FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              
                                   (Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT
               OF 1934 For the fiscal year ended December 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 For the transition period from _______ to ________
                           Commission File No. 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 No.) 
of incorporation or organization)           

                      135 North Meramec, Clayton, MO 63105
               (Address of principal executive offices) (Zip Code)
       Registrant's telephone number, including area code: (314) 854-4600
                           --------------------------
           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 or 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 non-affiliates.  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,  President and Chief Executive  Officer,  and members of his
immediate family.

         At March 25, 1998 there were 23,661 shares of the  registrant's  common
stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
         Portions of the Annual Report to Shareholders for the fiscal year ended
December 31, 1997 (the "1997 Annual Report to Shareholders") are incorporated by
reference into Parts I and II.


<PAGE>


                                     PART I

     Information  appearing  in  this  report,  in  documents   incorporated  by
reference  herein and in documents  subsequently  filed with the  Securities and
Exchange  Commission  which are not  statements of  historical  fact may include
forward  looking  statements.  Such  forward-looking  statements  are subject to
certain  risks  and  uncertainties,  not  all  of  which  can  be  predicted  or
anticipated.  Factors that may cause actual  results to differ  materially  from
those  contemplated by such  forward-looking  statements  include general market
conditions as well as conditions  affecting the banking  industry  generally and
factors  having a specific  impact on the Company,  including but not limited to
fluctuations  in  interest  rates  and in the  economy;  the  impact of laws and
regulations   applicable  to  the  Company  and  changes  therein;   competitive
conditions in the markets in which the Company conducts its operations;  and the
ability of the Company to respond to changes in  technology.  With regard to the
Company's  efforts to grow through  acquisitions,  factors that could affect the
accuracy  or  completeness  of  such  forward-looking   statements  include  the
potential for higher than acceptable operating costs arising from the geographic
dispersion of the offices of First Banks, Inc.'s subsidiaries,  as compared with
competitors  operating solely in contiguous  markets;  the competition of larger
acquirers with greater resources than First Banks; fluctuations in the prices at
which acquisition  targets may be available for sale and in the market for First
Banks'  securities,  and the potential for difficulty or unanticipated  costs in
realizing the benefits of particular  acquisition  transactions.  Readers should
therefore not place undue reliance on forward-looking statements.

Item 1.  Business

General

     First  Banks,  Inc.  ("First  Banks"  or the  "Company"),  incorporated  in
Missouri in 1978, is  headquartered  in St. Louis,  Missouri and is a registered
bank holding company under the Bank Holding Company Act of 1956, as amended (the
"BHC Act").

     At December 31, 1997, First Banks had $4.17 billion in total assets,  $3.00
billion  in total  loans,  net of  unearned  discount,  $3.68  billion  in total
deposits and $231.5 million in total stockholders'  equity. First Banks operates
through its subsidiary  financial  institutions and bank holding  companies (the
"Subsidiary Banks") as follows:

 FirstBank,  headquartered in St. Louis County,  Missouri  ("First Bank").
 First Banks America, Inc.,  headquartered in St. Louis County,  Missouri 
 ("FBA"),and its  wholly  owned  subsidiaries:
     BankTEXAS  N. A.,  headquartered  in  Houston,  Texas ("BankTEXAS"). 
     First Bank of California,  headquartered in Roseville,  California 
     ("FB California").  
 CCB Bancorp, Inc., headquartered in Irvine, California ("CCB"), and its
 wholly owned subsidiary: 
    First Bank & Trust,  headquartered in Irvine,  California  ("FB&T").
 First Commercial Bancorp,  Inc.,  headquartered in Sacramento,  California 
 ("FCB"), and its wholly owned subsidiary:
    First Commercial Bank, headquartered in Sacramento, California ("First
    Commercial").

     All of the Subsidiary  Banks are wholly owned by their  respective  parents
except FBA and FCB, which were 65.85% and 61.48% owned,  respectively,  by First
Banks at December 31,  1997.  As discussed  under  "--Acquisitions"  in the 1997
Annual Report to Shareholders,  incorporated herein by reference,  FB California
is a  newly-formed  California  state bank  resulting from the merger of Sunrise
Bank of  California,  which was  acquired  by FBA on November 1, 1996 and Surety
Bank,  Vallejo,  California,  which was acquired by FBA on December 1, 1997.  In
February  1998,  FCB  was  acquired  by  FBA,  and its  subsidiary  bank,  First
Commercial, was merged into FB California.
<PAGE>

     Through  the  Subsidiary  Banks,  First  Banks  offers  a  broad  range  of
commercial  and  personal  banking  services  including  certificate  of deposit
accounts,  individual  retirement and other time deposit accounts,  checking and
other demand deposit accounts,  interest checking accounts, savings accounts and
money market accounts.  Loans include  commercial,  financial and  agricultural,
real estate  construction  and  development,  commercial  and  residential  real
estate,  consumer and  installment,  student and Small  Business  Administration
loans. Other financial services include mortgage banking, credit cards, discount
brokerage,   credit-related  insurance,  automatic  teller  machines,  telephone
account access, safe deposit boxes, trust and private banking services, and cash
management services.

     First  Banks  centralizes  overall  corporate   policies,   procedures  and
administrative  and  operational  support  functions for the  Subsidiary  Banks.
Primary  responsibility  for managing the  Subsidiary  Banks  remains with their
officers and directors.

<TABLE>
<CAPTION>
     The following table lists the Subsidiary Banks at December 31, 1997:

                                                                                        Loans, net of
                                                           Number of      Total           unearned         Total
                       Subsidiary Banks                    locations      assets          discount        deposits
                       ----------------                    ---------     ------           --------        --------
                                                                         (dollars expressed in thousands)

<S>                                                           <C>      <C>               <C>              <C>      
     First Bank......................................         98       $2,843,575        2,185,493        2,559,968
     FBA:
         BankTEXAS...................................          6          267,152          176,341          231,175
         FB California...............................          4          179,999          137,096          152,825
     CCB:
         FB&T........................................         17          672,410          385,251          598,560
     FCB:
         First Commercial............................          6          190,918          118,018          172,737

</TABLE>

     As described under "--Financial Condition and Average Balances" in the 1997
Annual Report to Shareholders,  incorporated herein by reference, on February 3,
1997,  First  Preferred  Capital Trust  ("First  Trust"),  a Delaware  statutory
business trust,  issued  3,450,000  shares of 9.25%  cumulative  trust preferred
securities ("Preferred Securities") for $86.25 million. In addition, First Trust
issued $2.7 million of common  securities  which are owned by First  Banks.  The
Preferred  Securities  are publicly held and listed on the Nasdaq Stock Market's
National Market System. The Preferred Securities have no voting rights except in
certain limited circumstances.  On December 1, 1997, First Banks redeemed all of
the outstanding Class C, 9.00% increasing rate, redeemable, cumulative preferred
stock ("Class C Preferred  Stock") which had  previously  been publicly held and
listed on the Nasdaq Stock Market's National Market System.

     As described in Note 17 to the  consolidated  financial  statements  of the
1997 Annual Report to Shareholders,  incorporated  herein by reference,  FBA and
FCB were merged. The merger of FBA and FCB will not have a significant impact on
the financial condition or results of operations of First Banks.

     The Company,  Mr.  Dierberg  and an  affiliate of Mr.  Dierberg own 18.55%,
0.20% and 4.44%,  respectively,  of the  outstanding  shares of common  stock of
Southside Bancshares  Corporation  ("Southside") located in St. Louis, Missouri.
The shares of Southside are currently held for investment purposes.

     The  voting  stock of First  Banks is owned by  various  trusts  which were
created by and are administered by and for the benefit of Mr. James F. Dierberg,
First Banks' Chairman of the Board,  President and Chief Executive Officer,  and
members  of  his  immediate  family.  Accordingly,  Mr.  Dierberg  controls  the
management  and policies of First Banks and the election of its  directors.  The
Preferred  Securities  are publicly held and listed on the Nasdaq Stock Market's
National  Market.  The  Preferred  Securities  have no voting  rights  except in
certain limited circumstances.

     For a description  of the business of First Banks during the past year, see
"Management's  Discussion  and Analysis - General" in the 1997 Annual  Report to
Shareholders, incorporated herein by reference.
<PAGE>

Acquisitions

     Prior to 1994, First Banks'  acquisitions had been concentrated  within its
primary market area of eastern Missouri and central and southern  Illinois.  The
premiums required to successfully pursue acquisitions escalated sharply in 1993,
reducing  dramatically the economic viability of many potential  acquisitions in
that area.  Recognizing this, First Banks began to expand the geographic area in
which it approached acquisition candidates.  While First Banks was successful in
making  acquisitions in Chicago and northern  Illinois,  it became apparent that
acquisition pricing, in Chicago and other areas being considered, was comparable
to that of First Banks' primary acquisition area. As a result, while First Banks
continued  to pursue  acquisitions  within  these  areas,  it turned much of its
attention  in 1994 and 1995 to  institutions  which  could be  acquired  at more
attractive  prices which were within  major  metropolitan  areas  outside of its
immediate  market area. This led to the  acquisition of a financial  institution
which had offices in Dallas and Houston,  Texas in 1994 and several acquisitions
of financial institutions which had offices in Los Angeles, Orange County, Santa
Barbara,  San Francisco,  San Jose and Sacramento,  California in 1995, 1996 and
1997.

     During 1997, 1996 and 1995, First Banks completed nine acquisitions and two
deposit purchases. These transactions provided total assets of $1.41 billion and
39 banking locations. For a description of the acquisitions completed during the
three years ended December 31, 1997, see "Management's Discussion and Analysis -
Acquisitions"  and Note 2 to the consolidated  financial  statements of the 1997
Annual Report to Shareholders, incorporated herein by reference.

Market Area

     As of December 31, 1997, the Subsidiary Banks' 131 banking  facilities were
located  throughout  eastern  Missouri,  Illinois,  California and Texas.  First
Banks' primary market area is the St. Louis,  Missouri  metropolitan area. First
Banks' second and third largest  market areas are central and southern  Illinois
and  southern  and  northern  California,  respectively.  First  Banks  also has
locations in the Houston, Dallas, Irving and McKinney, Texas metropolitan areas,
rural eastern Missouri and the greater Chicago, Illinois metropolitan area.
<TABLE>
<CAPTION>

     The following  table lists the market areas in which the  Subsidiary  Banks
operate, total deposits and number of locations as of December 31, 1997:

                                                                Total         Deposits
                                                              deposits        as percent     No. of
         Geographic area                                   (in millions)      of total      locations
         ---------------                                   -------------      --------      ---------

<S>                                                           <C>               <C>             <C>
St. Louis, Missouri Metropolitan Area (1).................    $   801.9         21.8%           27
Rural Eastern Missouri (1)................................        343.2          9.3            16
Central and Southern Illinois (1).........................      1,030.5         27.9            38
Northern Illinois (1).....................................        354.1          9.6            17
Texas (2).................................................        231.2          6.3             6
Southern and Central California (3).......................        566.6         15.4            15
Northern California (4)...................................        357.1          9.7            12
                                                              ---------       ------         -----
     Total Deposits.......................................    $ 3,684.6        100.0%          131
                                                              =========        =====         =====
</TABLE>
----------------------
(1) First Bank  operates in the St. Louis  metropolitan  market  area,  in rural
    eastern Missouri, in central and southern Illinois and in northern Illinois,
    including Chicago.
(2) BankTEXAS operates in the Houston, Dallas and McKinney metropolitan areas.
(3) FB&T operates in the greater Los Angeles metropolitan area, including Orange
    County, California.  Three of the branches are also located in Santa Barbara
    County, California.
(4) FB&T and FB California operate in northern California, including the greater
    San Francisco, San Jose and Sacramento metropolitan market areas.



<PAGE>


Lending Activities

     Lending  activities  are conducted  pursuant to a written loan policy which
has been  adopted  by each of the  Subsidiary  Banks.  Each loan  officer  has a
defined  lending  authority and loans made by each such officer must be reviewed
by a loan  committee  of the  banking  facility  at which  the loan  officer  is
located,  the  Subsidiary  Bank's  Board of  Directors  or the  Central  Finance
Committee of the Company,  depending  upon the amount of the loan request.  Loan
requests for amounts in excess of  $4,000,000,  and loan requests for amounts in
excess of $1,000,000  where the aggregate  indebtedness of the borrower  exceeds
$8,000,000,  must also be  approved  by the  Company's  Chairman of the Board or
Chief Financial Officer.

     Generally, loans are limited to borrowers residing or doing business in the
immediate  market area of the originating  Subsidiary Bank. The Company's policy
is for each  Subsidiary Bank to meet the quality loan demand and credit needs of
its local community before it considers the purchase of loan participations from
an affiliate.

     The Company  offers the following  types of loans:  commercial,  financial,
agricultural,   real  estate   construction  and  development,   commercial  and
residential  real estate,  consumer and  installment  loans.  The loan portfolio
composition  for the five  years  ended  December  31,  1997 is  included  under
"Management's  Discussion  and Analysis - Loans and  Allowance for Possible Loan
Losses"  in the 1997  Annual  Report  to  Shareholders,  incorporated  herein by
reference.

Mortgage Banking Operations

     Through the First Bank Mortgage  division  ("First Bank Mortgage") of First
Bank,  the Company  provides  mortgage  banking  services.  First Bank  Mortgage
originates, underwrites, closes and services a full line of residential mortgage
loan  products,  both for the  portfolios of First Bank and the Company's  other
Subsidiary Banks and for resale in the secondary  mortgage market.  In addition,
First Bank Mortgage  acquires loans  originated by the other Subsidiary Banks or
by unrelated entities, which it then underwrites and services.

     For a summary  of the  mortgage  banking  activities  of First  Banks,  see
"Management's  Discussion and Analysis Mortgage Banking  Activities" in the 1997
Annual Report to Shareholders, incorporated herein by reference.

Investment Portfolio

     The Company has  established  a written  investment  policy  which has been
adopted by the Subsidiary Banks and is reviewed annually.  The investment policy
identifies  investment criteria and states specific objectives in terms of risk,
interest  rate  sensitivity,   and  liquidity.  The  investment  policy  directs
management  of the  Subsidiary  Banks to  consider,  among other  criteria,  the
quality, term, and marketability of the securities acquired for their respective
investment portfolios. The investment portfolio composition is presented in Note
3 to  the  consolidated  financial  statements  of the  1997  Annual  Report  to
Shareholders, incorporated herein by reference.

Deposits

     The Company's deposits consist  principally of core deposits from the local
market  areas of the  Subsidiary  Banks.  The  Subsidiary  Banks  do not  accept
brokered deposits,  except for any such deposits which acquired institutions may
have had prior to their  acquisition by the Company.  A table  illustrating  the
distribution of the Company's  deposit accounts and the weighted average nominal
interest rates on each category of deposits for the three years ending  December
31, 1997 is included under "Management's  Discussion and Analysis - Deposits" in
the 1997 Annual Report to Shareholders, incorporated herein by reference.



<PAGE>


Competition and Branch Banking

     The activities in which the Subsidiary Banks engage are highly competitive.
Those activities and the geographic markets served involve primarily competition
with  other  banks,  some of  which  are  affiliated  with  large  bank  holding
companies. Competition among financial institutions is 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.

     In addition to  competing  with other banks within  their  primary  service
areas,  the Subsidiary  Banks also compete with other financial  intermediaries,
such as thrifts, credit unions, industrial loan associations,  securities firms,
insurance  companies,   small  loan  companies,   finance  companies,   mortgage
companies,  real estate investment trusts, certain governmental agencies, credit
organizations  and other  enterprises.  Additional  competition  for depositors'
funds comes from United States  Government  securities,  private issuers of debt
obligations and suppliers of other investment alternatives for depositors.  Many
of the  Company's  non-bank  competitors  are not subject to the same  extensive
federal  regulations  that govern bank holding  companies and  federally-insured
banks and  thrifts and state  regulations  governing  state-chartered  banks and
thrifts. As a result, such non-bank competitors may have certain advantages over
the Company in providing some services.

     The  trend  in  Missouri,  Illinois,  California  and  Texas  has  been for
multi-bank  holding  companies  to  acquire  independent  banks and  thrifts  in
communities  throughout  these states.  The Company believes it will continue to
face  competition in the acquisition of such banks and thrifts from bank holding
companies  based in those states and from bank holding  companies based in other
states under interstate  banking laws. Many of the financial  institutions  with
which the Company  competes  are larger than the Company and have  substantially
greater resources available for making acquisitions.

     Subject to  regulatory  approval,  commercial  banks  situated in Missouri,
Illinois,  California and Texas are permitted to establish  branches  throughout
their  respective   states,   thereby  creating  the  potential  for  additional
competition in the services areas of the Subsidiary Banks.

Supervision and Regulation

General

     The  Company  and its  Subsidiary  Banks are  extensively  regulated  under
federal  and state  law.  These laws and  regulations  are  intended  to protect
depositors, not shareholders.  To the extent the following information describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions.  Any change in applicable
laws or regulations  may have a material effect on the business and prospects of
the  Company.  The  operations  of the Company  may be  affected by  legislative
changes and by the policies of various  regulatory  authorities.  The Company is
unable to predict  the nature or the extent of the effects on its  business  and
earnings that fiscal or monetary  policies,  economic controls or new federal or
state legislation may have in the future.

     The Company is a registered bank holding company under the BHC Act, and, as
such, is subject to  regulation,  supervision  and  examination  by the Board of
Governors of the Federal Reserve System (the "FRB").  The Company is required to
file annual reports with the FRB and to provide additional information as it may
require.

     The Company's  state-chartered  Subsidiary  Banks (First Bank,  FB&T and FB
California)  are subject to supervision  and regulation by the bank  supervisory
authorities  in their  respective  states and also by their  respective  primary
federal bank regulators.  The primary such regulator for First Bank, as a member
of the  Federal  Reserve  System,  is the FRB,  while the primary  federal  bank
regulator  for FB&T and FB  California,  which are not  members  of the  Federal
Reserve  System,  is the Federal  Deposit  Insurance  Corporation  (the "FDIC").
BankTEXAS,  a national  banking  association,  is subject to the supervision and
regulation of the Office of the Comptroller of the Currency (the "OCC"). Because
the FDIC  provides  deposit  insurance to the  Company's  depository  subsidiary

<PAGE>

financial  institutions,  they are also subject to supervision and regulation by
the FDIC, even where the FDIC is not their primary federal regulator.

Recent and Pending Legislation.

     The enactment of the legislation described below has significantly affected
the banking  industry  generally and will have an ongoing  effect on the Company
and its Subsidiary Banks in the future.

     Financial  Institutions Reform,  Recovery, and Enforcement Act of 1989. The
Financial Institutions Reform,  Recovery, and Enforcement Act of 1989 ("FIRREA")
reorganized  and  reformed  the  regulatory  structure  applicable  to financial
institutions generally. Among other things, FIRREA: (i) enhanced the supervisory
and enforcement powers for the federal bank regulatory  agencies;  (ii) required
insured financial  institutions to guaranty  repayment of losses incurred by the
FDIC in  connection  with the failure of an  affiliated  financial  institution;
(iii) required financial institutions to provide their primary federal regulator
with notice, under certain circumstances,  of changes in senior management;  and
(iv)  broadened   authority  for  bank  holding  companies  to  acquire  savings
institutions.

     Under FIRREA,  federal bank  regulators were granted  expanded  enforcement
authority over  "institution-affiliated  parties"  (i.e.,  officers,  directors,
controlling  stockholders,  as well as attorneys,  appraisers or accountants who
knowingly or recklessly participate in wrongful action likely to have an adverse
effect on an insured  institution).  Federal  banking  regulators  have  greater
flexibility  to bring  enforcement  actions  against  insured  institutions  and
institution-affiliated  parties,  including cease and desist orders, prohibition
orders,  civil money  penalties,  termination of insurance and the imposition of
operating  restrictions  and  capital  plan  requirements.   In  general,  these
enforcement  actions may be initiated for violations of laws and regulations and
unsafe or unsound  practices.  Since the  enactment of FIRREA,  the federal bank
regulators have significantly increased the use of written agreements to correct
compliance  deficiencies  with respect to applicable laws and regulations and to
ensure safe and sound  practices.  Violations  of such  written  agreements  are
grounds for initiation of cease-and-desist proceedings.  FIRREA granted the FDIC
back-up enforcement  authority to recommend enforcement action to an appropriate
federal banking agency and to bring such enforcement  action against a financial
institution or an  institution-affiliated  party if such federal  banking agency
fails to follow the FDIC's recommendation.  In addition, FIRREA requires, except
under certain  circumstances,  public disclosure of final enforcement actions by
the federal banking agencies.

     FIRREA also established a cross guarantee  provision  pursuant to which the
FDIC may  recover  from a  depository  institution  losses  the FDIC  incurs  in
providing assistance to, or paying off the depositors of, any of such depository
institution's  affiliated  insured banks or thrifts.  The cross  guarantee  thus
enables  the FDIC to assess a holding  company's  healthy  Bank  Insurance  Fund
("BIF") members and Savings Association  Insurance Fund ("SAIF") members for the
losses of any of such  holding  company's  failed  BIF and SAIF  members.  Cross
guarantee  liabilities are generally  superior in priority to obligations of the
depository  institution  to its  stockholders  due  solely  to their  status  as
stockholders and obligations to other  affiliates.  Cross guarantee  liabilities
are  generally  subordinated,  except  with  respect to  affiliates,  to deposit
liabilities, secured obligations or any other general or senior liabilities, and
any obligations subordinated to depositors or other general creditors.

