement on
          Form S-2, File No. 333-102549, dated January 16, 2003).

   10.6   Stock Purchase and Operating  Agreement by and between the Company and
          BancTEXAS  Group,  Inc.,  dated May 19, 1994  (incorporated  herein by
          reference to Exhibit 2 to the Company's  Quarterly Report on Form 10-Q
          for the quarter ended June 30, 1994).
<PAGE>

   10.7*  Service  Agreement  by and  between  First  Services,  L.P.  and First
          Banks, Inc., dated October 15, 2001 (incorporated  herein by reference
          to Exhibit 10.6 to the  Company's  Annual  Report on Form 10-K for the
          year ended December 31, 2001).

   10.8*  Service Agreement by and between First Services,  L.P. and First Bank,
          dated  October 15, 2001  (incorporated  herein by reference to Exhibit
          10.7 to the  Company's  Annual  Report on Form 10-K for the year ended
          December 31, 2001).

   10.9*  Service  Agreement by and between First Services,  L.P. and First Banc
          Mortgage,  Inc.,  dated  October  15,  2001  (incorporated  herein  by
          reference to Exhibit 10.8 to the Company's  Annual Report on Form 10-K
          for the year ended December 31, 2001).

   10.10* Service Agreement by and between First Services, L.P. and First Bank
          & Trust, dated October 15, 2001  (incorporated  herein by reference to
          Exhibit 10.9 to the Company's  Annual Report on Form 10-K for the year
          ended December 31, 2001).

   21.1   Subsidiaries of the Company - filed herewith.

   99.1   Certification  of Periodic  Report - Chief  Executive  Officer - filed
          herewith.

   99.2   Certification  of Periodic  Report - Chief  Financial  Officer - filed
          herewith.

--------------------------
*  Exhibits  designated  by an  asterisk  in the  Index to  Exhibits  relate  to
management contracts and/or compensatory plans or arrangements.




<PAGE>


                                  CERTIFICATION
                       REQUIRED BY RULES 13A-14 AND 15D-14
                    UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, James F. Dierberg, certify that:

1.   I have reviewed  this annual report on Form 10-K of First Banks,  Inc. (the
     "registrant");

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "evaluation date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the evaluation date.

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,  summarize  and  report  financial  data,  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:  March 28, 2003
                                  FIRST BANKS, INC.



                                  By:/s/ James F. Dierberg
                                     -------------------------------------------
                                         James F. Dierberg
                                         Chairman of the Board of Directors
                                         and Chief Executive Officer
                                         (Principal Executive Officer)




<PAGE>


                                  CERTIFICATION
                       REQUIRED BY RULES 13A-14 AND 15D-14
                    UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Allen H. Blake, certify that:

1.   I have reviewed  this annual report on Form 10-K of First Banks,  Inc. (the
     "registrant");

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "evaluation date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the evaluation date.

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,  summarize  and  report  financial  data,  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:  March 28, 2003
                                  FIRST BANKS, INC.



                                  By:/s/ Allen H. Blake
                                     -------------------------------------------
                                         Allen H. Blake
                                         President and Chief Financial Officer
                                         (Principal Financial and Accounting
                                         Officer)





<PAGE>
                                                                    EXHIBIT 21.1



                                FIRST BANKS, INC.

                                  Subsidiaries

<TABLE>
<CAPTION>

         The following is a list of our subsidiaries and the jurisdiction of
incorporation or organization.


                                                                      Jurisdiction of Incorporation
                      Name of Subsidiary                                     of Organization
                      ------------------                                     ---------------

<S>               <C>                                                           <C>
                  The San Francisco Company                                     Delaware

                      First Bank                                                Missouri

                      First Land Trustee Corp.                                  Missouri

                      FB Commercial Finance, Inc.                               Missouri

                      First Banc Mortgage, Inc.                                 Missouri

                      Missouri Valley Partners, Inc.                            Missouri

                      Star Lane Holdings Trust Statutory Trust                 Connecticut

                      Star Lane Trust                                           New York

                      First Bank & Trust                                       California

                           Bank of San Francisco Realty Investors, Inc.        California

</TABLE>

<PAGE>
                                                                    EXHIBIT 99.1


                        CERTIFICATION OF PERIODIC REPORT


         I, James F.  Dierberg,  Chairman  of the Board of  Directors  and Chief
Executive  Officer of First Banks,  Inc.  (the  Company),  certify,  pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

         (1) the Annual Report on Form 10-K of the Company for the annual period
ended  December 31, 2002 (the Report) fully  complies with the  requirements  of
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2) the  information  contained in the Report fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Company.


Dated:  March 28, 2003


                                       /s/ James F. Dierberg
                                       -----------------------------------------
                                           James F. Dierberg
                                           Chairman of the Board of Directors
                                           and Chief Executive Officer




A signed  original of this  written  statement  required by Section 906 has been
provided to First  Banks,  Inc.  and will be retained by First  Banks,  Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.



<PAGE>
                                                                    EXHIBIT 99.2


                        CERTIFICATION OF PERIODIC REPORT


         I,  Allen H.  Blake,  President  and Chief  Financial  Officer of First
Banks,   Inc.  (the   Company),   certify,   pursuant  to  Section  906  of  the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

         (1) the Annual Report on Form 10-K of the Company for the annual period
ended  December 31, 2002 (the Report) fully  complies with the  requirements  of
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2) the  information  contained in the Report fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Company.


Dated:  March 28, 2003



                                       /s/ Allen H. Blake
                                       -----------------------------------------
                                           Allen H. Blake
                                           President and Chief Financial Officer




A signed  original of this  written  statement  required by Section 906 has been
provided to First  Banks,  Inc.  and will be retained by First  Banks,  Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.