     The Federal  Deposit  Insurance  Corporation  Improvement  Act of 1991. The
Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA") was
adopted to  recapitalize  the BIF and impose certain  supervisory and regulatory
reforms  on  insured  depository  institutions.   In  general,  FDICIA  includes
provisions,  among  others,  to: (i) increase the FDIC's line of credit with the
U.S.  Treasury in order to provide the FDIC with  additional  funds to cover the
losses of federally  insured banks;  (ii) reform the deposit  insurance  system,
including the  implementation of risk-based  deposit insurance  premiums;  (iii)
establish a format for closer  monitoring  of financial  institutions  to enable

<PAGE>

prompt  corrective  action by banking  regulators  when a financial  institution
begins to experience  financial  difficulty;  (iv) establish five capital levels
for  financial  institutions  ("well  capitalized,"   "adequately  capitalized,"
"undercapitalized,"    "significantly    undercapitalized"    and    "critically
undercapitalized")   that  impose  more  scrutiny  and   restrictions   on  less
capitalized institutions;  (v) require the banking regulators to set operational
and  managerial  standards  for all insured  depository  institutions  and their
holding  companies,  including  limits on  excessive  compensation  to executive
officers,  directors,   employees  and  principal  stockholders,  and  establish
standards  for loans  secured  by real  estate;  (vi) adopt  certain  accounting
reforms  and  require  annual   on-site   examinations   of  federally   insured
institutions,  including the ability to require  independent audits of banks and
thrifts;  (vii)  revise  risk-based  capital  standards  to ensure they (a) take
adequate account of interest-rate changes,  concentration of credit risk and the
risks of nontraditional  activities,  and (b) reflect the actual performance and
expected  risk  of  loss  of   multi-family   mortgages;   and  (viii)  restrict
state-chartered  banks from  engaging in  activities  not permitted for national
banks unless they are adequately capitalized and have FDIC approval. FDICIA also
authorized  the  FDIC  to  make  special   assessments  on  insured   depository
institutions,  in  amounts  determined  by the FDIC to be  necessary  to give it
adequate  assessment income to repay amounts borrowed from the U.S. Treasury and
other  sources or for any other  purpose the FDIC deems  necessary.  FDICIA also
grants authority to the FDIC to establish semiannual assessment rates on BIF and
SAIF  member  banks so as to  maintain  these  funds at the  designated  reserve
ratios.

     FDICIA,  as noted  above,  authorizes  and,  under  certain  circumstances,
requires  the  federal   banking   agencies  to  take  certain  actions  against
institutions that fail to meet certain capital-based requirements. Under FDICIA,
the federal  banking  agencies are required to establish  five levels of insured
depository   institutions   based  on  leverage  limit  and  risk-based  capital
requirements  established for institutions subject to their jurisdiction,  plus,
in  their  discretion,  individual  additional  capital  requirements  for  such
institutions.  Under the final  rules  that  have  been  adopted  by each of the
federal banking agencies, an institution is designated:  (i) well-capitalized if
the institution has a total risk-based capital ratio of 10% or greater, a Tier 1
risk-based  capital  ratio  of 6% or  greater,  and a  leverage  ratio  of 5% or
greater,  and the  institution  is not subject to an order,  written  agreement,
capital directive,  or prompt corrective action directive to meet and maintain a
specific capital level for any capital measure;  (ii) adequately  capitalized if
the institution has a total risk-based  capital ratio of 8% or greater, a Tier 1
risk-based  capital  ratio  of 4% or  greater,  and a  leverage  ratio  of 4% or
greater;  (iii)  undercapitalized  if the  institution  has a  total  risk-based
capital  ratio that is less than 8%, a Tier 1 risk-based  capital  ratio that is
less than 4%, or a  leverage  ratio  that is less  than 4%;  (iv)  significantly
undercapitalized if the institution has a total risk-based capital ratio that is
less  than 6%, a Tier 1  risk-based  capital  ratio  that is less  than 3%, or a
leverage ratio that is less than 3%; and (v) critically  undercapitalized if the
institution  has a ratio of tangible  equity to total assets that is equal to or
less than 2%.

     Undercapitalized,    significantly    undercapitalized    and    critically
undercapitalized  institutions are required to submit capital  restoration plans
to the appropriate federal banking agency and are subject to certain operational
restrictions.  Moreover,  companies controlling an undercapitalized  institution
are required to  guarantee  the  subsidiary  institution's  compliance  with the
capital restoration plan subject to an aggregate  limitation of the lesser of 5%
of  the   institution's   assets  at  the  time  it   received   notice  it  was
undercapitalized  or the amount of the capital  deficiency  when the institution
first failed to meet the plan.

     Significantly    or   critically    undercapitalized    institutions    and
undercapitalized  institutions  that did not  submit or comply  with  acceptable
capital  restoration  plans are subject to restrictions  on the  compensation of
senior  executive  officers  and to  additional  regulatory  sanctions  that may
include a forced  offering  of  shares  or  merger,  restrictions  on  affiliate
transactions,  restrictions  on rates  paid on  deposits,  asset  growth and new
activities,  the  dismissal  of  directors  or  senior  executive  officers  and
mandatory  divestitures by the  institution or its parent  company.  The banking
agency must  require the  offering  of shares or merger and  restrict  affiliate
transactions  and the rates paid on deposits  unless it is determined they would
not further capital improvement.  FDICIA generally requires the appointment of a
conservator or receiver within 90 days after an institution  becomes  critically
undercapitalized.  The federal banking agencies have adopted uniform  procedures
for the issuance of directives by the appropriate federal banking agency.  Under
these procedures,  an institution will generally be provided advance notice when
the  appropriate  federal  banking agency  proposes to impose one or more of the

<PAGE>

sanctions  set forth above.  These  procedures  provide an  opportunity  for the
institution  to respond to the proposed  agency  action or, where  circumstances
warrant immediate agency action, an opportunity for administrative review of the
agency's action.

     As described in Note 18 to the  consolidated  financial  statements  of the
1997 Annual Report to Shareholders,  incorporated  herein by reference,  each of
the Company's  subsidiary bank depository  institutions have, as of December 31,
1997,   capital  in  excess  of  the  requirements   for  a   "well-capitalized"
institution.

     Pursuant to FDICIA,  the FRB and the other federal banking agencies adopted
real  estate  lending  guidelines  pursuant  to which  each  insured  depository
institution  is  required to adopt and  maintain  written  real  estate  lending
policies in conformity with the prescribed  guidelines.  Under these guidelines,
each  institution  is expected to set  loan-to-value  ratios not  exceeding  the
supervisory  limits  set  forth  in the  guidelines.  A  loan-to-value  ratio is
generally defined as the total loan amount divided by the appraised value of the
property  at the  time  the  loan is  originated.  The  guidelines  require  the
institution's real estate policy include proper loan documentation,  and that it
establish prudent underwriting  standards.  These guidelines became effective on
March 19, 1993. These rules have had no material adverse impact on the Company.

     FDICIA also  contained the Truth in Savings Act,  which  requires clear and
uniform  disclosure  of the rates of  interest  payable on deposit  accounts  by
depository  institutions and the fees assessable  against deposit  accounts,  so
that consumers can make a meaningful  comparison between the competing claims of
financial institutions with regard to deposit accounts and products.

     Riegle-Neal  Interstate  Banking and Branching  Efficiency  Act of 1994. In
September  1994,  Congress  enacted  the  Riegle-Neal   Interstate  Banking  and
Branching Efficiency Act of 1994 (the "Interstate Act").  Beginning in September
1995,  bank holding  companies have the right to expand,  by acquiring  existing
banks, into all states,  even those which had theretofore  restricted entry. The
legislation also provides that, subject to future action by individual states, a
holding  company will have the right,  commencing  in 1997, to convert the banks
which its owns in  different  states to  branches of a single  bank.  A state is
permitted to "opt out" of the law which will permit conversion of separate banks
to branches,  but is not permitted to "opt out" of the law allowing bank holding
companies  from  other  states to enter  the state of those  states in which the
Subsidiary Banks are located.  Texas has adopted legislation to "opt out" of the
interstate  branching provisions (which Texas law currently expires on September
2, 1999). The federal  legislation  also  establishes  limits on acquisitions by
large banking organizations,  providing that no acquisition may be undertaken if
it would result in the organization  having deposits exceeding either 10% of all
bank  deposits in the United  States or 30% of the bank deposits in the state in
which the acquisition would occur.

     Economic  Growth  and  Regulatory  Paperwork  Reduction  Act of  1996.  The
Economic  Growth and Regulatory  Paperwork  Reduction Act of 1996 ("EGRPRA") was
signed into law on  September  30,  1996.  EGRPRA  streamlined  the  non-banking
activities  application  process  for  well-capitalized  and  well-managed  bank
holding companies. Under EGRPRA, qualified bank holding companies may commence a
regulatory  approved  non-banking  activity  without  prior  notice  to the FRB;
written notice is required within 10 days after  commencing the activity.  Under
EGRPRA,  the  prior  notice  period  is  reduced  to 12 days in the event of any
non-banking acquisition or share purchase,  assuming the size of the acquisition
does not  exceed  10% of  risk-weighted  assets of the  acquiring  bank  holding
company and the consideration does not exceed 15% of Tier 1 capital. The FRB has
recently announced comprehensive amendments to its regulations under the BHC Act
that implement the foregoing  provisions of EGRPRA and that also  streamline the
application  /  notice  process  for  acquisitions  of banks  and  bank  holding
companies and eliminate regulatory provisions the FRB considered unnecessary.

     EGRPRA also provided for the recapitalization of the SAIF in order to bring
it into parity with the BIF of the FDIC.  First Banks  recorded an $8.2  million
charge in 1996 for the one-time special deposit insurance assessment.

     Pending  Legislation.  Because of concerns relating to competitiveness  and
the safety and  soundness of the banking  industry,  Congress is  considering  a
number of  wide-ranging  proposals for altering the  structure,  regulation  and
competitive  relationships of the nation's  financial  institutions.  Among such

<PAGE>

bills  are new  proposals  to merge  the BIF and the SAIF  insurance  funds,  to
eliminate  the federal  thrift  charter,  to alter the  statutory  separation of
commercial  and  investment  banking and to further  expand the powers of banks,
bank holding  companies and competitors of banks. It cannot be predicted whether
or in what form any of these  proposals  will be  adopted or the extent to which
the business of First Banks may be affected thereby.

Bank and Bank Holding Company Regulation

     BHC Act.  Under the BHC Act, the  activities of a bank holding  company are
limited to business so closely related to banking, managing or controlling banks
as to be a proper  incident  thereto.  The  Company  is also  subject to capital
requirements applied on a consolidated basis in a form substantially  similar to
those required of the Subsidiary Banks. The BHC Act also requires a bank holding
company to obtain  approval  from the FRB  before:  (i)  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 the majority of such shares);
(ii)  acquiring all or  substantially  all of the assets of another bank or bank
holding  company;  or (iii) merging or  consolidating  with another bank holding
company. The FRB will not approve any acquisition,  merger or consolidation that
would have a substantially  anticompetitive  result,  unless the anticompetitive
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
FRB also considers  capital adequacy and other financial and managerial  factors
in reviewing acquisitions or mergers.

     The BHC Act also  prohibits a bank holding  company,  with certain  limited
exceptions:  (i) from  acquiring  or retaining  direct or indirect  ownership or
control of more than 5% of the voting  shares of any company which is not a bank
or bank  holding  company;  or (ii) from  engaging  directly  or  indirectly  in
activities  other than those of  banking,  managing  or  controlling  banks,  or
providing  services for its  subsidiaries.  The  principal  exceptions  to these
prohibitions  involve certain  non-bank  activities  which, by statute or by FRB
regulation or order,  have been identified as activities  closely related to the
business  of  banking  or of  managing  or  controlling  banks.  In making  this
determination, the FRB considers whether the performance of such activities by a
bank holding  company can be expected to produce  benefits to the public such as
greater convenience,  increased competition or gains in efficiency in resources,
which can be expected to outweigh the risks of possible  adverse effects such as
decreased  or unfair  competition,  conflicts  of  interest  or unsound  banking
practices.  FIRREA (described in more detail herein) made a significant addition
to this list of permitted  non-bank  activities  for bank  holding  companies by
providing  that bank holding  companies  may acquire  thrift  institutions  upon
approval  by the FRB and the  applicable  regulatory  authority  for the  thrift
institutions.

     Insurance of Accounts. The FDIC provides insurance, through the BIF and the
SAIF, to deposit  accounts at the Subsidiary  Banks to a maximum of $100,000 for
each insured depositor. Certain of the Subsidiary Banks have deposits which were
added through the merger of acquired thrifts. Consequently, First Bank, FB&T and
FB  California  are  members of both the BIF and the SAIF while  BankTEXAS  is a
member of the BIF only.

     Through December 31, 1992, all FDIC-insured  institutions,  whether members
of the BIF,  the SAIF or both,  paid the  same  premium  (23  cents  per $100 of
domestic deposits) under a flat-rate system mandated by law. FDICIA required the
FDIC to raise the  reserves of the BIF and the SAIF,  implement  a risk  related
premium  system  and  adopt a long term  schedule  for  recapitalizing  the BIF.
Effective January 1, 1993, the FDIC amended its regulations  regarding insurance
premiums  to provide  that a bank or thrift  would pay an  insurance  assessment
within a range of 23 cents to 31 cents per $100 of domestic deposits,  depending
on its risk classification.

     Effective  January 1, 1996,  the FDIC  implemented  an amendment to the BIF
risk-based  assessment  schedule which effectively  eliminated deposit insurance
assessments for most commercial  banks and other  depository  institutions  with
deposits  insured by the BIF only,  while  maintaining  the assessment  rate for
SAIF-insured  institutions in even the lowest risk-based  premium category at 23
cents for each $100 of assessable deposits. Following enactment of EGRPRA, First

<PAGE>

Banks paid a one-time special deposit  insurance  assessment with respect to its
SAIF-insured  deposits,  as part of the  recapitalization  of the SAIF,  and the
overall  assessment  rate for 1997 for  institutions  in the  lowest  risk-based
premium category was revised to equal 1.29 cents and 6.44 cents for each $100 of
assessable  deposits of BIF and SAIF,  respectively,  in comparison to the prior
assessment rate for such institutions,  applicable only to SAIF deposits,  of 23
cents for each $100 of assessable deposits.  At this time, the deposit insurance
assessment rate for  institutions in the lowest  risk-based  premium category is
zero. Amounts paid by institutions in the lowest risk-based premium category are
used to service  debt  issued by the  Financing  Corporation,  a federal  agency
established to finance the  recapitalization  of the former Federal  Savings and
Loan Insurance Corporation

     Regulations  Governing  Capital  Adequacy.   The  federal  bank  regulatory
agencies use capital adequacy  guidelines in their examination and regulation of
bank holding  companies and banks. If the capital falls below the minimum levels
established by these guidelines,  the bank holding company or bank may be denied
approval to acquire or establish  additional  banks or nonbank  businesses or to
open facilities.

     The FRB, the FDIC and the OCC adopted  risk-based  capital  guidelines  for
banks and bank holding companies. The risk-based capital guidelines are designed
to make regulatory  capital  requirements  more sensitive to differences in risk
profile among banks and bank holding companies, to account for off-balance-sheet
exposure and to minimize  disincentives  for holding liquid  assets.  Assets and
off-balance-sheet  items  are  assigned  to broad  risk  categories,  each  with
appropriate  weights.  The  resulting  capital  ratios  represent  capital  as a
percentage of total risk-weighted  assets and  off-balance-sheet  items. The FRB
has noted  that  bank  holding  companies  contemplating  significant  expansion
programs  should not allow expansion to diminish their capital ratios and should
maintain ratios well in excess of the minimums. Under these guidelines, all bank
holding  companies  and  federally  regulated  banks  must  maintain  a  minimum
risk-based  total capital ratio equal to 8%, of which at least 4% must be Tier 1
capital.

     The FRB also has implemented a leverage  ratio,  which is Tier 1 capital to
total  assets,  to be used as a supplement  to the  risk-based  guidelines.  The
principal  objective  of the  leverage  ratio  is to place a  constraint  on the
maximum  degree to which a bank holding  company may leverage its equity capital
base.  The FRB  requires  a minimum  leverage  ratio of 3%. For all but the most
highly-rated  bank holding  companies and for bank holding  companies seeking to
expand,  however, the FRB expects that additional capital sufficient to increase
the ratio by at least 100 to 200 basis points will be maintained.

     Management  of the Company  believes the  risk-weighting  of assets and the
risk-based  capital  guidelines  do not have a  material  adverse  impact on the
Company's  operations  or  on  the  operations  of  its  Subsidiary  Banks.  The
requirement  of  deducting  certain  intangibles  in  computing  capital  ratios
contained in the guidelines,  however, could adversely affect the ability of the
Company  to make  acquisitions  in the  future  in  transactions  that  would be
accounted  for  using  the  purchase   method  of  accounting.   Although  these
requirements  would not reduce the ability of the  Company to make  acquisitions
using the  pooling  of  interests  method of  accounting,  the  Company  has not
historically made, and has no present plans to make, acquisitions on this basis.

     Community  Reinvestment  Act. The Community  Reinvestment  Act of 1977 (the
"CRA")  requires,  in connection  with  examinations  of financial  institutions
within their jurisdiction, the federal banking regulators to 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  applications  to open a  branch  or
facility.

     Regulations  Governing  Extensions  of  Credit.  The  Subsidiary  Banks are
subject to certain restrictions imposed by the Federal Reserve Act on extensions
of credit to the bank holding  company or its  subsidiaries,  or  investments in
their  securities and on the use of their  securities as collateral for loans to
any borrowers. These regulations and restrictions limit the Company's ability to
borrow funds from its Subsidiary  Banks for its cash needs,  including funds for
acquisitions  and for payment of  dividends,  interest and  operating  expenses.
Transactions among the Subsidiary Banks (other than BankTEXAS and FB California)

<PAGE>

that do not  involve  the  Company  are  generally  exempt  from  the  foregoing
regulations and  restrictions.  Because the exemption is available only to those
Subsidiary Banks that are at least 80% owned by the Company,  it would not apply
to such transactions  involving BankTEXAS and FB California.  Further, under the
BHC Act and certain  regulations of the FRB,  subsidiary banks of a bank holding
company  are  prohibited  from  engaging  in  certain  tie-in   arrangements  in
connection with any extension of credit, lease or sale of property or furnishing
of services.  Bank holding companies and their nonbank  subsidiaries that engage
in electronic  benefit transfer services are also subject to certain  anti-tying
restrictions.

     The Subsidiary  Banks are also subject to certain  restrictions  imposed by
the  Federal  Reserve  Act  on  extensions  of  credit  to  executive  officers,
directors,  principal  stockholders  or any related  interest  of such  persons.
Extensions of credit (i) must be made on substantially the same terms, including
interest rates and collateral as, and following credit  underwriting  procedures
that are not less stringent  than,  those  prevailing at the time for comparable
transactions with persons not covered above and who are not employees;  and (ii)
must not  involve  more than the  normal  risk of  repayment  or  present  other
unfavorable  features.  The Subsidiary Banks are also subject to certain lending
limits and restrictions on overdrafts to such persons.

     Reserve  Requirements.  The FRB requires  all  depository  institutions  to
maintain  reserves  against their  transaction  accounts and  non-personal  time
deposits.  Reserves of 3% must be maintained against total transaction  accounts
of $49.3  million  or less  (subject  to  adjustment  by the FRB) and an initial
reserve of  $1,479,000  plus 10%  (subject to  adjustment  by the FRB to a level
between 8% and 14%) must be maintained against that portion of total transaction
accounts in excess of such amount.  The balances  maintained to meet the reserve
requirements imposed by the FRB may be used to satisfy liquidity requirements.

     Institutions  are  authorized  to  borrow  from the  Federal  Reserve  Bank
"discount  window," but FRB  regulations  require  institutions to exhaust other
reasonable  alternative  sources  of  funds,  including  Federal  Home Loan Bank
advances, before borrowing from the Federal Reserve Bank.

     Federal  Home Loan  Bank  System.  First  Bank,  FB&T,  FB  California  and
BankTEXAS are members of the Federal Home Loan Bank System (the "FHLB  System").
The FHLB System  consists of twelve  regional  Federal Home Loan Banks (each,  a
"FHLB"),  each subject to  supervision  and  regulation  by the Federal  Housing
Finance  Board,  an independent  agency  created by FIRREA.  The FHLBs provide a
central  credit  facility  primarily for member  institutions.  First Bank, as a
member of the FHLB of Des Moines,  BankTEXAS, as a member of the FHLB of Dallas,
and  FB&T and FB  California,  as  members  of the  FHLB of San  Francisco,  are
required to acquire  and hold shares of capital  stock in the FHLB in amounts at
least equal to 1% of the aggregate  principal  amount of its unpaid  residential
mortgage loans and similar  obligations at the beginning of each year, or 1/20th
of its advances  (borrowings) from the FHLB,  whichever is greater.  Each of the
Subsidiary  Banks  which is a member  of the FHLB is in  compliance  with  these
regulations.

     Dividends.  The  Company's  primary  sources of funds are the dividends and
management  fees paid by its  Subsidiary  Banks.  The ability of the  Subsidiary
Banks to pay  dividends  and  management  fees is limited  by various  state and
federal  laws,  by the  regulations  promulgated  by  their  respective  primary
regulators and by the principles of prudent bank  management.  In addition,  the
amount of dividends  the  Subsidiary  Banks may pay to the Company is limited by
the provisions of the Company's  credit  agreement with a group of  unaffiliated
lenders,  which imposes  certain minimum  capital  requirements.  Under the most
restrictive  of these  requirements,  dividends  from the  Subsidiary  Banks are
limited to  approximately  $29.7  million as of December 31, 1997,  unless prior
permission of the regulatory  authorities  and, if necessary,  the lead bank for
the lenders is obtained.

     Monetary Policy and Economic  Control.  The commercial  banking business in
which the Company engages is affected not only by general  economic  conditions,
but also by the monetary  policies of the FRB.  Changes in the discount  rate on
member bank borrowing,  availability of borrowing at the "discount window," open
market  operations,  the imposition of changes in reserve  requirements  against
member bank deposits and assets of foreign  branches,  and the imposition of and

<PAGE>

changes in reserve  requirements  against certain  borrowings by banks and their
affiliates are some of the instruments of monetary policy  available to the FRB.
These monetary  policies are used in varying  combinations to influence  overall
growth and distributions of bank loans,  investments and deposits,  and such use
may affect  interest  rates  charged on loans or paid on deposits.  The monetary
policies of the FRB have had a significant  effect on the  operating  results of
commercial banks and are expected to do so in the future.  The monetary policies
of the FRB are influenced by various factors, including inflation, unemployment,
short-term and long-term changes in the  international  trade balance and in the
fiscal policies of the U.S. Government.  Future monetary policies and the effect
of such  policies on the future  business and earnings of the Company  cannot be
predicted.

Employees

     As of  December  31,  1997,  the  Company  and  its  subsidiaries  employed
approximately 1,860 employees. None of the employees are subject to a collective
bargaining agreement. The Company considers its relationships with its employees
and those of the Subsidiary Banks and its other subsidiaries 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

     The Company owns the office  building  which houses the principal  place of
business of the Company, which is located at 135 N. Meramec,  Clayton,  Missouri
63105.  The property is in good condition and consists of  approximately  41,763
square feet, of which approximately 11,742 is currently leased to others. Of the
Subsidiary Banks' other 130 main offices and branch  facilities,  85 are located
in  buildings  owned  by the  Subsidiary  Banks  and 45 are  located  in  leased
facilities.

Item 3.  Legal Proceedings

     The Company and the  Subsidiary  Banks are,  from time to time,  parties to
various  legal  actions  arising in the normal  course of  business.  Management
believes there is no proceeding threatened or pending against the Company or any
of the Subsidiary  Banks which, if determined  adversely,  would have a material
adverse effect on the business or financial position of the Company,  any of the
Subsidiary Banks or any other subsidiary.

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

                  None.

                                     PART II

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

     There is no  established  public  trading  market for the Company's  common
stock.  All of the Company's  common stock is owned by various trusts created by
and for the benefit of Mr.  James F.  Dierberg,  the  Company's  Chairman of the
Board,  President  and Chief  Executive  Officer,  and members of his  immediate
family.

Item 6.  Selected Financial Data

     The information  required by this item is incorporated  herein by reference
to "Selected  Consolidated and Other Financial Data" included in the 1997 Annual
Report to Shareholders.



<PAGE>


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

     The information  required by this item is incorporated  herein by reference
to "Management's  Discussion and Analysis" included in the 1997 Annual Report to
Shareholders.

Item 7a.  Quantitative And Qualitative Disclosures About Market Risk.

     The information  required by this item is incorporated  herein by reference
to "Management's Discussion and Analysis-Interest Rate Risk Management" included
in the 1997 annual Report to Shareholders.

Item 8.  Financial Statements and Supplementary Data

     The  following  consolidated  financial  statements,  included  in the 1997
Annual  Report to  Shareholders,  and  quarterly  consolidated  financial  data,
included in the 1997 Annual Report to Shareholders,  are incorporated  herein by
reference.

         Consolidated Balance Sheets - December 31, 1997 and 1996
         Consolidated Statements of Income - Years Ended December 31, 1997, 1996
         and 1995
         Consolidated  Statements  of  Changes  in  Stockholders' Equity - Years
           Ended December 31, 1997, 1996, and 1995
         Consolidated Statements of Cash Flows - Years Ended  December 31, 1997,
           1996 and 1995
         Notes to Consolidated Financial Statements
         Independent Auditors' Report
         Quarterly Condensed Financial Data (Unaudited)

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

                  Not applicable.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant
<TABLE>
<CAPTION>

     The  directors  and  executive  officers of the  Company,  their ages,  and
positions  with the Company and the  Subsidiary  Banks and the  Company's  other
subsidiaries as of December 31, 1997, are set forth below.

         Name                               Age              Position with the Company and its Subsidiaries
         ----                               ---              -----------------------------------------------
<S>                                         <C>             <C>                                                 
James F. Dierberg...................        60              Chairman of the Board of Directors,  President and Chief
                                                            Executive Officer of the Company  and  FBA;  Director of
                                                            CCB and Sundowner Corporation (a wholly owned subsidiary
                                                            of FBA); and Trustee of First Preferred Capital Trust.

Allen H. Blake......................        55              Executive   Vice  President,  Chief  Financial  Officer,
                                                            Secretary  and Director of  the Company;  Secretary  and
                                                            Director   of  First   Bank;   Vice   President,   Chief
                                                            Financial   Officer,  Secretary  and  Director  of  FBA;
                                                            Director of  Sundowner  Corporation;  Vice President and
                                                            Assistant  Secretary  of  FB&T  and FB  California;  and
                                                            Trustee of First Preferred Capital Trust.

Donald Gunn, Jr.....................        62              Director of the Company.
<PAGE>

George J. Markos....................        49              Director of the Company.

Thomas A. Bangert...................        54              Senior Vice President and  Chief  Operations  Officer of
                                                            the Company;  and Executive  Vice President and Director
                                                            of First Bank.

Laurence J. Brost...................        41              Senior Vice  President  and  Controller  of the Company;
                                                            Vice  President,  Chief  Accounting   Officer  of  First
                                                            Bank; and Trustee of First  Preferred Capital Trust.

John A. Schreiber...................        47              Executive Vice  President and  Chief Lending  Officer of
                                                            the Company;  and  Chairman  of the Board of  Directors,
                                                            President and Chief Executive Officer of First Bank.

Mark T. Turkcan ....................        42              Executive Vice President,  Retail  and Mortgage  Banking
                                                            of the Company; and Director of First Bank and FBA.

Donald W. Williams..................        50              Executive  Vice  President  and Chief Credit  Officer of
                                                            the  Company;  Senior  Vice  President  and  Director of
                                                            First  Bank;   Director   of  FBA  and  BankTEXAS;   and
                                                            Chairman of the Board of  Directors and Chief  Executive
                                                            Officer of CCB, FB&T and FB California.
</TABLE>

     James F. Dierberg is the Chairman of the Board and Chief Executive  Officer
of the  Company;  positions  he has held  since  1988.  He has also  served as a
Director of the Company  since 1979.  Mr.  Dierberg was President of the Company
from 1979 until February 1992; he was  re-appointed  President in April 1994 and
continues to serve in that capacity.  Mr. Dierberg was appointed Chairman of the
Board,  President  and Chief  Executive  Officer of FBA in September  1994.  Mr.
Dierberg has served in various  capacities with other bank holding companies and
banks  owned or  controlled  by him or  members  of his family  since  1957.  In
addition, Mr. Dierberg serves as a trustee of First Preferred Capital Trust.

     Allen H. Blake has been an Executive  Vice  President of the Company  since
April 18,  1996.  Mr.  Blake  joined  the  Company as Vice  President  and Chief
Financial  Officer in 1984,  and in 1988 he was  appointed  as  Secretary  and a
Director of the Company.  In addition,  Mr. Blake has served as Chief  Financial
Officer,  Secretary and Director of FBA since September 1994 and as a trustee of
First Preferred Capital Trust.

     Donald  Gunn,  Jr. was elected a Director of the Company in December  1992.
Mr. Gunn is a practicing  attorney and has been a shareholder in the law firm of
Gunn & Gunn, P.C. during the past five years.

     George J. Markos was  elected a Director  of the Company in December  1992.
Mr. Markos is a management  consultant  providing  services  primarily to banks,
savings  and  loans  and  related  businesses,  including  the  Company  and has
performed such services during the past five years.

     Thomas A. Bangert is Senior Vice President and Chief Operations  Officer of
the Company,  Executive Vice President and Director of First Bank,  positions he
assumed on January 1, 1990. Mr. Bangert is also a Director of First Land Trustee
Corporation, a position he assumed during 1997.

     Laurence J. Brost has been  Senior Vice  President  and  Controller  of the
Company since October 21, 1997. Mr. Brost assumed the position of Vice President
and  Controller  of the Company in 1990.  Mr.  Brost also serves as a trustee of
First Preferred Capital Trust.
<PAGE>

     John A. Schreiber is Executive Vice President and Chief Lending  Officer of
the Company and President and a Director of First Bank,  positions he assumed in
April 1996 and September 1992, respectively.  In May 1994, he became Chairman of
First Bank. He was previously  Senior Vice  President at Mercantile  Bank of St.
Louis,  N.A., a position he had held since 1989,  where he was  responsible  for
commercial lending and operating services to St.
Louis-based companies.

     Mark T. Turkcan is Executive Vice President, Retail and Mortgage Banking of
the Company,  positions he assumed in April 1996.  Mr. Turkcan has been employed
in various  executive  capacities  since 1985. Mr. Turkcan is also a Director of
First  Bank and FBA,  positions  he has held since  April 1994 and August  1994,
respectively.

     Donald W. Williams is an Executive  Vice President and Chief Credit Officer
of the Company and a Senior Vice President and Director of First Bank, positions
he assumed in March  1993.  Mr.  Williams  also  serves as a Director of FBA and
BankTEXAS and Chairman of the Board of Directors and Chief Executive  Officer of
CCB,  FB&T  and FB  California.  He was  previously  Senior  Vice  President  at
Mercantile Bank of St. Louis,  N.A., a position he had held since 1989, where he
was responsible for credit approval.

Section 16(a) Beneficial Ownership Reporting Compliance

     To the Company's knowledge,  no director,  executive officer or shareholder
of the Company, subject, in their capacity as such, to the reporting obligations
set forth in Section 16 of the Securities  Exchange Act of 1934, as amended (the
"Exchange Act") has failed to file on a timely basis reports required by Section
16(a) of the  Exchange  Act  during the year ended  December  31,  1997 or prior
years.

Item 11.  Executive Compensation


     The following  table sets forth the  compensation  for the named  executive
officers for the last three years.
<TABLE>
<CAPTION>


                                            SUMMARY COMPENSATION TABLE

                                                                                All Other
  Name and Principal Positions           Year                  Salary             Bonus         Compensation (1)
  ----------------------------           ----                  ------           --------        ----------------
<S>                                       <C>                  <C>               <C>               <C>    
James F. Dierberg
Chairman of the Board of                 1997                 $ 492,000          $      0          $  4,750
Directors, President and                 1996                   492,000                 0             4,750
Chief Executive Officer                  1995                   492,000                 0             4,500

Donald W. Williams                       1997                 $ 166,250          $ 40,000          $  4,750
Executive Vice President                 1996                   155,000            30,000             4,750
                                         1995                   138,750            26,000             4,260

John A. Schreiber                        1997                 $ 166,250          $ 30,000          $  4,750
Executive Vice President                 1996                   155,000            20,000             4,750
                                         1995                   138,750            25,000             4,260

Allen H. Blake                           1997                 $ 147,500          $ 30,000          $  4,750
Executive Vice President and             1996                   140,000            30,000             4,750
Chief Financial Officer                  1995                   128,750            30,000             4,260

Mark T. Turkcan                          1997                 $ 133,750          $ 15,000          $  4,012
Executive Vice President                 1996                   130,000            10,000             4,088
                                         1995                   113,750            25,000             4,163

-------------------
(1)  All  other   compensation   reported   represents   First  Banks'  matching
contributions to the 401(k) Plan for the year indicated.
</TABLE>

<PAGE>

Employment Agreements

     Messrs.  Schreiber and Williams are parties to employment  agreements  with
the Company and First Bank. In most  respects,  the two contracts are identical.
The term of each contract is one year, and each is  automatically  renewable for
additional  one-year  periods.  As part of the annual renewal process,  the base
salary payable under each  employment  agreement is reviewed and may be adjusted
at the discretion of the Board of Directors of the Company. The base salary paid
to  each  of  Messrs.  Schreiber  and  Williams  pursuant  to  their  respective
employment  agreements  is  set  forth  in the  salary  column  of  the  Summary
Compensation Table.

     Both employment contracts provide for a bonus of up to twenty percent (20%)
of the employee's annual base salary, with the exact percentage to be determined
by the Chairman of the Board of the Company if the  employee  meets the criteria
set by the Company and First Bank at the beginning of each contract  year.  Each
annual bonus is payable  within  ninety (90) days after the close of the year to
which it relates.  In addition,  each employee is entitled to participate in the
401(k) Plan, the Company's  health  insurance plan and in such other  additional
benefit plans which the Company may adopt for its employees.

     Under the terms of the employment contracts, if either Mr. Schreiber or Mr.
Williams terminated for a reason other than retirement,  death,  "disability" or
for  "cause," as those terms are defined in the  employment  agreements,  or are
terminated due to a change in control of the Company,  each such individual will
be entitled to receive two years base salary. Should either Mr. Schreiber or Mr.
Williams  voluntarily  terminate  employment with the Company and First Bank, he
would be  entitled  to receive the balance of his base salary for that year or a
minimum of six months salary, provided that neither would 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 either  Mr.  Schreiber  or Mr.  Williams,
their  respective  employment  agreements  provide  that their  widows  would be
entitled to receive  compensation  that would have been  payable to the employee
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 not  employees  of the Company or any of its
subsidiaries  receive  remuneration  for  their  services  as  directors.   Such
non-employee  directors  (currently only Messrs.  Donald Gunn and George Markos)
receive a retainer  of $1,000 per  quarter  and a fee of $500 per Board  meeting
attended.  No  directors  are  compensated  for  attendance  at Audit  Committee
meetings, which is the only committee of the Board of Directors.

     In  addition to Board  meeting  fees,  during  1997,  the Company  paid Mr.
Markos,  directly  and  indirectly,  consulting  fees in the  amount  of  $1,500
exclusive of reimbursement for his travel expenses. It is anticipated Mr. Markos
will continue to provide  consulting  services to the Company during the current
fiscal year.

     During 1997,  the Company paid $33,160 in legal fees to a law firm of which
Mr.  Donald  Gunn,  one of the  Company's  directors,  is a  shareholder.  It is
anticipated  Mr. Gunn's law firm will continue to provide legal  services to the
Company during the current fiscal year.

     Executive  officers of the Company who are also directors of the Company do
not  receive  remuneration  other than  salaries  and bonuses for serving on the
Board of Directors.

Compensation Committee Interlock and Insider Participation in Compensation
Decisions

     The  Company  does  not  have a  compensation  committee  of the  Board  of
Directors or another committee which performs the functions normally reserved to
compensation  committees.  All  decisions  with respect to the  compensation  of
executive  officers  of the  Company  are the  responsibility  of the  Board  of
Directors.  Messrs.  Dierberg and Blake are the only  executive  officers of the
Company  who serve on the Board of  Directors.  The  aforementioned  individuals
abstain from voting with respect to matters relating to their own compensation.
<PAGE>

     Certain of the  executive  officers and  directors of the Company  serve as
executive officers and directors of certain of the Subsidiary Banks.

     The  Company  believes  these  relationships  are  typical of bank  holding
companies in general and that they do not constitute "insider  participation" as
set forth in the executive  compensation  disclosure  rules  promulgated  by the
Securities  and  Exchange  Commission.  The  salaries  and bonuses paid to these
individuals  for their  services  to the Company  and its  Subsidiary  Banks are
established  in their  entirety by the Board of Directors  of the  Company.  The
Boards  of  Directors  of  the  Subsidiary  Banks  do  not  participate  in  the
deliberations   of  the  Company's  Board  of  Directors  with  respect  to  the
compensation paid to these individuals.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The  following  table  sets forth the entire  ownership  of all  classes of
voting capital stock of the Company issued and outstanding.
<TABLE>
<CAPTION>
                                                                                                       Percent of
                                                                         Number of                        Total
                    Title of Class                                        Shares           Percent       Voting
                   and Name of Owner                                       Owned          of Class        Power
                   -----------------                                       -----          --------        -----

  Common Stock ($250 par value)
<S>                                                                     <C>                <C>               
     James F. Dierberg II, Family Trust (1)..........................   7,714.677(2)       32.605%          *
     Michael J. Dierberg, Family Trust (1)...........................   4,255.319(2)       17.985%          *
     Ellen C. Dierberg, Trustees, Family Trust (1)...................   7,714.676(2)       32.605%          *
     Michael J. Dierberg and Mary W. Dierberg,
        Trustees under living trust of Michael J. Dierberg (1).......   3,459.358(2)       14.621%          *
     First Trust (Mary W. Dierberg and First Bank
        Trustees)....................................................     516.830(3)        2.184%          *
  Class A Convertible Adjustable Rate Preferred Stock
  ($20 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%
</TABLE>
----------------------------------
 *       Represent 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 N. Meramec,  Clayton,  Missouri 63105.  Mr. James F. Dierberg,  the
         Company's Chairman of the Board, President and Chief Executive Officer,
         and Mrs. Mary W. Dierberg,  are husband and wife, and Messrs.  James F.
         Dierberg II,  Michael  James  Dierberg  and Miss Ellen C.  Dierberg are
         their 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 the Company's common stock.
(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, 1997, is 1,645, which shares are not included in the above
         table.
(5)      Sole voting and investment power.

<PAGE>


Security Ownership of Management

     As set forth above, other than trusts established by and for the benefit of
Mr. James F. Dierberg,  the Company's Chairman of the Board, President and Chief
Executive  Officer,  or for the benefit of members of Mr.  Dierberg's  immediate
family, no other director or executive officer of the Company  beneficially owns
any of the issued and outstanding shares of the Company's (i) Common Stock, (ii)
Class  A  Convertible   Adjustable  Rate  Preferred  Stock,  or  (iii)  Class  B
Non-Convertible  Adjustable  Rate  Preferred  Stock - the only classes of voting
stock of the Company outstanding.
   
     The following  table sets forth, as of December 31, 1997, the shares of the
Company's  non-voting  Preferred  Securities  owned by the Company's  Directors,
executive officers, including those named in the Summary Compensation Table, and
all Directors and executive officers as a group. The Company has no knowledge of
any person or entity who beneficially  owns more than five percent (5.0%) of the
Preferred Securities.
<TABLE>
<CAPTION>

                                               Number of Preferred Securities
                                                   Shares Beneficially Owned
          Beneficial Owners                       as of December 31, 1997(1)             Percent of Class
          -----------------                       -----------------------                ----------------

<S>                                                         <C>                              
  James F. Dierberg.............................               -0-                              *
  Allen H. Blake................................            1,280                               *
  Donald Gunn, Jr...............................               -0-                              *
  George Markos.................................               -0-                              *
  Donald W. Williams............................               -0-                              *
  John A. Schreiber.............................               -0-                              *
  Mark T. Turkcan...............................               -0-                              *
Directors and Executive
    Officers as a Group (9 persons).............            1,280                               *
</TABLE>
---------------------------
*        Represents less than 1.0%
(1)      Beneficial  ownership  of shares,  as  determined  in  accordance  with
         applicable  rules of the Securities and Exchange  Commission,  includes
         shares as to which a person directly or indirectly has or shares voting
         power or investment power or both.

Item 13.  Certain Relationships and Related Transactions

     Directors  and  executive  officers  of  the  Company,   and  some  of  the
corporations  and firms in which one of the directors is a majority owner,  have
been customers of the Subsidiary  Banks in the ordinary  course of business,  or
have been indebted to the Subsidiary  Banks for loans of $60,000 or more, and it
is anticipated that some of these persons,  corporations and firms will continue
to be customers of and indebted to the  Subsidiary  Banks on a similar  basis in
the future. All loans extended to such persons, corporations and firms since the
beginning  of the last full  fiscal  year were  made in the  ordinary  course of
business,  none  involved more than normal risk of  collectibility  or presented
other unfavorable  features,  and all were made on substantially the same terms,
including  interest rates and collateral,  as those  prevailing at the same time
for comparable bank  transactions  with  unaffiliated  persons.  At December 31,
1997, the Subsidiary Banks had no loans outstanding to such persons.
<PAGE>

     Outside of normal customer  relationships,  no Directors or officers of the
Company,  no  shareholders  holding  over five percent  (5.0%) of the  Company's
voting  securities  and no  corporations  or firms with  which  such  persons or
entities are associated,  maintain or have maintained since the beginning of the
last full fiscal year, any significant  business or personal  relationship  with
the  Company  or its  subsidiaries,  other than such as arises by virtue of such
position or ownership interest in the Company or its subsidiaries, except as set
forth in Item 11,  "Executive  Compensation - Compensation  of Directors," or as
described in the following paragraphs.

     During 1997, 1996 and 1995, Tidal Insurance Limited (Tidal),  a corporation
owned   indirectly  by  First  Banks'   Chairman  and  his  children,   received
approximately  $214,000,  $326,000  and  $192,000,  respectively,  in  insurance
premiums for  accident,  health and life  insurance  policies  purchased by loan
customers of First Banks.  The insurance  policies are issued by an unaffiliated
company and then ceded to Tidal.  First Banks  believes the premiums paid by the
loan  customers of First Banks are  comparable to those that such loan customers
would have paid if the premiums were subsequently being ceded to an unaffiliated
third-party  insurer.  In addition,  for the years ended December 31, 1997, 1996
and 1995, First Securities America, Inc., doing business as First Banc Insurors,
received  approximately  $206,000,  $231,000  and  $196,000,   respectively,  in
commissions  or  insurance  premiums  for  policies  purchased by First Banks or
customers of the Subsidiary Banks from the unaffiliated, third-party insurors to
which First Banc Insurors placed such policies.  First Banc Insurors received an
additional  $136,000 and  $999,000 in annuity  sales  commissions  for the years
ended December 31, 1996 and 1995,  respectively.  In addition,  First  Brokerage
L.P. received  approximately  $707,000 and $822,000 for the years ended December
31, 1997 and 1996, respectively, in commissions and lease payments in connection
with  annuities  and  securities  and other  insurance  product  sales  services
provided to certain customers of the Subsidiary Banks.  Commissions  received by
First Banc Insurors and First  Brokerage  L.P. in  connection  with the purchase
and/or  sale of such  annuities  and  securities  were paid by an  unaffiliated,
third-party company. First Securities America, Inc. and First Brokerage L.P. are
owned by a trust  established  and  administered by and for the benefit of First
Banks' Chairman and members of his immediate family.  The insurance  premiums on
which the  aforementioned  commissions  were earned were  competitively  bid and
First Banks deems the commissions First Banc Insurors earned to be comparable to
those which would have been earned by an unaffiliated third-party agent.

     First  Services,  L.P.,  a limited  partnership  indirectly  owned by First
Banks'  Chairman  and his  children  through  its General  Partners  and Limited
Partners,  provides data processing  services and operational  support for First
Banks and its subsidiaries. Fees paid under the agreement to First Services L.P.
were $6.4  million,  $3.2 million and $2.9 million for the years ended  December
31, 1997, 1996 and 1995,  respectively.  During 1997, First Services,  L.P. paid
First Banks $1.1 million in rental fees for the use of data processing and other
equipment owned by First Banks.


<PAGE>



                                     PART IV

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

         (a)      The following documents are filed as part of this Report:

                  1.       Financial Statements: The Financial Statements listed
                           under Item 8 to this Report are set forth at pages 34
                           through 38, and the Notes to  Consolidated  Financial
                           Statements  are set forth at pages 39 through  58, of
                           the 1997 Annual Report to  Shareholders  (See Exhibit
                           13 under Paragraph (a)3 of this Item 14).

                  2.       Financial Statement Schedules:  None

                  3.       Exhibits:  See the Exhibit  Index at pages 23 through
                           24 of this Report.  The following  exhibits listed in
                           the Exhibit Index are filed with this Report:

                           Exhibit 10.8     Service   Agreement  by and between
                                            First  Services, L.P. and First Bank
                                            dated April 1, 1997.

                           Exhibit 10.9     Service  Agreement  by  and  between
                                            First Services,  L.P. and First Bank
                                            & Trust dated April 1, 1997.

                           Exhibit 10.10    Service   Agreement  by and  between
                                            First  Services  L.P. and  BankTEXAS
                                            dated April 1, 1997.

                           Exhibit 10.11    Service  Agreement  by  and  between
                                            First Services L.P. and  SunriseBank
                                            dated April 1, 1997.

                           Exhibit 13.1     1997 Annual Report to  Shareholders.
                                            The    1997   Annual    Report   to 
                                            Shareholders is being  filed  as  an
                                            Exhibit  solely  for the  purpose of
                                            incorporating   certain   provisions
                                            thereof by  reference.  Portions  of
                                            the  Annual  Report to  Shareholders
                                            not  specifically   incorporated  by
                                            reference are not deemed "filed" for
                                            the   purposes  of  the   Securities
                                            Exchange Act of 1934, as amended.

                           Exhibit 21.1     Subsidiaries of the Registrant.

         (b) Reports on Form 8-K during the quarter ended December 31, 1997:

                           None.

         (c) See the Exhibit Index attached hereto.

                           Management  Contracts and  Compensatory  Plans -- The
                           following  exhibits  listed in the Exhibit  Index are
                           identified  below in response to Item 14(a)-3 of Form
                           10-K:

                           Exhibit 10.4     Employment    Agreement   by     and
                                            among the  Company,  First  Bank and
                                            John A.  Schreiber,  dated September
                                            21, 1992.

                           Exhibit 10.5     Employment    Agreement    by    and
                                            among the  Company,  First  Bank and
                                            Donald W. Williams,  dated March 22,
                                            1993.


<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,
                                  President and Chief Executive 
                                  Officer (Principal Executive Officer)



                                 By: /s/ Allen H. Blake
                                 ----------------------
                                 Allen H. Blake
                                 Executive Vice President, Chief
                                    Financial Officer, Secretary and
                                    Director (Principal Financial Officer)




                                 By: /s/ Laurence J. Brost
                                 -------------------------
                                 Laurence J. Brost
                                 Senior Vice President and Controller
                                   (Principal Accounting Officer)

Date:  March 26, 1998

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Company and in the capacities and on the date indicated.


   Signature and Title                                   Date
   -------------------                                   ----



/s/ James F. Dierberg                                March 26, 1998
-------------------------
James F. Dierberg
Chairman of the Board of Directors, President
     and Chief Executive Officer


<PAGE>


Signature and Title                                      Date
-------------------                                      ----




/s/ Allen H. Blake                                   March 26, 1998
---------------------------
Allen H. Blake
Executive Vice President,
     Chief Financial Officer,
     Secretary and Director



/s/ Donald Gunn, Jr.                                 March 26, 1998
-------------------
Donald Gunn, Jr.
Director


/s/ George Markos                                    March 26, 1998
-------------------
George Markos
Director


<PAGE>


                                  EXHIBIT INDEX


These Exhibits are numbered in accordance  with the Exhibit Table of Item 601 of
Regulation S-K.

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  ending
       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 filed herewith).

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  (incorporated 
       herein by reference to Exhibit 4(a) to  the Company' Report on
       Form 10-Q for the quarter ended March 31, 1997).

4.4    Preferred Securities Guarantee Agreement (incorporated  herein
       by reference to Exhibit (4(b) to the Company's Report on  Form
       10-Q for the quarter ended March 31, 1997).

4.5    Indenture (incorporated herein by reference to Exhibit 4(c) to
       the Company's Report on Form 10-Q for the quarter ended  March
       31, 1997).

4.6    Amended and Restated Trust Agreement (incorporated  herein  by 
       reference to Exhibit 4(d) to the Company's Report on Form 10-Q
       for the quarter ended March 31, 1997). 

10.1   Shareholders' Agreement by and among James F. Dierberg, II and
       Mary W.  Dierberg,  Trustees  under  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  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).

10.4   Employment  Agreement  by and  among  the  Company,  First Bank
       and  John A. Schreiber,  dated September 21, 1992 (incorporated
       herein by  reference to  Exhibit  10(iii)(A)  to  the Company's
       Form 10-K for the year ended December 31, 1993).

10.5   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 Form 10-K for
       the year ended December 31, 1993).
<PAGE>

10.6   $90,000,000  Secured  Credit  Agreement,  dated  as  of  July 18,
       1996 among the Company, The Boatmen's National Bank of St. Louis,
       Harris Trust and Savings   Bank,   Norwest   Bank  of  Minnesota, 
       National  Association, American  National Bank and Trust Company,
       The Frost  National Bank and The Boatmen's National Bank  of  St.
       Louis, as Agent.

10.7   Stock  Purchase  and  Operating  Agreement  by and  between  the 
       Company and BancTEXAS, 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).

10.8   Service Agreement by and between First Services, L.P.  and First
       Bank dated April 1, 1997.

10.9   Service  Agreement  by  and between  First  Services,  L.P.  and
       First Bank & Trust dated April 1, 1997.

10.10  Service  Agreement  by  and  between  First  Services  L. P. and
       BankTEXAS dated April 1, 1997.

10.11  Service Agreement by and between First Services L.P. and Sunrise
       Bank dated April 1, 1997.

13.1   The Company's 1997 Annual Report to Shareholders.

21.1   Subsidiaries of the Company.

27.1   Financial Data Schedule (EDGAR only).



<PAGE>


                        EXHIBIT 10.8

                      SERVICE AGREEMENT

         This  Service  Agreement  is made and entered into as of the 1st day of
April, 1997, by and between First Services, L.P., a Missouri Limited Partnership
and First Bank (MO), a banking institution duly organized and existing by virtue
of the laws of the State of Missouri.

     WHEREAS,  FIRST  BANK  (MO) and  FIRSTSERV,  INC.  entered  into a  Service
Agreement dated May l, l992; and

     WHEREAS, said Service Agreement was assigned to First Services,  L.P. on or
about April 1, 1997; and

     WHEREAS,  FIRST  SERVICES,  L.P.  and FIRST  BANK (MO)  desire to amend and
restate said Service Agreement in its entirety.

     NOW,  THEREFORE,  for  and in  consideration  of the  mutual  promises  and
covenants  contained  herein,  and the sum of Ten Dollars ($l0.00) in hand paid,
each to the other, the receipt and sufficiency of which is hereby  acknowledged,
the parties agree as follows:


I.       TERMINATION AND REVOCATION

         The  Parties  hereto  hereby  revoke,  cancel  and hold for  naught the
Service  Agreement  dated May l, l992,  and hereby  substitute  in its place the
Service Agreement herein contained.


II.      SERVICES

         (A)      First  Services,  L.P.  shall  furnish  First  Bank  (MO) data
                  processing and item processing services selected by First Bank
                  (MO) from the Product and Price  Schedule as per Attachment 1,
                  attached hereto and incorporated  herein by reference thereto.
                  Additional  services may be selected upon prior written notice
                  to First Services, L.P. at First Services, L.P.'s then current
                  list price by executing an amended Summary Page.

         (B)      First  Services,  L.P.  will provide  conversion  and training
                  services  for the fees  specified  from the  Product and Price
                  Schedule  (Attachment  1).  Classroom  training in the use and
                  operation  of the  system  for the  number of First  Bank (MO)
                  personnel  mutually  agreed  upon in the  conversion  planning
                  process  will be  provided  at a  training  facility  mutually
                  agreed upon. Conversion services are those activities designed
                  to transfer the  processing of First Bank's (MO) data from its
                  present processing company to First Services, L.P.

         (C)      First Services, L.P. will also provide Network Support Service
                  consisting of  communication  line  monitoring  and diagnostic
                  equipment and support personnel to discover,  diagnose, repair
                  or report line problems to the appropriate  telephone company.
                  The fee for this  service is also  listed from the Product and
                  Price Schedule (Attachment 1).

         (D)      First  Services,  L.P.  shall upon request act as First Bank's
                  (MO)  designated  representative  to arrange for the purchase,
                  and  installation  of data lines necessary to access the First
                  Services,  L.P. system.  Where requested,  additional  dial-up
                  lines and  equipment to be utilized as a backup to the regular
                  data lines may also be ordered.  First  Services,  L.P.  shall
                  bill First Bank (MO) for the actual  charges  incurred for the
                  data  lines and for the  maintenance  of the  modems and other
                  interface devices.
<PAGE>

         (E)      Processing priorities will be  determined  by mutual agreement
                  of the parties hereto.

         (F)      In addition, First Services, L.P. acknowledges that First Bank
                  (MO) acts as a correspondent  bank to certain  Affiliate Banks
                  and that as part of its duties hereunder First Services,  L.P.
                  will be performing  certain services for First Bank (MO) which
                  are necessary because of its status as a correspondent bank.


III.     TERM

         The term of this  Agreement  shall be twelve (12) months  commencing on
         April 1, 1997. Upon expiration,  the Agreement will automatically renew
         for  successive  terms of twelve (12) months each unless  either  party
         shall have provided  written  notice to the other at least  one-hundred
         eighty (180) days prior to the  expiration of the then current term, of
         its intent not to renew. In the event of  termination,  First Services,
         L.P. shall provide  reasonable  time allowance to allow First Bank (MO)
         to convert to another system.


IV.      SOFTWARE/FIRMWARE

         Unmodified  third  party  software  or  firmware  ("Software")  may  be
         supplied as part of the Agreement.  All such Software shall be provided
         subject to Software License Agreements.


V.       PRICE AND PAYMENT

         (A)      Fees for First  Services,  L.P.'s  services are set forth from
                  the Product and Price Schedule (Attachment 1), including where
                  applicable  minimum monthly charges and payment  schedules for
                  onetime fees.
         (B)      Standard  Fees shall be invoiced  no later than the  fifteenth
                  (15th) of each  month  for the then  current  month.  Terms of
                  payment shall be net cash.

         (C)      The Base  Service  Charge  listed  from the  Product and Price
                  Schedule (Attachment 1) shall not change more than once a year
                  and then only upon six (6) months' prior written  notice.  The
                  fee schedule shall be reviewed  annually to ensure fair market
                  value in  pricing.  Comparisons  will be made  with  peers and
                  other providers of similar services.

         (D)      This above limitation shall not apply to pass-thru expenses. A
                  pass-thru  expense is a charge for goods or  services by First
                  Services,  L.P. on First  Bank's  (MO) behalf  which are to be
                  billed to First Bank (MO) without mark-up.

         (E)      The  fees  listed   from  the   Product  and  Price   Schedule
                  (Attachment   1)  do  not  include  and  First  Bank  (MO)  is
                  responsible for furnishing  transportation  or transmission of
                  information between First Services,  L.P.'s data center, First
                  Bank's (MO) site and any applicable clearing house, regulatory
                  agency or  Federal  Reserve  Bank.  Where  First Bank (MO) has
                  elected to have First Services, L.P. provide Telecommunication
                  Services,  the price for the  Services  will be  provided  and
                  billed as a pass-thru expense.

         (F)      Network  Support Service Fees and Local Network Fees are based
                  upon services  rendered from First Services,  L.P.'s premises.
                  Off-premise  support  will be provided  upon First Bank's (MO)
                  request on an as available basis at First Services,  L.P. then
                  current charges for time and materials, plus reasonable travel
                  and living expenses.
<PAGE>

         (G)      First Services L.P.'s Price Schedule for First Bank (MO) shall
                  allow for a discount from the Schedule of Fees  (Attachment 1)
                  in return for the use by First  Services,  L.P.  of certain of
                  First Bank's (MO) computer  hardware,  software and equipment.
                  The  monthly  discount  is  determined  by adding the  monthly
                  depreciation of the assets used and a reasonable cost of funds
                  factor,  said cost of funds factor may be changed from time to
                  time with the written consent of the parties hereto.


VI.      CLIENT OBLIGATIONS

         (A)      First Bank (MO)  shall be solely  responsible  for the  input,
                  transmission  or  delivery  of  all   information   and   data
                  required by First  Services,  L.P. to  perform  the   services
                  except  where First  Bank (MO) has  retained  First  Services,
                  L.P. to handle  such responsibilities on its behalf.  The data
                  shall be  provided  in a format and manner  approved  by First
                  Services,  L.P. First  Bank (MO)  will   provide  at  its  own
                  expense or procure  from  First Services,  L.P. all equipment,
                  computer software,  communication  lines and interface devices
                  required to access the First Services,  L.P. System.  If First
                  Bank (MO) has  elected to  provide  such items  itself,  First
                  Services,  L.P. shall  provide  First Bank (MO) with a list of
                  compatible  equipment and software.

         (B)      First Bank (MO) shall  designate  appropriate  First Bank (MO)
                  personnel for training in the use of the First Services,  L.P.
                  System,  shall  allow  First  Services,  L.P.  access to First
                  Bank's (MO) site during normal  business  hours for conversion
                  and shall cooperate with First Services, L.P. personnel in the
                  conversion and implementation of the services.

         (C)      First Bank (MO) shall comply with any  operating  instructions
                  on the use of the First  Services,  L.P.  system  provided  by
                  First Services,  L.P.,  shall review all reports  furnished by
                  First  Services,  L.P.  for accuracy and shall work with First
                  Services,  L.P. to  reconcile  any out of balance  conditions.
                  First Bank (MO) shall  determine  and be  responsible  for the
                  authenticity   and  accuracy  of  all   information  and  data
                  submitted to First Services, L.P.

         (D)      First  Bank (MO) shall  furnish,  or if First  Services,  L.P.
                  agrees to so  furnish,  reimburse  First  Services,  L.P.  for
                  courier services applicable to the services requested.


VII.     GENERAL ADMINISTRATION

                  First  Services,  L.P. is continually  reviewing and modifying
         the First  Services,  L.P. system to improve service and to comply with
         federal  government  regulations  applicable  to the data  utilized  in
         providing  services to First Bank (MO). First Services,  L.P.  reserves
         the right to make changes in the service, including, but not limited to
         operating  procedures,  security  procedures,  the  type  of  equipment
         resident at and the  location of First  Services,  L.P.'s data  center.
         First  Services,  L.P. will provide First Bank (MO) at least sixty (60)
         days prior written  notice of changes in procedures or reporting and at
         least six (6) months prior written notice of changes in service costs.


VIII.    CLIENT CONFIDENTIAL INFORMATION

         (A)      First  Services,  L.P. shall treat all  information  and  data
                  relating  to  First Bank  (MO)  business  provided  to   First
                  Services,  L.P. by First Bank (MO),  or  information  relating
                  to First Bank's    (MO) customers,  as confidential  and shall
                  safe-guard First Bank's (MO) information with the same  degree
                  of care used to protect  First  Services,  L.P.'s confidential
                  information.  First Services,  L.P.  and First Bank (MO) agree
                  that  master and  transaction  data  files are  owned  by  and
                  constitute  property of First Bank (MO).  First Bank (MO) data
                  and records shall be subject  to regulation  and  examination 
                  by State and Federal  supervisory  agencies to the same extent
                  as  if such  information  were on First Bank's (MO)  premises.
                  First  Services,  L.P.'s  obligations  under this Section VIII
                  shall survive the termination or expiration of this Agreement.
<PAGE>

         (B)      First Services, L.P. shall maintain adequate backup procedures
                  including  storage of  duplicate  record files as necessary to
                  reproduce  First Bank's (MO) records and data. In the event of
                  a service  disruption  due to reasons  beyond First  Services,
                  L.P.'s  control,  First  Services,  L.P.  shall  use  diligent
                  efforts to mitigate the effects of such an occurrence.


IX.               FIRST SERVICES, L.P. CONFIDENTIAL INFORMATION

         (A)      First Bank (MO) shall not use or disclose to any third persons
                  any confidential  information concerning First Services,  L.P.
                  First Services,  L.P.  confidential  information is that which
                  relates  to  First  Services,   L.P.'s   software,   research,
                  development,  trade secrets or business affairs including, but
                  not limited to, the terms and conditions of this Agreement but
                  does not include  information  in the public domain through no
                  fault of First Bank (MO).  First Bank (MO)  obligations  under
                  this Section IX shall survive the termination or expiration of
                  this Agreement.

         (B)      First  Services,   L.P.'s  system  contains   information  and
                  computer   software  which  is  proprietary  and  confidential
                  information  of  First  Services,   L.P.,  its  suppliers  and
                  licensees. First Bank (MO) agrees not to attempt to circumvent
                  the  devices  employed  by First  Services,  L.P.  to  prevent
                  unauthorized access to the First Services, L.P.'s System.


X.       WARRANTIES

         First  Services,  L.P. will  accurately  process First Bank's (MO) work
         provided  that First Bank (MO)  supplies  accurate data and follows the
         procedures  described in First Services,  L.P.'s User Manuals,  notices
         and advises.  First Services,  L.P. personnel will exercise due care in
         the  processing  of First  Bank's  (MO) work.  In the event of an error
         caused by First  Services,  L.P.'s  personnel,  programs or  equipment,
         First  Services,  L.P.  shall  correct  the data and/or  reprocess  the
         affected report at no additional cost to First Bank (MO).




<PAGE>



XI.      LIMITATION OF LIABILITY

         IN NO EVENT SHALL FIRST SERVICES,  L.P. BE LIABLE FOR LOSS OF GOODWILL,
         OR FOR SPECIAL,  INDIRECT,  INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
         FROM FIRST BANK'S (MO) USE OF FIRST SERVICES L.P.'S SERVICES,  OR FIRST
         SERVICES,  L.P.'S SUPPLY OF EQUIPMENT OR SOFTWARE, UNDER THIS AGREEMENT
         REGARDLESS  OF WHETHER SUCH CLAIM ARISES IN TORT OR IN CONTRACT.  FIRST
         SERVICES,  L.P.'S AGGREGATE  LIABILITY FOR ANY AND ALL CAUSES OF ACTION
         RELATING TO SERVICES PERFORMED HEREUNDER OR ANY DAMAGE OR LOSS INCURRED
         OR  SUSTAINED  BY FIRST BANK (MO)  RELATING TO THIS  AGREEMENT  AND THE
         SERVICES  PERFORMED  HEREUNDER  SHALL BE LIMITED TO THE AMOUNT OF TOTAL
         FEES PAID BY FIRST BANK (MO) TO FIRST  SERVICES,  L.P. IN THE THREE (3)
         MONTH PERIOD  PRECEDING  THE DATE THE CLAIM  ACCRUED.  FIRST  SERVICES,
         L.P.'S  AGGREGATE  LIABILITY  FOR A DEFAULT  RELATING TO  EQUIPMENT  OR
         SOFTWARE  SHALL BE  LIMITED  TO THE AMOUNT  PAID FOR THE  EQUIPMENT  OR
         SOFTWARE.


XII.     PERFORMANCE STANDARDS

         (A)      On-Line  Availability  -  First  Services, L.P.'s standard of 
                  performance  shall  be  on-line availability of the system 98%
                  of the time that it is scheduled to  be  so available   over a
                  three month period (the "Measurement  Period")  Actual on-line
                  performance will be calculated monthly by comparing the number
                  of hours which the system was scheduled to be  operational  on
                  an   on-line  basis  with  the  number  of hours, or a portion
                  thereof,  it was actually  operational on  an  on-line  basis.
                  Downtime  may   be   caused  by  o perator   error,  hardware 
                  malfunction  or  failure,  or environmental  failures  such as
                  loss of power or air conditioning.  Downtime caused by reasons
                  beyond First Services, L.P.'s control should not be considered
                  in the statistics.

         (B)      Report  Availability - First  Services,  L.P.'s   standard  of
                  performance  for report  availability   shall be that,  over a
                  three (3) month  period,   ninety-five  percent (95%)  of  all
                  Critical  Daily Reports shall be available for remote printing
                  on time without  significant  errors.  A Critical Daily Report
                  shall mean priority  group reports  which First Services, L.P.
                  and First Bank (MO)    have   mutually  agreed in  writing are
                  necessary  to   properly  account  for  the   previous   day's
                  activity  and  properly  notify First  Bank (MO) of overdraft,
                  NSF or return items.  A significant error is one which impairs
                  First Bank's (MO) ability to properly account for the previous
                  days  activity and/or properly  account for overdraft,  NSF or
                  return items.  Actual  performance  will be calculated monthly
                  by  comparing   the  total  number of  First Bank (MO) reports
                  scheduled to be  available  from First  Services,  L.P. to the
                  number  of  reports  which  were available on time and withou
                  error.

         (C)      Exclusive Remedy - In the  event that  First  Services, L.P.'s
                  performance  fails to meet the  standards   listed  above  and
                  such  failure  is not the  result  of First  Bank's  (MO)error
                  or omission,  First  Bank (MO) sole and  exclusive  remedy for
                  such  default  shall be the right to terminate this  Agreement
                  in  accordance with the  provisions of this  paragraph. In the
                  event   that   First   Services,  L.P.   fails  to achieve any
                  Performance   Standards,  alone   or  in  combination, for the
                  prescribed  measurement period, First Bank (MO)  shall  notify
                  First Services,  L.P. ofits intent to terminate this agreement
                  if First  Services,  L.P. fails to restore  performance to the
                  committed  levels.  First  Services,  L.P. shall advise  First
                  Bank (MO) promptly upon  correction of the system deficiencies
                  (in no event shall corrective  action exceed sixty  (60)  days
                  from  the  notice  date)  and  shall   begin   an   additional
                  measurement  period.  Should First  Services,  L.P.    fail to
                  achieve  the   required   Performance   Standards  during  the
                  remeasurement   period,  First  Bank (MO) may  terminate  this
                  Agreement and First Services,  L.P. shall cooperate with First
                  Bank (MO)  to achieve an orderly  transition  to First  Bank's
                  (MO)  replacement processing system.  First Bank (MO) may also
                  terminate   this   Agreement   if   First   Services,   L.P.'s
                  performance  for  the  same  standard  is  below  the relevant
                  performance standard for more than two (2) measurement periods
                  in  any  consecutive  twelve (12) months or for more than five
                  (5)  measurement  periods during the  term of this  agreement.
                  During  the period of  transition,  First Bank (MO) shall  pay
                  only such  charges as are incurred  for monthly fees until the
                  date of  deconversion.  First Services,  L.P. shall not charge
                  First  Bank (MO) for  services relating  t  First Bank's (MO) 
                  deconversion.

         (D)      Audit - First  Bank  (MO)  shall  have the  right  to  perform
                  reasonable  audits, at its cost, upon giving written notice to
                  First  Services,  L.P. of its intent to do so. First Services,
                  L.P. shall  provide,  upon request,  financial  information to
                  First Bank (MO).


XIII.    DISASTER RECOVERY

         (A)      A Disaster   shall  mean  any  unplanned  interruption of the 
                  operations of or  inaccessibility to the First Services,  L.P.
                  data   center   which   appears   in   First Services, L.P.'s 
                  reasonable judgement to  require   relocation   of processing
                  to  an  alternative site.  First Services,  L.P. shall notify
                  First  Bank (MO) as soon as possible after it deems a service
                  outage to be a  Disaster.  First  Services,  L.P. shall  move 
                  the processing of First Bank's (MO) standard on-line services
                  to  an  alternative  processing  center  as  expeditiously as
                  possible. First Bank (MO) shall  maintain   adequate  records 
                  of   all  transactions   during   the   period  of    service
                  interruption  and shall have personnel  available to   assist
                  First Services L.P.,   Inc. in  implementing  the switch over
                  to  the  alternative  processing   site.  During a  disaster, 
                  optional  or on-request services  shall be provided  by First
                  Services,  L.P. only  to   the extent that  there is adequate
                  capacity at the alternate center and  only  after stabilizing
                  the  provision  of  base on-line services. (B) First Services,
                  L.P.  shall  work  with  First  Bank (MO) to establish a plan
                  for  alternative   data   communications   in  the event of a
                  disaster. First Bank (MO) shall be responsible for furnishing
                  any additional  communications  equipment and   data    lines
                  required under the adopted plan.

         (C)      First Services, L.P. shall test its Disaster Recovery Services
                  Plan by conducting one annual test.  First Bank (MO) agrees to
                  participate  in and  assist  First  Services,  L.P.  with such
                  testing.  Test results will be made  available to First Bank's
                  (MO)  regulators,  internal and external  auditors,  and (upon
                  request) to First Bank's (MO) insurance underwriters.

         (D)      First  Bank  (MO)   understands  and  agrees  that  the  First
                  Services,  L.P. Disaster Recovery Plan is designed to minimize
                  but not eliminate risks  associated with a disaster  affecting
                  First Services,  L.P.'s data center. First Services, L.P. does
                  not warrant that service will be  uninterrupted  or error free
                  in  the  event  of  a  disaster.  First  Bank  (MO)  maintains
                  responsibility  for adopting a disaster recovery plan relating
                  to disasters  affecting  First Bank's (MO)  facilities and for
                  securing business interruption insurance or other insurance as
                  necessary to properly  protect  First Bank's (MO)  revenues in
                  the event of a disaster.


XIV.     DEFAULT

         (A)      In the event  that  First  Bank  (MO) is  thirty  (30) days in
                  arrears in making any payment required, or in the event of any
                  other material default by either First Services, L.P. or First
                  Bank  (MO)  in  the  performance  of  their  obligations,  the
                  affected  party shall have the right to give written notice to
                  the other of the  default  and its  intent to  terminate  this
                  Agreement stating with reasonable  particularity the nature of
                  the claimed  default.  This Agreement  shall  terminate if the
                  default  has not been cured  within a  reasonable  time with a
                  minimum being thirty (30) days from the effective  date of the
                  notice.
         (B)      Upon the  expiration of this  Agreement,  or its  termination,
                  First  Services,  L.P.  shall  furnish to First Bank (MO) such
                  copies of First  Bank's (MO) data files as First Bank (MO) may
                  request in machine  readable format form along with such other
                  information  and  assistance as or is reasonable and customary
                  to  enable  First  Bank  (MO)  to  deconvert  from  the  First
                  Services,  L.P. system.  First Bank (MO) shall reimburse First
                  Services,  L.P. for the  production  of data records and other
                  services  at  First  Services,  L.P.'s  current  fees for such
                  services.


XV.      INSURANCE

         First Services,  L.P. carries Comprehensive General Liability insurance
         with primary limits of two million dollars,  Commercial Crime insurance
         covering Employee  Dishonesty in the amount of fifteen million dollars,
         all-risk  replacement  cost  coverage  on all  equipment  used at First
         Services, L.P.'s data center and Workers Compensation coverage on First
         Services,  L.P. employees wherever located in the United States.  First
         Bank (MO) shall carry adequate  insurance to cover liability for source
         documents  while in transit and in case of data loss through errors and
         omissions.


XVI.     GENERAL

         (A)      This   Agreement   is  binding  upon  the  parties  and  their
                  respective successors and permitted assigns. Neither party may
                  assign this  Agreement in whole or in part without the consent
                  of First Bank (MO)  and/or  First  Services,  L.P.,  provided,
                  however, that First Services,  L.P. may subcontract any or all
                  of the services to be performed  under this Agreement  without
                  the   written   consent   of  First   Bank   (MO).   Any  such
                  subcontractors  shall be  required  to comply  with all of the
                  applicable terms and conditions of this Agreement.

         (B)      The parties agree that, in connection  with the performance of
                  their  obligations  hereunder,   they  will  comply  with  all
                  applicable  Federal,  State, and local laws including the laws
                  and regulations regarding Equal Employment Opportunities.

         (C)      First   Services,  L. P.  agrees  that  the Office  of Thrift 
                  Supervision, FDIC, or other authority will have the authority 
                  and  responsibility  provided to the other regulatory agencies
                  pursuant to the Bank Service Corporation Act,  12 U.S.C.  1867
                  (C)  relating  to service  performed by contract or otherwise.
                  First Services,  L.P., also agrees that its services shall be 
                  subject  to   oversight  by the O.C.C.,  FDIC or state banking
                  departments as may be applicable  under laws and   regulations
                  pertaining   to  First  Bank's (MO)  charter  and  shall,   if
                  applicable,  provide  the     O.T.S.  DistrictDirector  of the
                  district in which the data  processing  center is located  and
                  other state and  federal  agencies  with  a  copy  of   First 
                  Services,  L.P.'s  current  audit and financial statements and
                  a copy of any current third party review report when a review 
                  has been performed.

         (D)      Neither  party  shall be  liable  for any  errors,  delays  or
                  non-performance  due to events beyond its  reasonable  control
                  including,  but not limited to, acts of God,  failure or delay
                  of power or  communications,  changes in law or  regulation or
                  other  acts  of  governmental   authority,   strike,   weather
                  conditions or transpor- tation.

         (E)      All written notices  required to be given under this Agreement
                  shall be sent by Registered or Certified Mail,  Return Receipt
                  Requested,  postage prepaid,  or by confirmed facsimile to the
                  persons  and at the  addresses  listed  below or to such other
                  address or person as a party shall have designated in writing.

                     First Services, L.P.         First Bank (MO)
                     #l First Missouri Center     11901 Olive Blvd.
                     St. Louis, Missouri 63l4l    Creve Coeur, Missouri 63l4l

         (F)      The  failure of either  party to  exercise  in any respect any
                  right  provided for herein shall not be deemed a waiver of any
                  rights.

         (G)      Each  party  acknowledges  that is has  read  this  Agreement,
                  understands  it,  and  agrees  that  it is  the  complete  and
                  exclusive  statement of the Agreement  between the parties and
                  supersedes  and  merges any prior or  simultaneous  proposals,
                  understandings  and all other  agreements  with respect to the
                  subject matter.  This Agreement may not be modified or altered
                  except by a written instrument duly executed by both parties.

         (H)      No  waiver  of any of the  terms  of this  Agreement  shall be
                  effective  unless in writing and signed by the duly authorized
                  representative  of the party charged  therewith.  No waiver of
                  any provision  hereof shall extend to or affect any obligation
                  not  expressly  waived,  impair any rights  consequent on such
                  obligation  or imply a subsequent  waiver of that or any other
                  provision.

         (I)      This Agreement shall be governed by, construed and interpreted
                  in accordance with the laws of the State of Missouri.



<PAGE>



         IN WITNESS  WHEREOF,  the parties have executed this Agreement the date
first above written.


First Bank (MO)                                    First Services, L.P.
11901 Olive Boulevard                              One First Missouri Center
Creve Coeur, Missouri 63141                        St. Louis, Missouri  63141



BY: /s/ John A. Schreiber                         BY: /s/Thomas A. Bangert
-------------------------                         ------------------------
  John A. Schreiber                                  Thomas A. Bangert
 President                                           President




<PAGE>





                                  Attachment 1
                     First Bank - Product And Price Schedule

                                Effective 4/1/97
<TABLE>
<CAPTION>

              DATA PROCESSING

<S>                         <C>                             <C>                     <C>
                            Accounts
                                    DDA                     per account               $0.50
                                    Savings                 per account               $0.50
                                    Time                    per account               $0.50
                                    Loans                   per account               $0.50
                            Transactions                    each                      $0.01
                            Terminal Management             each                      $5.00
                            Branch Data Connection          each                     $500.00
                            ATM Management                  each                     $200.00
                            Telephone Switch Mgmt           each                     $750.00
                            Other Services                  per application          $100.00

              ITEM PROCESSING

                            Proof                           each                      $0.020
                            POD And EFT                     each                      $0.009
                            Inclearing and Transmission     each                      $0.009
                                     DDA                    per account               $0.250
                                     Savings                per account               $0.050
                                     Time                   per account               $0.100

                            Lockbox                         each                      $0.020
                            Branch Courier Route            each, per month           $17.00
                            Mail Services                   per month                $200.00

              DEPOSIT SERVICES
                            Customer Accounts               per account                $0.30
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

Included in Above:
<S>                                                                      <C>   
              Charge Backs                                               CIF Management
              Returns                                                    Exception Item Processing
              Stops                                                      Signature Verification
              Wire Transfers                                             Corporate Analysis
              ACH Incoming                                               Cash Management Support
              ACH Origination                                            FirstLink
              Official Checks                                            Control Disbursement
              Money Orders                                               Balance Reporting
              Savings Bonds                                              Research
              Funds Transfer                                             Adjustments
              B Notices 1099s                                            "Due From" Reconciliation
              Kiting                                                     "Due To" Reconciliation
              Holds                                                      FRB Reconciliation's
              Dormant Accounts                                           Application Balancing
              ATM Settlement                                             Records Management
              Debit Card Settlement                                      Savings Bonds

OTHER SERVICES
              Collection System (Cyber Resources)                        Cash Management System (FirstLink)
              Recovery System (Cyber Resources)                          Commercial Analysis
              Asset/Liability (Bankware)                                 Charge Back System
              Optical System (RVI)                                       Teller Platform (ISC)
              MCIF (OKRA)                                                ATM Support
              Loan Documentation (FTI/CFI)                               General Ledger
              Bank Audit                                                 Fixed Asset Interface
              Accounts Payable Interface                                 Interactive Voice
              Remote Laser Printing                                      Card Management System
              ACH Origination                                            Wire Transfer (Fundtec)
              Organization Profitability (IPS)                           NOW Reclassification
              Loan Tracking (Baker Hill)                                 Retrofit/New Releases
              Credit Scoring (Fair Issac)

</TABLE>


<PAGE>



                                  EXHIBIT 10.9

                                SERVICE AGREEMENT

         This  Service  Agreement  is made and entered into as of the 1st day of
April, 1997, by and between First Services, L.P., a Missouri Limited Partnership
and First Bank & Trust,  a banking  institution  duly  organized and existing by
virtue of the laws of the State of California.

     WHEREAS,  FIRST BANK & TRUST and  FIRSTSERV,  INC.  entered  into a Service
Agreement dated December 8, 1995, as amended; and

     WHEREAS, said Service Agreement was assigned to First Services,  L.P. on or
about April 1, 1997; and

     WHEREAS,  FIRST  SERVICES,  L.P. and FIRST BANK & TRUST desire to amend and
restate said Service Agreement in its entirety.

     NOW,  THEREFORE,  for  and in  consideration  of the  mutual  promises  and
covenants  contained  herein,  and the sum of Ten Dollars ($l0.00) in hand paid,
each to the other, the receipt and sufficiency of which is hereby  acknowledged,
the parties agree as follows:


I.       TERMINATION AND REVOCATION

     The Parties  hereto hereby  revoke,  cancel and hold for naught the Service
Agreement dated December 8, 1995, as amended, and hereby substitute in its place
the Service Agreement herein contained.


II.      SERVICES

         (A)      First  Services,  L.P.  shall  furnish First Bank & Trust data
                  processing and item processing services selected by First Bank
                  & Trust from the Product and Price  Schedule as per Attachment
                  1,  attached  hereto  and  incorporated  herein  by  reference
                  thereto.  Additional  services  may  be  selected  upon  prior
                  written  notice to First  Services,  L.P.  at First  Services,
                  L.P.'s then current list price by executing an amended Summary
                  Page.

         (B)      First  Services,  L.P.  will provide  conversion  and training
                  services  for the fees  specified  from the  Product and Price
                  Schedule  (Attachment  1).  Classroom  training in the use and
                  operation  of the  system for the number of First Bank & Trust
                  personnel  mutually  agreed  upon in the  conversion  planning
                  process  will be  provided  at a  training  facility  mutually
                  agreed upon. Conversion services are those activities designed
                  to transfer the  processing  of First Bank & Trust's data from
                  its present processing company to First Services, L.P.

         (C)      First Services, L.P. will also provide Network Support Service
                  consisting of  communication  line  monitoring  and diagnostic
                  equipment and support personnel to discover,  diagnose, repair
                  or report line problems to the appropriate  telephone company.
                  The fee for this  service is also  listed from the Product and
                  Price Schedule (Attachment 1).

         (D)      First  Services,  L.P.  shall upon request act as First Bank &
                  Trust's designated representative to arrange for the purchase,
                  and  installation  of data lines necessary to access the First
                  Services,  L.P. system.  Where requested,  additional  dial-up
                  lines and  equipment to be utilized as a backup to the regular
                  data lines may also be ordered.  First  Services,  L.P.  shall
                  bill First Bank & Trust for the actual  charges  incurred  for
                  the data lines and for the maintenance of the modems and other
                  interface devices.

         (E)      Processing priorities will be determined by  mutual agreement 
                  of the parties hereto.


III.     TERM

         The term of this  Agreement  shall be twelve (12) months  commencing on
         April 1, 1997. Upon expiration,  the Agreement will automatically renew
         for  successive  terms of twelve (12) months each unless  either  party
         shall have provided  written  notice to the other at least  one-hundred
         eighty (180) days prior to the  expiration of the then current term, of
         its intent not to renew. In the event of  termination,  First Services,
         L.P.  shall  provide  reasonable  time  allowance to allow First Bank &
         Trust to convert to another system.


IV.      SOFTWARE/FIRMWARE

         Unmodified  third  party  software  or  firmware  ("Software")  may  be
         supplied as part of the Agreement.  All such Software shall be provided
         subject to Software License Agreements.


V.       PRICE AND PAYMENT

         (A)      Fees for First  Services,  L.P.'s  services are set forth from
                  the Product and Price Schedule (Attachment 1), including where
                  applicable  minimum monthly charges and payment  schedules for
                  onetime fees.

         (B)      Standard  Fees shall be invoiced  no later than the  fifteenth
                  (15th) of each  month  for the then  current  month.  Terms of
                  payment shall be net cash.
         (C)      The Base  Service  Charge  listed  from the  Product and Price
                  Schedule (Attachment 1) shall not change more than once a year
                  and then only upon six (6) months' prior written  notice.  The
                  fee schedule shall be reviewed  annually to ensure fair market
                  value in  pricing.  Comparisons  will be made  with  peers and
                  other providers of similar services.

         (D)      This above limitation shall not apply to pass-thru expenses. A
                  pass-thru  expense is a charge for goods or  services by First
                  Services,  L.P. on First Bank & Trust's behalf which are to be
                  billed to First Bank & Trust without mark-up.

         (E)      The  fees  listed   from  the   Product  and  Price   Schedule
                  (Attachment  1) do not  include  and  First  Bank &  Trust  is
                  responsible for furnishing  transportation  or transmission of
                  information between First Services,  L.P.'s data center, First
                  Bank  &  Trust's  site  and  any  applicable  clearing  house,
                  regulatory  agency or Federal Reserve Bank. Where First Bank &
                  Trust  has  elected  to  have  First  Services,  L.P.  provide
                  Telecommunication Services, the price for the Services will be
                  provided and billed as a pass-thru expense.

         (F)      Network  Support Service Fees and Local Network Fees are based
                  upon services  rendered from First Services,  L.P.'s premises.
                  Off-premise support will be provided upon First Bank & Trust's
                  request on an as available basis at First Services,  L.P. then
                  current charges for time and materials, plus reasonable travel
                  and living expenses.






<PAGE>



VI.      CLIENT OBLIGATIONS

         (A)      First Bank & Trust shall be solely responsible for the input, 
                  transmission  or delivery of all information and data required
                  by First  Services,  L.P. to  perform  the   services  except 
                  where First Bank & Trust has  retained  First  Services,  L.P.
                  to handle such  responsibilities on its behalf. The data shall
                  be provided in a format and manner approved by First Services,
                  L.P.   First Bank & Trust will  provide at its own  expense or
                  procure  from First  Services,  L.P.  all equipment,  computer
                  software,  communication  lines and interface devices required
                  to access the First  Services,  L.P. System.  If First Bank & 
                  Trust   has  elected  to  provide  such  items  itself,  First
                  Services,  L.P.  shall provide First Bank & Trust with a  list
                  of compatible  equipment and software.

         (B)      First Bank & Trust shall  designate  appropriate  First Bank &
                  Trust personnel for training in the use of the First Services,
                  L.P. System, shall allow First Services,  L.P. access to First
                  Bank  &  Trust's  site  during  normal   business   hours  for
                  conversion  and shall  cooperate  with  First  Services,  L.P.
                  personnel  in  the  conversion  and   implementation   of  the
                  services.

         (C)      First  Bank  &  Trust   shall   comply   with  any   operating
                  instructions  on the use of the First  Services,  L.P.  system
                  provided by First  Services,  L.P.,  shall  review all reports
                  furnished by First Services,  L.P. for accuracy and shall work
                  with First  Services,  L.P.  to  reconcile  any out of balance
                  conditions.   First  Bank  &  Trust  shall  determine  and  be
                  responsible   for  the   authenticity   and  accuracy  of  all
                  information and data submitted to First Services, L.P.

         (D)      First Bank & Trust shall furnish,  or if First Services,  L.P.
                  agrees to so  furnish,  reimburse  First  Services,  L.P.  for
                  courier services applicable to the services requested.


VII.     GENERAL ADMINISTRATION

                  First  Services,  L.P. is continually  reviewing and modifying
         the First  Services,  L.P. system to improve service and to comply with
         federal  government  regulations  applicable  to the data  utilized  in
         providing services to First Bank & Trust. First Services, L.P. reserves
         the right to make changes in the service, including, but not limited to
         operating  procedures,  security  procedures,  the  type  of  equipment
         resident at and the  location of First  Services,  L.P.'s data  center.
         First  Services,  L.P.  will provide  First Bank & Trust at least sixty
         (60) days prior  written  notice of changes in  procedures or reporting
         and at least six (6) months prior written  notice of changes in service
         costs.


VIII.    CLIENT CONFIDENTIAL INFORMATION

         (A)      First  Services,  L.P.  shall  treat all  informatio  and data
                  relating  to First  Bank & Trust   business  provided to First
                  Services,  L.P.  by  First  Bank  &  Trust,   or   information
                  relating to First Bank & Trust's  customers,  as  confidential
                  and  shall  safeguard  First  Bank & Trust's information  with
                  the same degree of care used to protect First Services, L.P.'s
                  confidential   information.  First  Services,  L.P.  and First
                  Bank & Trust agree that  master and  transaction  data  files 
                  are owned by and  constitute  property  of First Bank & Trust.
                  First Bank & Trust's data  and  records  shall  be  subject to
                  regulation   and   examination    by    State   and    Federal
                  supervisory agencies to the same extent as if such information
                  were on First Bank & Trust's premises. First Services, L.P.'s 
                  obligations  under  this   Section   VIII  shall  survive  the
                  termination or expiration of this Agreement.

         (B)      First Services, L.P. shall maintain adequate backup procedures
                  including  storage of  duplicate  record files as necessary to
                  reproduce  First Bank & Trust's records and data. In the event
                  of a service  disruption due to reasons beyond First Services,
                  L.P.'s  control,  First  Services,  L.P.  shall  use  diligent
                  efforts to mitigate the effects of such an occurrence.
<PAGE>



IX.      FIRST SERVICES, L.P. CONFIDENTIAL INFORMATION

         (A)      First  Bank & Trust  shall  not use or  disclose  to any third
                  persons  any   confidential   information   concerning   First
                  Services, L.P. First Services,  L.P. confidential  information
                  is that which  relates  to First  Services,  L.P.'s  software,
                  research,  development,  trade  secrets  or  business  affairs
                  including,  but not  limited to, the terms and  conditions  of
                  this Agreement but does not include  information in the public
                  domain  through no fault of First  Bank & Trust.  First Bank &
                  Trust's  obligations  under this Section IX shall  survive the
                  termination or expiration of this Agreement.

         (B)      First  Services,   L.P.'s  system  contains   information  and
                  computer   software  which  is  proprietary  and  confidential
                  information  of  First  Services,   L.P.,  its  suppliers  and
                  licensees.  First  Bank  &  Trust  agrees  not to  attempt  to
                  circumvent  the devices  employed by First  Services,  L.P. to
                  prevent  unauthorized  access  to the First  Services,  L.P.'s
                  System.


X.       WARRANTIES

         First Services,  L.P. will accurately process First Bank & Trust's work
         provided that First Bank & Trust supplies accurate data and follows the
         procedures  described in First Services,  L.P.'s User Manuals,  notices
         and advises.  First Services,  L.P. personnel will exercise due care in
         the  processing  of First Bank & Trust's work. In the event of an error
         caused by First  Services,  L.P.'s  personnel,  programs or  equipment,
         First  Services,  L.P.  shall  correct  the data and/or  reprocess  the
         affected report at no additional cost to First Bank & Trust.


XI.      LIMITATION OF LIABILITY

         IN NO EVENT SHALL FIRST SERVICES,  L.P. BE LIABLE FOR LOSS OF GOODWILL,
         OR FOR SPECIAL,  INDIRECT,  INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
         FROM FIRST BANK & TRUST'S USE OF FIRST  SERVICES  L.P.'S  SERVICES,  OR
         FIRST  SERVICES,  L.P.'S  SUPPLY OF EQUIPMENT  OR SOFTWARE,  UNDER THIS
         AGREEMENT  REGARDLESS  OF  WHETHER  SUCH  CLAIM  ARISES  IN  TORT OR IN
         CONTRACT.  FIRST SERVICES,  L.P.'S AGGREGATE  LIABILITY FOR ANY AND ALL
         CAUSES OF ACTION RELATING TO SERVICES PERFORMED HEREUNDER OR ANY DAMAGE
         OR LOSS  INCURRED OR SUSTAINED  BY FIRST BANK & TRUST  RELATING TO THIS
         AGREEMENT AND THE SERVICES PERFORMED  HEREUNDER SHALL BE LIMITED TO THE
         AMOUNT OF TOTAL FEES PAID BY FIRST BANK & TRUST TO FIRST SERVICES, L.P.
         IN THE THREE (3) MONTH  PERIOD  PRECEDING  THE DATE THE CLAIM  ACCRUED.
         FIRST SERVICES,  L.P.'S  AGGREGATE  LIABILITY FOR A DEFAULT RELATING TO
         EQUIPMENT  OR  SOFTWARE  SHALL BE LIMITED  TO THE  AMOUNT  PAID FOR THE
         EQUIPMENT OR SOFTWARE.


XII.     PERFORMANCE STANDARDS

         (A)      On-Line  Availability  -  First  Services,  L.P.'s    standard
                  of  performance  shall be  on-line availability  of the system
                  98% of the time that it is scheduled to be so available over a
                  three month period (the "Measurement  Period"). Actual on-line
                  performance will be calculated monthly by comparing the number
                  of hours which the system was scheduled to be  operational  on
                  an  on-line  basis  with  the  number  of  hours, or a portion
                  thereof,  it was actually  operational on an  on-line   basis.
                  Downtime  may  be   caused   by   operator   error,   hardware
                  malfunction  or  failure, or environmental  failures  such as 
                  loss  of  power  or  air  conditioning.   Downtime  caused  by
                  reasons   beyond  First Services, L.P.'s control should not be
                  considered in the statistics.
<PAGE>

         (B)      Report  Availability - First  Services,  L.P.'s   standard  of
                  performance  for report  availability   shall be that, over a 
                  three (3)  month  period,  ninety-five  percent (95%)  of  all
                  Critical Daily Reports shall be available for remote  printing
                  on time without  significant  errors.  A Critical Daily Report
                  shall mean priority group reports which First  Services,  L.P.
                  and First Bank &  Trust  have  mutually  agreed in writing are
                  necessary to properly  account for the previous day's activity
                  and  properly notify First  Bank &  Trust  of  overdraft,  NSF
                  or  return  items.  A  significant  error is one which impairs
                  First  Bank & Trust's  ability  to  properly  account  for the
                  previous   days   activity   and/or  properly    account   for
                  overdraft,  NSF or return  items.  Actual performance  will be
                  calculated  monthly  by  comparing  the total  number of First
                  Bank & Trust   reports  scheduled to  be  available from First
                  Services,  L.P. to the number of reports which were  available
                  on time and without error.

         (C)      Exclusive  Remedy - In the  event that First Services,  L.P.'s
                  performance  fails to meet the    standards  listed  above and
                  such  failure  is  not  the  result  of First  Bank & Trust's 
                  error  or   omission,  First Bank & Trust's sole and exclusive
                  remedy for such default shall be the right to  terminate  this
                  Agreement in accordance with the provisions of this paragraph.
                  In the event   that First Services,  L.P. fails to achieve any
                  Performance  Standards,  alone  or  in combination,   for the 
                  prescribed measurement period, First Bank & Trust shall notify
                  First Services, L.P. of its intent to terminate this agreement
                  if First  Services,  L.P.  fails  to  restore  performance  to
                  the  committed  levels.  First  Services,  L.P.  shall  advise
                  First Bank & Trust  promptly  upon   correction  of the system
                  deficiencies  (in no event  shall  corrective   action  exceed
                  sixty (60)  days from the  notice  date) and  shall   begin an
                  additional measurement  period.  Should  First Services,  L.P.
                  fail to achieve the  required  Performance  Standards   during
                  the remeasurement period,  First Bank & Trust  may  terminate
                  this  Agreement  and  First  Services,  L.P.  shall  cooperate
                  with  First Bank & Trust to  achieve  an  orderly  transition 
                  to First Bank & Trust's replacement processing  system.  First
                  Bank & Trust  may  also  terminate  this  Agreement  if  First
                  Services, L.P.'s  performance for the same standard is  below 
                  the  relevant  performance   standard    for more than two (2)
                  measurement  periods in any  consecutive  twelve  (12)  months
                  or for more than five (5) measurement periods during  the term
                  of this  agreement.  During  the  period of transition,  First
                  Bank & Trust shall pay only such  charges as are  incurred for
                  monthly fees until the date of deconversion.  First  Services,
                  L.P. shall not charge First Bank & Trust for services relating
                  to First Bank & Trust's deconversion.

         (D)      Audit - First  Bank & Trust  shall  have the right to  perform
                  reasonable  audits, at its cost, upon giving written notice to
                  First  Services,  L.P. of its intent to do so. First Services,
                  L.P. shall  provide,  upon request,  financial  information to
                  First Bank & Trust.


XIII.    DISASTER RECOVERY

         (A)      A  Disaster  shall  mean  any  unplanned  interruption  of the
                  operations of or  inaccessibility to the First Services,  L.P.
                  data center which appears in First Services, L.P.s reasonable 
                  judgement   to   require   relocation   of   processing  to an
                  alternative  site.  First Services,  L.P. shall notify   First
                  Bank & Trust as soon as  possible  after it  deems  a service 
                  outage to be a Disaster. First Services,  L.P. shall move the 
                  processing of First Bank & Trust's  standard  on-line services
                  to  an  alternative  processing  center  as expeditiously  as 
                  possible.  First Bank & Trust shall maintain adequate records 
                  of all  transactions during the period of service interruption
                  and shall  have  personnel available to assist First Services 
                  L.P.,  Inc.in implementing  the switch over to the alternative
                  processing  site.  During a disaster,  optional or  on-request
                  services shall be provided by First Services, L.P. only to the
                  extent that there is adequate capacity at the alternate center
                  and  only  after  stabilizing  the  provision  of base on-line
                  services.
<PAGE>

         (B)      First  Services,  L.P.  shall  work with First Bank & Trust to
                  establish a plan for alternative  data  communications  in the
                  event of a disaster.  First Bank & Trust shall be  responsible
                  for  furnishing any  additional  communications  equipment and
                  data lines required under the adopted plan.

         (C)      First Services, L.P. shall test its Disaster Recovery Services
                  Plan by conducting one annual test.  First Bank & Trust agrees
                  to  participate in and assist First  Services,  L.P. with such
                  testing.  Test results will be made  available to First Bank &
                  Trust's regulators,  internal and external auditors, and (upon
                  request) to First Bank & Trust's insurance underwriters.

         (D)      First  Bank & Trust  understands  and  agrees  that the  First
                  Services,  L.P. Disaster Recovery Plan is designed to minimize
                  but not eliminate risks  associated with a disaster  affecting
                  First Services,  L.P.'s data center. First Services, L.P. does
                  not warrant that service will be  uninterrupted  or error free
                  in the  event  of a  disaster.  First  Bank & Trust  maintains
                  responsibility  for adopting a disaster recovery plan relating
                  to disasters affecting First Bank & Trust's facilities and for
                  securing business interruption insurance or other insurance as
                  necessary to properly protect First Bank & Trust's revenues in
                  the event of a disaster.


XIV.     DEFAULT

         (A)      In the event that  First  Bank & Trust is thirty  (30) days in
                  arrears in making any payment required, or in the event of any
                  other material default by either First Services, L.P. or First
                  Bank & Trust  in the  performance  of their  obligations,  the
                  affected  party shall have the right to give written notice to
                  the other of the  default  and its  intent to  terminate  this
                  Agreement stating with reasonable  particularity the nature of
                  the claimed  default.  This Agreement  shall  terminate if the
                  default  has not been cured  within a  reasonable  time with a
                  minimum being thirty (30) days from the effective  date of the
                  notice.

         (B)      Upon the  expiration of this  Agreement,  or its  termination,
                  First Services,  L.P. shall furnish to First Bank & Trust such
                  copies of First  Bank &  Trust's  data  files as First  Bank &
                  Trust may request in machine  readable  format form along with
                  such other  information and assistance as or is reasonable and
                  customary to enable  First Bank & Trust to deconvert  from the
                  First  Services,   L.P.  system.  First  Bank  &  Trust  shall
                  reimburse  First  Services,  L.P. for the  production  of data
                  records and other services at First  Services,  L.P.'s current
                  fees for such services.



<PAGE>



XV.      INSURANCE

         First Services,  L.P. carries Comprehensive General Liability insurance
         with primary limits of two million dollars,  Commercial Crime insurance
         covering Employee  Dishonesty in the amount of fifteen million dollars,
         all-risk  replacement  cost  coverage  on all  equipment  used at First
         Services, L.P.'s data center and Workers Compensation coverage on First
         Services,  L.P. employees wherever located in the United States.  First
         Bank & Trust shall carry  adequate  insurance  to cover  liability  for
         source  documents  while in  transit  and in case of data loss  through
         errors and omissions.


XVI.     GENERAL

         (A)      This   Agreement   is  binding  upon  the  parties  and  their
                  respective successors and permitted assigns. Neither party may
                  assign this  Agreement in whole or in part without the consent
                  of First Bank & Trust and/or First Services,  L.P.,  provided,
                  however, that First Services,  L.P. may subcontract any or all
                  of the services to be performed  under this Agreement  without
                  the  written   consent  of  First  Bank  &  Trust.   Any  such
                  subcontractors  shall be  required  to comply  with all of the
                  applicable terms and conditions of this Agreement.

         (B)      The parties agree that, in connection  with the performance of
                  their  obligations  hereunder,   they  will  comply  with  all
                  applicable  Federal,  State, and local laws including the laws
                  and regulations regarding Equal Employment Opportunities.

         (C)      First  Services,  L.P.  agrees  that  the  Office  of   Thrift
                  Supervision, FDIC, or other authority will have the authority 
                  and responsibility  provided to the other regulatory  agencies
                  pursuant to the Bank Service Corporation  Act,  12 U.S.C. 1867
                  (C)  relating  to service performed  by contract or otherwise.
                  First  Services,  L.P., also agrees that its services shall be
                  subject  to oversight by  the  O.C.C., FDIC  or state banking 
                  departments as may be applicable  under laws and   regulations
                  pertaining to  First Bank & Trusts's  charter and  shall,   if
                  applicable,  provide  the   O.T.S.  District Director  of  the
                  district  in which the data  processing  center is located and
                  other state  and  federal  agencies  with  a  copy  of  First 
                  Services,  L.P.'s  current  audit and financial statements and
                  a copy of any current third party review report when a review 
                  has been performed.

         (D)      Neither  party  shall be  liable  for any  errors,  delays  or
                  non-performance  due to events beyond its  reasonable  control
                  including,  but not limited to, acts of God,  failure or delay
                  of power or  communications,  changes in law or  regulation or
                  other  acts  of  governmental   authority,   strike,   weather
                  conditions or transpor- tation.

         (E)      All written notices  required to be given under this Agreement
                  shall be sent by Registered or Certified Mail,  Return Receipt
                  Requested,  postage prepaid,  or by confirmed facsimile to the
                  persons  and at the  addresses  listed  below or to such other
                  address or person as a party shall have designated in writing.

                   First Services, L.P.               First Bank & Trust
                   #l First Missouri Center           2400 Michelson Drive
                   St. Louis, Missouri 63l4l          Irvine, California 92714

         (F)      The  failure of either  party to  exercise  in any respect any
                  right  provided for herein shall not be deemed a waiver of any
                  rights.

         (G)      Each  party  acknowledges  that is has  read  this  Agreement,
                  understands  it,  and  agrees  that  it is  the  complete  and
                  exclusive  statement of the Agreement  between the parties and
                  supersedes  and  merges any prior or  simultaneous  proposals,
                  understandings  and all other  agreements  with respect to the
                  subject matter.  This Agreement may not be modified or altered
                  except by a written instrument duly executed by both parties.
<PAGE>

         (H)      No  waiver  of any of the  terms  of this  Agreement  shall be
                  effective  unless in writing and signed by the duly authorized
                  representative  of the party charged  therewith.  No waiver of
                  any provision  hereof shall extend to or affect any obligation
                  not  expressly  waived,  impair any rights  consequent on such
                  obligation  or imply a subsequent  waiver of that or any other
                  provision.

         (I)      This Agreement shall be governed by, construed and interpreted
                  in accordance with the laws of the State of Missouri.

         IN WITNESS  WHEREOF,  the parties have executed this Agreement the date
first above written.


First Bank & Trust                                   First Services, L.P.
2400 Michelson Drive                                 One First Missouri Center
Irvine, California 92714                             St. Louis, Missouri  63141



BY:/s/ Fred D. Jensen                                BY:/s/ Thomas A. Bangert
---------------------                                ------------------------
     Fred D. Jensen                                         Thomas A. Bangert
     President                                              President



<PAGE>

<TABLE>
<CAPTION>


                                  Attachment 1
                 First Bank & Trust- Product And Price Schedule

                                Effective 4/1/97

              DATA PROCESSING

                            Accounts
<CAPTION>
<S>                         <C>                             <C>                     <C>  
                                    DDA                     per account               $0.50
                                    Savings                 per account               $0.50
                                    Time                    per account               $0.50
                                    Loans                   per account               $0.50
                            Transactions                    each                      $0.01
                            Terminal Management             each                      $5.00
                            Branch Data Connection          each                     $500.00
                            ATM Management                  each                     $200.00
                            Telephone Switch Mgmt           each                     $750.00
                            Other Services                  per application          $100.00

              ITEM PROCESSING

                            Proof                           each                      $0.020
                            POD And EFT                     each                      $0.009
                            Inclearing and Transmission     each                      $0.009
                                     DDA                    per account               $0.250
                                     Savings                per account               $0.050
                                     Time                   per account               $0.100

                            Lockbox                         each                      $0.020
                            Branch Courier Route            each, per month           $17.00
                            Mail Services                   per month                $200.00

              DEPOSIT SERVICES
                            Customer Accounts               per account            $5,000.00
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

Included in Above:
<S>           <C>                                                        <C>                                           
              Charge Backs                                               CIF Management
              Returns                                                    Exception Item Processing
              Stops                                                      Signature Verification
              Wire Transfers                                             Corporate Analysis
              ACH Incoming                                               Cash Management Support
              ACH Origination                                            FirstLink
              Official Checks                                            Control Disbursement
              Money Orders                                               Balance Reporting
              Savings Bonds                                              Research
              Funds Transfer                                             Adjustments
              B Notices 1099s                                            "Due From" Reconciliation
              Kiting                                                     "Due To" Reconciliation
              Holds                                                      FRB Reconciliation's
              Dormant Accounts                                           Application Balancing
              ATM Settlement                                             Records Management
              Debit Card Settlement                                      Savings Bonds

OTHER SERVICES
              Collection System (Cyber Resources)                        Cash Management System (FirstLink)
              Recovery System (Cyber Resources)                          Commercial Analysis
              Asset/Liability (Bankware)                                 Charge Back System
              Optical System (RVI)                                       Teller Platform (ISC)
              MCIF (OKRA)                                                ATM Support
              Loan Documentation (FTI/CFI)                               General Ledger
              Bank Audit                                                 Fixed Asset Interface
              Accounts Payable Interface                                 Interactive Voice
              Remote Laser Printing                                      Card Management System
              ACH Origination                                            Wire Transfer (Fundtec)
              Organization Profitability (IPS)                           NOW Reclassification
              Loan Tracking (Baker Hill)                                 Retrofit/New Releases
              Credit Scoring (Fair Issac)

</TABLE>


<PAGE>


                                  EXHIBIT 10.10
                                SERVICE AGREEMENT

                                  

         This  Service  Agreement  is made and entered into as of the 1st day of
April, 1997, by and between First Services, L.P., a Missouri Limited Partnership
and BankTEXAS N.A., a banking  institution duly organized and existing by virtue
of the laws of the United State.

          WHEREAS,   BankTEXAS  and  FIRSTSERV,  INC.  entered  into  a  Service
Agreement dated December 8, 1995, as amended; and

          WHEREAS,  said Service Agreement was assigned to First Services,  L.P.
on or about April 1, 1997; and

          WHEREAS,  FIRST  SERVICES,  L.P.  and  BankTEXAS  desire  to amend and
restate said Service Agreement in its entirety.

         NOW,  THEREFORE,  for and in  consideration  of the mutual promises and
covenants  contained  herein,  and the sum of Ten Dollars ($l0.00) in hand paid,
each to the other, the receipt and sufficiency of which is hereby  acknowledged,
the parties agree as follows:


I.       TERMINATION AND REVOCATION

         The  Parties  hereto  hereby  revoke,  cancel  and hold for  naught the
Service  Agreement dated December 8, 1995, as amended,  and hereby substitute in
its place the Service Agreement herein contained.


II.      SERVICES

(A)       First Services,  L.P. shall furnish BankTEXAS data processing and item
          processing  services  selected by BankTEXAS from the Product and Price
          Schedule as per Attachment 1, attached hereto and incorporated  herein
          by reference thereto.  Additional  services may be selected upon prior
          written notice to First Services, L.P. at First Services,  L.P.'s then
          current list price by executing an amended Summary Page.

(B)       First Services, L.P. will provide conversion and training services for
          the fees specified from the Product and Price Schedule (Attachment 1).
          Classroom  training  in the use and  operation  of the  system for the
          number of BankTEXAS  personnel  mutually agreed upon in the conversion
          planning  process  will be  provided at a training  facility  mutually
          agreed  upon.  Conversion  services are those  activities  designed to
          transfer  the  processing  of   BankTEXAS's   data  from  its  present
          processing company to First Services, L.P.

(C)       First  Services,  L.P.  will  also  provide  Network  Support  Service
          consisting of communication  line monitoring and diagnostic  equipment
          and support  personnel  to discover,  diagnose,  repair or report line
          problems  to the  appropriate  telephone  company.  The fee  for  this
          service is also listed from the Product and Price Schedule (Attachment
          1).

(D)       First Services,  L.P. shall upon request act as BankTEXAS's designated
          representative  to arrange for the purchase,  and installation of data
          lines  necessary  to access the First  Services,  L.P.  system.  Where
          requested,  additional dial-up lines and equipment to be utilized as a
          backup to the regular data lines may also be ordered.  First Services,
          L.P. shall bill BankTEXAS for the actual charges incurred for the data
          lines  and for the  maintenance  of the  modems  and  other  interface
          devices.

                  (E)  Processing   priorities  will  be  determined  by  mutual
agreement of the parties hereto.


III.              TERM

         The term of this  Agreement  shall be twelve (12) months  commencing on
         April 1, 1997. Upon expiration,  the Agreement will automatically renew
         for  successive  terms of twelve (12) months each unless  either  party
         shall have provided  written  notice to the other at least  one-hundred
         eighty (180) days prior to the  expiration of the then current term, of
         its intent not to renew. In the event of  termination,  First Services,
         L.P.  shall provide  reasonable  time  allowance to allow  BankTEXAS to
         convert to another system.


IV.      SOFTWARE/FIRMWARE

         Unmodified  third  party  software  or  firmware  ("Software")  may  be
         supplied as part of the Agreement.  All such Software shall be provided
         subject to Software License Agreements.


V.       PRICE AND PAYMENT

(A)       Fees for  First  Services,  L.P.'s  services  are set  forth  from the
          Product and Price Schedule  (Attachment 1), including where applicable
          minimum monthly charges and payment schedules for onetime fees.

(B)       Standard Fees shall be invoiced no later than the fifteenth  (15th) of
          each month for the then current  month.  Terms of payment shall be net
          cash.  (C) The Base Service  Charge  listed from the Product and Price
          Schedule  (Attachment  1) shall not  change  more than once a year and
          then only upon six (6) months' prior written notice.  The fee schedule
          shall be reviewed  annually  to ensure  fair market  value in pricing.
          Comparisons  will be made with  peers and other  providers  of similar
          services.

(D)       This  above  limitation  shall  not  apply to  pass-thru  expenses.  A
          pass-thru expense is a charge for goods or services by First Services,
          L.P. on BankTEXAS's behalf which are to be billed to BankTEXAS without
          mark-up.

(E)       The fees listed from the Product and Price Schedule  (Attachment 1) do
          not include and BankTEXAS is responsible for furnishing transportation
          or  transmission of information  between First  Services,  L.P.'s data
          center, BankTEXAS's site and any applicable clearing house, regulatory
          agency or Federal  Reserve Bank.  Where  BankTEXAS has elected to have
          First Services, L.P. provide Telecommunication Services, the price for
          the Services will be provided and billed as a pass-thru expense.

(F)       Network  Support  Service  Fees and Local  Network Fees are based upon
          services  rendered from First Services,  L.P.'s premises.  Off-premise
          support will be provided upon  BankTEXAS's  request on an as available
          basis  at First  Services,  L.P.  then  current  charges  for time and
          materials, plus reasonable travel and living expenses.


VI.      CLIENT OBLIGATIONS

(A)       BankTEXAS shall be solely  responsible for the input,  transmission or
          delivery of all information and data required by First Services,  L.P.
          to perform the services  except  where  BankTEXAS  has retained  First
          Services, L.P. to handle such responsibilities on its behalf. The data
          shall be provided in a format and manner  approved by First  Services,
          L.P.  BankTEXAS  will provide at its own expense or procure from First
          Services, L.P. all equipment,  computer software,  communication lines
          and  interface  devices  required to access the First  Services,  L.P.
          System.  If BankTEXAS has elected to provide such items itself,  First
          Services,  L.P.  shall  provide  BankTEXAS  with a list of  compatible
          equipment and software.

(B)       BankTEXAS shall designate appropriate BankTEXAS personnel for training
          in the use of the First  Services,  L.P.  System,  shall  allow  First
          Services, L.P. access to BankTEXAS's site during normal business hours
          for conversion and shall cooperate with First Services, L.P. personnel
          in the conversion and implementation of the services.

(C)       BankTEXAS  shall comply with any operating  instructions on the use of
          the First Services,  L.P.  system  provided by First  Services,  L.P.,
          shall  review  all  reports  furnished  by First  Services,  L.P.  for
          accuracy and shall work with First Services, L.P. to reconcile any out
          of balance  conditions.  BankTEXAS  shall determine and be responsible
          for  the  authenticity  and  accuracy  of  all  information  and  data
          submitted to First Services, L.P.

(D)       BankTEXAS  shall  furnish,  or if First  Services,  L.P.  agrees to so
          furnish,   reimburse  First  Services,   L.P.  for  courier   services
          applicable to the services requested.


VII.     GENERAL ADMINISTRATION

          First Services,  L.P. is continually reviewing and modifying the First
Services,  L.P. system to improve service and to comply with federal  government
regulations  applicable to the data utilized in providing services to BankTEXAS.
First  Services,  L.P.  reserves  the  right  to make  changes  in the  service,
including,  but not limited to operating  procedures,  security procedures,  the
type of equipment  resident at and the location of First  Services,  L.P.'s data
center.  First  Services,  L.P. will provide  BankTEXAS at least sixty (60) days
prior written  notice of changes in procedures or reporting and at least six (6)
months prior written notice of changes in service costs.


VIII.    CLIENT CONFIDENTIAL INFORMATION

(A)       First Services,  L.P. shall treat all information and data relating to
          BankTEXAS business provided to First Services,  L.P. by BankTEXAS,  or
          information  relating to BankTEXAS's  customers,  as confidential  and
          shall safeguard  BankTEXAS's  information with the same degree of care
          used to protect First Services, L.P.'s confidential information. First
          Services,  L.P. and BankTEXAS agree that master and  transaction  data
          files are owned by and constitute  property of BankTEXAS.  BankTEXAS's
          data and records shall be subject to  regulation  and  examination  by
          State and Federal  supervisory  agencies to the same extent as if such
          information  were on  BankTEXAS's  premises.  First  Services,  L.P.'s
          obligations  under this Section VIII shall survive the  termination or
          expiration of this Agreement.

(B)       First  Services,   L.P.  shall  maintain  adequate  backup  procedures
          including  storage of duplicate record files as necessary to reproduce
          BankTEXAS's records and data. In the event of a service disruption due
          to reasons beyond First Services, L.P.'s control, First Services, L.P.
          shall  use  diligent  efforts  to  mitigate  the  effects  of  such an
          occurrence.



IX.      FIRST SERVICES, L.P. CONFIDENTIAL INFORMATION

(A)       BankTEXAS  shall  not  use  or  disclose  to  any  third  persons  any
          confidential   information  concerning  First  Services,   L.P.  First
          Services, L.P. confidential information is that which relates to First
          Services,  L.P.'s software,  research,  development,  trade secrets or
          business  affairs  including,  but  not  limited  to,  the  terms  and
          conditions of this  Agreement but does not include  information in the
          public domain through no fault of BankTEXAS.  BankTEXAS's  obligations
          under this Section IX shall survive the  termination  or expiration of
          this Agreement.

(B)       First  Services,  L.P.'s  system  contains  information  and  computer
          software which is proprietary  and  confidential  information of First
          Services,  L.P., its suppliers and licensees.  BankTEXAS agrees not to
          attempt to circumvent the devices employed by First Services,  L.P. to
          prevent unauthorized access to the First Services, L.P.'s System.


X.       WARRANTIES

         First Services,  L.P. will accurately process BankTEXAS's work provided
         that  BankTEXAS  supplies  accurate  data and  follows  the  procedures
         described in First Services,  L.P.'s User Manuals, notices and advises.
         First Services, L.P. personnel will exercise due care in the processing
         of BankTEXAS's work. In the event of an error caused by First Services,
         L.P.'s  personnel,  programs or equipment,  First Services,  L.P. shall
         correct the data and/or  reprocess the affected report at no additional
         cost to BankTEXAS.


XI.      LIMITATION OF LIABILITY

         IN NO EVENT SHALL FIRST SERVICES,  L.P. BE LIABLE FOR LOSS OF GOODWILL,
         OR FOR SPECIAL,  INDIRECT,  INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
         FROM  BANKTEXAS'S  USE OF  FIRST  SERVICES  L.P.'S  SERVICES,  OR FIRST
         SERVICES,  L.P.'S SUPPLY OF EQUIPMENT OR SOFTWARE, UNDER THIS AGREEMENT
         REGARDLESS  OF WHETHER SUCH CLAIM ARISES IN TORT OR IN CONTRACT.  FIRST
         SERVICES,  L.P.'S AGGREGATE  LIABILITY FOR ANY AND ALL CAUSES OF ACTION
         RELATING TO SERVICES PERFORMED HEREUNDER OR ANY DAMAGE OR LOSS INCURRED
         OR SUSTAINED BY BANKTEXAS  RELATING TO THIS  AGREEMENT AND THE SERVICES
         PERFORMED  HEREUNDER  SHALL BE LIMITED TO THE AMOUNT OF TOTAL FEES PAID
         BY  BANKTEXAS  TO FIRST  SERVICES,  L.P. IN THE THREE (3) MONTH  PERIOD
         PRECEDING THE DATE THE CLAIM ACCRUED. FIRST SERVICES,  L.P.'S AGGREGATE
         LIABILITY  FOR A DEFAULT  RELATING TO  EQUIPMENT  OR SOFTWARE  SHALL BE
         LIMITED TO THE AMOUNT PAID FOR THE EQUIPMENT OR SOFTWARE.


XII.              PERFORMANCE STANDARDS

(A)       On-Line Availability - First Services,  L.P.'s standard of performance
          shall be on-line availability of the system 98% of the time that it is
          scheduled  to  be  so  available   over  a  three  month  period  (the
          "Measurement  Period").  Actual on-line performance will be calculated
          monthly  by  comparing  the  number  of hours  which  the  system  was
          scheduled  to be  operational  on an on-line  basis with the number of
          hours, or a portion thereof, it was actually operational on an on-line
          basis.  Downtime may be caused by operator error, hardware malfunction
          or failure,  or  environmental  failures  such as loss of power or air
          conditioning. Downtime caused by reasons beyond First Services, L.P.'s
          control should not be considered in the statistics.

(B)       Report  Availability - First Services,  L.P.'s standard of performance
          for report  availability shall be that, over a three (3) month period,
          ninety-five  percent  (95%) of all  Critical  Daily  Reports  shall be
          available for remote printing on time without  significant  errors.  A
          Critical  Daily Report shall mean  priority  group reports which First
          Services,  L.P.  and  BankTEXAS  have  mutually  agreed in writing are
          necessary  to properly  account for the  previous  day's  activity and
          properly  notify  BankTEXAS  of  overdraft,  NSF or  return  items.  A
          significant error is one which impairs BankTEXAS's ability to properly
          account for the previous days  activity  and/or  properly  account for
          overdraft,  NSF or return items. Actual performance will be calculated
          monthly by comparing the total number of BankTEXAS  reports  scheduled
          to be  available  from First  Services,  L.P. to the number of reports
          which were available on time and without error.

(C)       Exclusive   Remedy  -  In  the  event  that  First  Services,   L.P.'s
          performance  fails to meet the standards listed above and such failure
          is not the result of BankTEXAS's  error or omission,  BankTEXAS's sole
          and exclusive  remedy for such default shall be the right to terminate
          this Agreement in accordance with the provisions of this paragraph. In
          the event that First  Services,  L.P. fails to achieve any Performance
          Standards,  alone or in  combination,  for the prescribed  measurement
          period,  BankTEXAS shall notify First Services,  L.P. of its intent to
          terminate  this  agreement if First  Services,  L.P.  fails to restore
          performance to the committed levels. First Services, L.P. shall advise
          BankTEXAS  promptly upon correction of the system  deficiencies (in no
          event shall  corrective  action exceed sixty (60) days from the notice
          date) and shall begin an additional  measurement period.  Should First
          Services,  L.P.  fail to achieve the  required  Performance  Standards
          during  the  remeasurement   period,   BankTEXAS  may  terminate  this
          Agreement and First  Services,  L.P. shall cooperate with BankTEXAS to
          achieve an orderly  transition to BankTEXAS's  replacement  processing
          system. BankTEXAS may also terminate this Agreement if First Services,
          L.P.'s  performance  for the  same  standard  is  below  the  relevant
          performance  standard for more than two (2) measurement periods in any
          consecutive  twelve (12) months or for more than five (5)  measurement
          periods  during  the term of this  agreement.  During  the  period  of
          transition,  BankTEXAS shall pay only such charges as are incurred for
          monthly  fees until the date of  deconversion.  First  Services,  L.P.
          shall not  charge  BankTEXAS  for  services  relating  to  BankTEXAS's
          deconversion.

                  (D)  Audit  -  BankTEXAS  shall  have  the  right  to  perform
                  reasonable  audits, at its cost, upon giving written notice to
                  First  Services,  L.P. of its intent to do so. First Services,
                  L.P. shall  provide,  upon request,  financial  information to
                  BankTEXAS.


XIII.    DISASTER RECOVERY

(A)       A Disaster shall mean any unplanned  interruption of the operations of
          or  inaccessibility  to the First  Services,  L.P.  data center  which
          appears in First  Services,  L.P.'s  reasonable  judgement  to require
          relocation of processing to an alternative site. First Services,  L.P.
          shall notify  BankTEXAS  as soon as possible  after it deems a service
          outage  to  be  a  Disaster.  First  Services,  L.P.  shall  move  the
          processing of BankTEXAS's  standard on-line services to an alternative
          processing  center  as  expeditiously  as  possible.  BankTEXAS  shall
          maintain  adequate  records of all  transactions  during the period of
          service  interruption  and shall have  personnel  available  to assist
          First  Services  L.P.,  Inc.  in  implementing  the switch over to the
          alternative processing site. During a disaster, optional or on-request
          services shall be provided by First Services,  L.P. only to the extent
          that there is adequate capacity at the alternate center and only after
          stabilizing the provision of base on-line services.

(B)       First Services, L.P. shall work with BankTEXAS to establish a plan for
          alternative data communications in the event of a disaster.  BankTEXAS
          shall be responsible  for  furnishing  any  additional  communications
          equipment and data lines required under the adopted plan.

(C)       First Services, L.P. shall test its Disaster Recovery Services Plan by
          conducting  one annual test.  BankTEXAS  agrees to  participate in and
          assist First  Services,  L.P. with such testing.  Test results will be
          made  available  to  BankTEXAS's  regulators,  internal  and  external
          auditors, and (upon request) to BankTEXAS's insurance underwriters.

(D)       BankTEXAS  understands  and  agrees  that  the  First  Services,  L.P.
          Disaster Recovery Plan is designed to minimize but not eliminate risks
          associated  with a disaster  affecting  First  Services,  L.P.'s  data
          center.  First  Services,  L.P.  does not warrant that service will be
          uninterrupted  or error  free in the  event of a  disaster.  BankTEXAS
          maintains   responsibility  for  adopting  a  disaster  recovery  plan
          relating  to  disasters  affecting  BankTEXAS's   facilities  and  for
          securing  business  interruption   insurance  or  other  insurance  as
          necessary to properly protect  BankTEXAS's  revenues in the event of a
          disaster.

XIV.     DEFAULT

(A)       In the event that  BankTEXAS  is thirty (30) days in arrears in making
          any payment required, or in the event of any other material default by
          either First  Services,  L.P. or BankTEXAS in the performance of their
          obligations,  the affected  party shall have the right to give written
          notice to the other of the  default and its intent to  terminate  this
          Agreement  stating  with  reasonable  particularity  the nature of the
          claimed default. This Agreement shall terminate if the default has not
          been cured within a reasonable  time with a minimum  being thirty (30)
          days from the effective date of the notice.

(B)       Upon the  expiration  of this  Agreement,  or its  termination,  First
          Services,  L.P.  shall furnish to BankTEXAS such copies of BankTEXAS's
          data files as BankTEXAS  may request in machine  readable  format form
          along with such other  information  and assistance as or is reasonable
          and  customary  to  enable  BankTEXAS  to  deconvert  from  the  First
          Services, L.P. system.  BankTEXAS shall reimburse First Services, L.P.
          for the  production  of data  records  and  other  services  at  First
          Services, L.P.'s current fees for such services.

XV.      INSURANCE

         First Services,  L.P. carries Comprehensive General Liability insurance
         with primary limits of two million dollars,  Commercial Crime insurance
         covering Employee  Dishonesty in the amount of fifteen million dollars,
         all-risk  replacement  cost  coverage  on all  equipment  used at First
         Services, L.P.'s data center and Workers Compensation coverage on First
         Services,  L.P.  employees  wherever  located  in  the  United  States.
         BankTEXAS shall carry adequate  insurance to cover liability for source
         documents  while in transit and in case of data loss through errors and
         omissions.


XVI.              GENERAL

(A)       This  Agreement  is  binding  upon the  parties  and their  respective
          successors  and  permitted  assigns.  Neither  party may  assign  this
          Agreement in whole or in part without the consent of BankTEXAS  and/or
          First Services, L.P., provided, however, that First Services, L.P. may
          subcontract  any or all of the  services  to be  performed  under this
          Agreement   without  the  written  consent  of  BankTEXAS.   Any  such
          subcontractors  shall be required to comply with all of the applicable
          terms and conditions of this Agreement.

(B)       The parties agree that, in connection  with the  performance  of their
          obligations  hereunder,  they will comply with all applicable Federal,
          State,  and local laws  including the laws and  regulations  regarding
          Equal Employment Opportunities.

(C)       First  Services,  L.P.  agrees that the Office of Thrift  Supervision,
          FDIC, or other  authority  will have the authority and  responsibility
          provided to the other regulatory agencies pursuant to the Bank Service
          Corporation Act, 12 U.S.C.  1867 (C) relating to service  performed by
          contract or  otherwise.  First  Services,  L.P.,  also agrees that its
          services  shall be subject to oversight  by the O.C.C.,  FDIC or state
          banking  departments as may be applicable  under laws and  regulations
          pertaining to BankTEXASs's  charter and shall, if applicable,  provide
          the  O.T.S.  DistrictDirector  of  the  district  in  which  the  data
          processing center is located and other state and federal agencies with
          a  copy  of  First  Services,   L.P.'s  current  audit  and  financial
          statements  and a copy of any current third party review report when a
          review has been performed.

(D)       Neither   party   shall  be   liable   for  any   errors,   delays  or
          non-performance due to events beyond its reasonable control including,
          but not  limited  to,  acts of God,  failure  or  delay  of  power  or
          communications,  changes  in  law  or  regulation  or  other  acts  of
          governmental  authority,   strike,  weather  conditions  or  transpor-
          tation.

(E)       All written notices required to be given under this Agreement shall be
          sent by  Registered  or  Certified  Mail,  Return  Receipt  Requested,
          postage prepaid,  or by confirmed  facsimile to the persons and at the
          addresses  listed below or to such other  address or person as a party
          shall have designated in writing.

            First Services, L.P.                    BankTEXAS
            #l First Missouri Center                8820 Westheimer
            St. Louis, Missouri 63l4l               Houston, Texas 77063

(F)       The  failure of either  party to  exercise  in any  respect  any right
          provided for herein shall not be deemed a waiver of any rights.

                  (G) Each party  acknowledges  that is has read this Agreement,
                  understands  it,  and  agrees  that  it is  the  complete  and
                  exclusive  statement of the Agreement  between the parties and
                  supersedes  and  merges any prior or  simultaneous  proposals,
                  understandings  and all other  agreements  with respect to the
                  subject matter.  This Agreement may not be modified or altered
                  except by a written instrument duly executed by both parties.

                  (H) No waiver of any of the terms of this  Agreement  shall be
                  effective  unless in writing and signed by the duly authorized
                  representative  of the party charged  therewith.  No waiver of
                  any provision  hereof shall extend to or affect any obligation
                  not  expressly  waived,  impair any rights  consequent on such
                  obligation  or imply a subsequent  waiver of that or any other
                  provision.

                  (I)  This  Agreement  shall  be  governed  by,  construed  and
                  interpreted  in  accordance  with  the  laws of the  State  of
                  Missouri.

         IN WITNESS  WHEREOF,  the parties have executed this Agreement the date
first above written.


BankTEXAS                                            First Services, L.P.
8820 Westheimer                                      One First Missouri Center
Houston, Texas 77063                                 St. Louis, Missouri  63141



BY:/s/ David W. Weaver                               BY:/s/ Thomas A. Bangert
     David Weaver                                    Thomas A. Bangert
         President                                   President


                               


<PAGE>

                                  Attachment 1
                     BankTEXAS - Product And Price Schedule

                                Effective 4/1/97
<TABLE>
<CAPTION>

              DATA PROCESSING

                            Accounts
<S>                         <C>                            <C>                       <C>  
                                    DDA                     per account               $0.50
                                    Savings                 per account               $0.50
                                    Time                    per account               $0.50
                                    Loans                   per account               $0.50
                            Transactions                    each                      $0.01
                            Terminal Management             each                      $5.00
                            Branch Data Connection          each                     $500.00
                            ATM Management                  each                     $200.00
                            Telephone Switch Mgmt           each                     $750.00
                            Other Services                  per application          $100.00

              ITEM PROCESSING

                            Proof                           each                      $0.020
                            POD And EFT                     each                      $0.009
                            Inclearing and Transmission     each                      $0.009
                                     DDA                    per account               $0.250
                                     Savings                per account               $0.050
                                     Time                   per account               $0.020
                                     Loan                                             $0.100


              DEPOSIT SERVICES
                            Customer Accounts               per account                $0.30
</TABLE>

<PAGE>




Included in Above:
<TABLE>
<CAPTION>

<S>           <C>                                                        <C>
              Charge Backs                                               CIF Management
              Returns                                                    Exception Item Processing
              Stops                                                      Signature Verification
              Wire Transfers                                             Corporate Analysis
              ACH Incoming                                               Cash Management Support
              ACH Origination                                            FirstLink
              Official Checks                                            Control Disbursement
              Money Orders                                               Balance Reporting
              Savings Bonds                                              Research
              Funds Transfer                                             Adjustments
              B Notices 1099s                                            "Due From" Reconciliation
              Kiting                                                     "Due To" Reconciliation
              Holds                                                      FRB Reconciliation's
              Dormant Accounts                                           Application Balancing
              ATM Settlement                                             Records Management
              Debit Card Settlement                                      Savings Bonds

OTHER SERVICES
              Collection System (Cyber Resources)                        Cash Management System (FirstLink)
              Recovery System (Cyber Resources)                          Commercial Analysis
              Asset/Liability (Bankware)                                 Charge Back System
              Optical System (RVI)                                       Teller Platform (ISC)
              MCIF (OKRA)                                                ATM Support
              Loan Documentation (FTI/CFI)                               General Ledger
              Bank Audit                                                 Fixed Asset Interface
              Accounts Payable Interface                                 Interactive Voice
              Remote Laser Printing                                      Card Management System
              ACH Origination                                            Wire Transfer (Fundtec)
              Organization Profitability (IPS)                           NOW Reclassification
              Loan Tracking (Baker Hill)                                 Retrofit/New Releases
              Credit Scoring (Fair Issac)
</TABLE>

<PAGE>


                                  EXHIBIT 10.11


                                SERVICE AGREEMENT

         This  Service  Agreement  is made and entered into as of the 1st day of
April, 1997, by and between First Services, L.P., a Missouri Limited Partnership
and Sunrise Bank, a banking institution duly organized and existing by virtue of
the laws of the State of California.

          WHEREAS,  SUNRISE  BANK and  FIRSTSERV,  Inc.  entered  into a Service
Agreement dated November 21, 1996;

          WHEREAS,  said Service Agreement was assigned to First Services,  L.P.
on or about April 1, 1997; and

          WHEREAS,  FIRST  SERVICES,  L.P.  and SUNRISE BANK desire to amend and
restate said Service Agreement in its entirety.

         NOW,  THEREFORE,  for and in  consideration  of the mutual promises and
covenants  contained  herein,  and the sum of Ten Dollars ($l0.00) in hand paid,
each to the other, the receipt and sufficiency of which is hereby  acknowledged,
the parties agree as follows:


I.       TERMINATION AND REVOCATION

         The  Parties  hereto  hereby  revoke,  cancel  and hold for  naught the
Service  Agreement  dated November 21, 1996, and hereby  substitute in its place
the Service Agreement herein contained.


II.      SERVICES

         (A)      First   Services,   L.P.  shall  furnish   Sunrise  Bank  data
                  processing and item  processing  services  selected by Sunrise
                  Bank from the Product and Price  Schedule as per Attachment 1,
                  attached hereto and incorporated  herein by reference thereto.
                  Additional  services may be selected upon prior written notice
                  to First Services, L.P. at First Services, L.P.'s then current
                  list price by executing an amended Summary Page.

         (B)      First  Services,  L.P.  will provide  conversion  and training
                  services  for the fees  specified  from the  Product and Price
                  Schedule  (Attachment  1).  Classroom  training in the use and
                  operation  of the  system  for  the  number  of  Sunrise  Bank
                  personnel  mutually  agreed  upon in the  conversion  planning
                  process  will be  provided  at a  training  facility  mutually
                  agreed upon. Conversion services are those activities designed
                  to transfer  the  processing  of Sunrise  Bank's data from its
                  present processing company to First Services, L.P.

         (C)      First Services, L.P. will also provide Network Support Service
                  consisting of  communication  line  monitoring  and diagnostic
                  equipment and support personnel to discover,  diagnose, repair
                  or report line problems to the appropriate  telephone company.
                  The fee for this  service is also  listed from the Product and
                  Price Schedule (Attachment 1).

         (D)      First Services,  L.P. shall upon request act as Sunrise Bank's
                  designated  representative  to arrange for the  purchase,  and
                  installation  of data  lines  necessary  to  access  the First
                  Services,  L.P. system.  Where requested,  additional  dial-up
                  lines and  equipment to be utilized as a backup to the regular
                  data lines may also be ordered.  First  Services,  L.P.  shall
                  bill Sunrise Bank for the actual charges incurred for the data
                  lines  and  for  the  maintenance  of  the  modems  and  other
                  interface devices.

         (E)      Processing priorities will be determined by  mutual  agreement
                  of the parties hereto.


III.     TERM

         The term of this  Agreement  shall be twelve (12) months  commencing on
         April 1, 1997. Upon expiration,  the Agreement will automatically renew
         for  successive  terms of twelve (12) months each unless  either  party
         shall have provided  written  notice to the other at least  one-hundred
         eighty (180) days prior to the  expiration of the then current term, of
         its intent not to renew. In the event of  termination,  First Services,
         L.P. shall provide  reasonable  time allowance to allow Sunrise Bank to
         convert to another system.


IV.      SOFTWARE/FIRMWARE

         Unmodified  third  party  software  or  firmware  ("Software")  may  be
         supplied as part of the Agreement.  All such Software shall be provided
         subject to Software License Agreements.


V.       PRICE AND PAYMENT

         (A)      Fees for First  Services,  L.P.'s  services are set forth from
                  the Product and Price Schedule (Attachment 1), including where
                  applicable  minimum monthly charges and payment  schedules for
                  onetime fees.

         (B)      Standard  Fees shall be invoiced  no later than the  fifteenth
                  (15th) of each  month  for the then  current  month.  Terms of
                  payment shall be net cash.

         (C)      The Base  Service  Charge  listed  from the  Product and Price
                  Schedule (Attachment 1) shall not change more than once a year
                  and then only upon six (6) months' prior written  notice.  The
                  fee schedule shall be reviewed  annually to ensure fair market
                  value in  pricing.  Comparisons  will be made  with  peers and
                  other providers of similar services.

         (D)      This above limitation shall not apply to pass-thru expenses. A
                  pass-thru  expense is a charge for goods or  services by First
                  Services, L.P. on Sunrise Bank's behalf which are to be billed
                  to Sunrise Bank without mark-up.

         (E)      The  fees  listed   from  the   Product  and  Price   Schedule
                  (Attachment  1) do not include and Sunrise Bank is responsible
                  for furnishing  transportation  or transmission of information
                  between First  Services,  L.P.'s data center,  Sunrise  Bank's
                  site and any applicable  clearing house,  regulatory agency or
                  Federal  Reserve Bank.  Where Sunrise Bank has elected to have
                  First Services, L.P. provide  Telecommunication  Services, the
                  price  for the  Services  will be  provided  and  billed  as a
                  pass-thru expense.

         (F)      Network  Support Service Fees and Local Network Fees are based
                  upon services  rendered from First Services,  L.P.'s premises.
                  Off-premise  support  will be  provided  upon  Sunrise  Bank's
                  request on an as available basis at First Services,  L.P. then
                  current charges for time and materials, plus reasonable travel
                  and living expenses.


VI.      CLIENT OBLIGATIONS

         (A)      Sunrise  Bank  shall  be  solely  responsible  for the  input,
                  transmission or delivery of all information and data  required
                  by  First  Services,  L.P. to  perform  the  services  except 
                  where Sunrise Bank has retained First Services, L.P. to handle
                  such   responsibilities   on  its  behalf. The  data  shall be
                  provided  in a format and manner  approved by First  Services,
                  L.P. Sunrise Bank will  provide at its own  expense or procure
                  from First  Services,  L.P. all  equipment, computer software,
                  communication lines and interface devices  required  to access
                  the First Services,  L.P. System. If Sunrise Bank has elected 
                  to provide  such  items  itself,  First Services,  L.P. shall 
                  provide Sunrise Bank with a list of compatible  equipment and 
                  software.

         (B)      Sunrise  Bank  shall   designate   appropriate   Sunrise  Bank
                  personnel for training in the use of the First Services,  L.P.
                  System,  shall allow First  Services,  L.P.  access to Sunrise
                  Bank's site during normal  business  hours for  conversion and
                  shall  cooperate with First  Services,  L.P.  personnel in the
                  conversion and implementation of the services.

         (C)      Sunrise Bank shall comply with any operating  instructions  on
                  the use of the First  Services,  L.P. system provided by First
                  Services,  L.P.,  shall review all reports  furnished by First
                  Services,   L.P.  for  accuracy  and  shall  work  with  First
                  Services,  L.P. to  reconcile  any out of balance  conditions.
                  Sunrise  Bank  shall  determine  and be  responsible  for  the
                  authenticity   and  accuracy  of  all   information  and  data
                  submitted to First Services, L.P.

         (D)      Sunrise Bank shall furnish, or if First Services,  L.P. agrees
                  to so furnish,  reimburse  First  Services,  L.P.  for courier
                  services applicable to the services requested.


VII.     GENERAL ADMINISTRATION

                  First  Services,  L.P. is continually  reviewing and modifying
         the First  Services,  L.P. system to improve service and to comply with
         federal  government  regulations  applicable  to the data  utilized  in
         providing  services to Sunrise Bank. First Services,  L.P. reserves the
         right to make  changes in the  service,  including,  but not limited to
         operating  procedures,  security  procedures,  the  type  of  equipment
         resident at and the  location of First  Services,  L.P.'s data  center.
         First Services, L.P. will provide Sunrise Bank at least sixty (60) days
         prior written notice of changes in procedures or reporting and at least
         six (6) months prior written notice of changes in service costs.


VIII.    CLIENT CONFIDENTIAL INFORMATION

         (A)      First  Services,  L.P.  shall treat all  information and data 
                  relating to Sunrise Bank business provided to First  Services,
                  L.P. by  Sunrise Bank,  or  information  relating  to  Sunrise
                  Bank's customers,  as confidential and shall safeguard Sunrise
                  Bank's  information  with  the  same  degree  of care used  to
                  protect  First  Services,  L.P.'s  confidential   information.
                  First Services,  L.P.  and  Sunrise  Bank  agree  that  master
                  and  tra \nsaction  data files are  owned  by  and  constitute
                  property of Sunrise  Bank.  Sunrise  Bank  data  and  records 
                  shall be subject to  regulation and  examination by State and 
                  Federal  supervisory  agencies to the same extent as  if  such
                  information were on Sunrise Bank's premises.  First  Services,
                  L.P.'s  obligations  under this Section VIII shall survive the
                  termination or expiration of this Agreement.

         (B)      First Services, L.P. shall maintain adequate backup procedures
                  including  storage of  duplicate  record files as necessary to
                  reproduce  Sunrise  Bank's records and data. In the event of a
                  service  disruption  due to  reasons  beyond  First  Services,
                  L.P.'s  control,  First  Services,  L.P.  shall  use  diligent
                  efforts to mitigate the effects of such an occurrence.

IX.               FIRST SERVICES, L.P. CONFIDENTIAL INFORMATION

         (A)      Sunrise  Bank shall not use or disclose  to any third  persons
                  any confidential  information concerning First Services,  L.P.
                  First Services,  L.P.  confidential  information is that which
                  relates  to  First  Services,   L.P.'s   software,   research,
                  development,  trade secrets or business affairs including, but
                  not limited to, the terms and conditions of this Agreement but
                  does not include  information  in the public domain through no
                  fault of Sunrise  Bank.  Sunrise Bank  obligations  under this
                  Section IX shall survive the termination or expiration of this
                  Agreement.

         (B)      First  Services,   L.P.'s  system  contains   information  and
                  computer   software  which  is  proprietary  and  confidential
                  information  of  First  Services,   L.P.,  its  suppliers  and
                  licensees.  Sunrise  Bank agrees not to attempt to  circumvent
                  the  devices  employed  by First  Services,  L.P.  to  prevent
                  unauthorized access to the First Services, L.P.'s System.


X.       WARRANTIES

         First  Services,  L.P.  will  accurately  process  Sunrise  Bank's work
         provided  that  Sunrise  Bank  supplies  accurate  data and follows the
         procedures  described in First Services,  L.P.'s User Manuals,  notices
         and advises.  First Services,  L.P. personnel will exercise due care in
         the  processing of Sunrise Bank's work. In the event of an error caused
         by First  Services,  L.P.'s  personnel,  programs or  equipment,  First
         Services,  L.P.  shall  correct the data and/or  reprocess the affected
         report at no additional cost to Sunrise Bank.


XI.      LIMITATION OF LIABILITY

         IN NO EVENT SHALL FIRST SERVICES,  L.P. BE LIABLE FOR LOSS OF GOODWILL,
         OR FOR SPECIAL,  INDIRECT,  INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
         FROM SUNRISE BANK'S USE OF FIRST  SERVICES  L.P.'S  SERVICES,  OR FIRST
         SERVICES,  L.P.'S SUPPLY OF EQUIPMENT OR SOFTWARE, UNDER THIS AGREEMENT
         REGARDLESS  OF WHETHER SUCH CLAIM ARISES IN TORT OR IN CONTRACT.  FIRST
         SERVICES,  L.P.'S AGGREGATE  LIABILITY FOR ANY AND ALL CAUSES OF ACTION
         RELATING TO SERVICES PERFORMED HEREUNDER OR ANY DAMAGE OR LOSS INCURRED
         OR  SUSTAINED  BY  SUNRISE  BANK  RELATING  TO THIS  AGREEMENT  AND THE
         SERVICES  PERFORMED  HEREUNDER  SHALL BE LIMITED TO THE AMOUNT OF TOTAL
         FEES PAID BY  SUNRISE  BANK TO FIRST  SERVICES,  L.P.  IN THE THREE (3)
         MONTH PERIOD  PRECEDING  THE DATE THE CLAIM  ACCRUED.  FIRST  SERVICES,
         L.P.'S  AGGREGATE  LIABILITY  FOR A DEFAULT  RELATING TO  EQUIPMENT  OR
         SOFTWARE  SHALL BE  LIMITED  TO THE AMOUNT  PAID FOR THE  EQUIPMENT  OR
         SOFTWARE.




<PAGE>



XII.     PERFORMANCE STANDARDS

         (A)      On-Line  Availability  -  First  Services,  L.P.'s    standard
                  of  performance  shall  be  on-line availability of the system
                  98% of the time that it is scheduled to be so available over a
                  three month period (the "Measurement  Period"). Actual on-line
                  performance will be calculated monthly by comparing the number
                  of hours which the system was scheduled to be  operational  on
                  an   on-line   basis  with  the number of hours, or a portion 
                  thereof,  it  was  actually   operational on an on-line basis.
                  Downtime  may  be   caused   by   operator   error,   hardware
                  malfunction  or  failure,  or environmental  failures  such as
                  loss of power or air conditioning.  Downtime caused by reasons
                  beyond First Services, L.P.'s control should not be considered
                  in the statistics.

         (B)      Report  Availability - First  Services,  L.P.'s   standard  of
                  performance  for report  availability shall be that,  over  a 
                  three (3) month  period,  ninety-five   percent  (95%) of  all
                  Critical  Daily Reports shall be available for remote printing
                  on time without  significant  errors.  A Critical Daily Report
                  shall mean priority group reports which First  Services,  L.P.
                  and Sunrise Bank have mutually agreed in writing are necessary
                  to properly  account for  the  previous  day's  activity   and
                  properly  notify  Sunrise  Bank  of  overdraft,  NSF or return
                  items. A significant error is one which impairs Sunrise Bank's
                  ability to properly  account for  the previous days  activity 
                  and/or properly account for  overdraft,  NSF or return  items.
                  Actual  performance  will be calculated   monthly by comparing
                  the  total number of Sunrise  Bank  reports  scheduled  to  be
                  available from  First Services, L.P. to the number of reports 
                  which were available on time and without error.

         (C)      Exclusive  Remedy - In the  event  tha  First Services, L.P.'
                  performance fails to meet the standards listed above and such 
                  failure is not the result of Sunrise Bank's error or omission,
                  Sunrise  Bank's sole and exclusive remedy  for  such  default 
                  shall be the right to terminate this Agreement in  accordance 
                  with  the  provisions  of this  paragraph.  In the event  that
                  First  Services,  L.P.  fails  to  achieve   any   Performance
                  Standards,  alone or  in  combination,  for  the   prescribed 
                  measurement period, Sunrise Bank shall notify First Services, 
                  L.P.  of its  intent  to  terminate   this  agreement if First
                  Services,  L.P. fails to restore  performance to the committed
                  levels.  First  Services,  L.P. shall  advise   Sunrise   Bank
                  promptly upon  correction of the system   deficiencies  (in no
                  event shall corrective  action exceed sixty (60) days from the
                  notice date) and shall begin an additional measurement period.
                  Should  First  Services,  L.P. fail  to  achieve  the required
                  Performance   Standards  during  the  remeasurement   period, 
                  Sunrise Bank may terminate this Agreement and First  Services,
                  L.P. shall  cooperate  with Sunrise Bank to achieve an orderly
                  transition to Sunrise  Bank's  replacement processing  system.
                  Sunrise Bank  may   also  terminate  this  Agreement  if First
                  Services,  L.P.'s  performance  for  the   same  standard   is
                  below  the  relevant  performance  standard  for more than two
                  (2)  measurement  periods  in  any  consecutive   twelve  (12)
                  months  or for more  than  five (5) measurement periods during
                  the term of this agreement.  During the period of  transition,
                  Sunrise Bank shall pay only such charges as are incurred  for 
                  monthly fees until the date of deconversion.  First  Services,
                  L.P.  shall not  charge  Sunrise Bank for services relating to
                  Sunrise Bank's  deconversion.

         (D)      Audit  -  Sunrise   Bank  shall  have  the  right  to  perform
                  reasonable  audits, at its cost, upon giving written notice to
                  First  Services,  L.P. of its intent to do so. First Services,
                  L.P. shall  provide,  upon request,  financial  information to
                  Sunrise Bank.


XIII.    DISASTER RECOVERY

         (A)      A  Disaster  shall  mean  any  unplanned  interruption of  the
                  operations of or  inaccessibility to the First Services,  L.P.
                  data center which appear in First Services, L.P.'s reasonable
                  judgement   to   require  relocation  of  processing   to  an 
                  alternative  site.  First Services, L.P. shall notify Sunrise 

<PAGE>

                  Bank as soon as  possible after it  deems a  service   outage 
                  to  be  a  Disaster.  First  Services,  L.P. shall  move  the 
                  processing of Sunrise  Bank's  standard  on-line  services  to
                  an  alternative   processing  center   as   expeditiously  as 
                  possible.  Sunrise  Bank  shall  maintain adequate  records of
                  all  transactions  during the period of service  interruption 
                  and shall  have  personnel available to assist First Services 
                  L.P., Inc. in  implementing the switch over to the alternative
                  processing site.  During a  disaster, optional  or  on-request
                  services  shall be   provided  by First  Services,  L.P.  only
                  to the extent that there is adequate capacity at the alternate
                  center  and  only  after  stabilizing  the  provision  of base
                  on-line services.

         (B)      First Services, L.P. shall work with Sunrise Bank to establish
                  a plan for alternative data  communications  in the event of a
                  disaster. Sunrise Bank shall be responsible for furnishing any
                  additional  communications  equipment and data lines  required
                  under the adopted plan.

         (C)      First Services L.P., shall test its Disaster Recovery Services
                  Plan by  conducting  one annual  test.  Sunrise Bank agrees to
                  participate  in and  assist  First  Services,  L.P.  with such
                  testing. Test results will be made available to Sunrise Bank's
                  regulators, internal and external auditors, and (upon request)
                  to Sunrise Bank's insurance underwriters.

         (D)      Sunrise Bank  understands  and agrees that the First Services,
                  L.P.  Disaster  Recovery  Plan is designed to minimize but not
                  eliminate  risks  associated  with a disaster  affecting First
                  Services,  L.P.'s data center.  First Services,  L.P. does not
                  warrant that service  will be  uninterrupted  or error free in
                  the event of a disaster. Sunrise Bank maintains responsibility
                  for adopting a disaster  recovery  plan  relating to disasters
                  affecting  Sunrise Bank's facilities and for securing business
                  interruption  insurance  or other  insurance  as  necessary to
                  properly  protect  Sunrise  Bank's  revenues in the event of a
                  disaster.


XIV.     DEFAULT

         (A)      In the event that  Sunrise Bank is thirty (30) days in arrears
                  in making any payment  required,  or in the event of any other
                  material  default by either  First  Services,  L.P. or Sunrise
                  Bank in the  performance  of their  obligations,  the affected
                  party shall have the right to give written notice to the other
                  of the  default  and its intent to  terminate  this  Agreement
                  stating  with  reasonable  particularity  the  nature  of  the
                  claimed default. This Agreement shall terminate if the default
                  has not been  cured  within a  reasonable  time with a minimum
                  being thirty (30) days from the effective date of the notice.

         (B)      Upon the  expiration of this  Agreement,  or its  termination,
                  First Services, L.P. shall furnish to Sunrise Bank such copies
                  of Sunrise  Bank's  data files as Sunrise  Bank may request in
                  machine readable format form along with such other information
                  and  assistance  as or is  reasonable  and customary to enable
                  Sunrise  Bank to  deconvert  from  the  First  Services,  L.P.
                  system. Sunrise Bank shall reimburse First Services,  L.P. for
                  the  production  of data  records and other  services at First
                  Services, L.P.'s current fees for such services.


XV.      INSURANCE

         First Services,  L.P. carries Comprehensive General Liability insurance
         with primary limits of two million dollars,  Commercial Crime insurance
         covering Employee  Dishonesty in the amount of fifteen million dollars,
         all-risk  replacement  cost  coverage  on all  equipment  used at First
         Services, L.P.'s data center and Workers Compensation coverage on First
         Services, L.P. employees wherever located in the United States. Sunrise
         Bank shall  carry  adequate  insurance  to cover  liability  for source
         documents  while in transit and in case of data loss through errors and
         omissions.


XVI.     GENERAL

         (A)      This   Agreement   is  binding  upon  the  parties  and  their
                  respective successors and permitted assigns. Neither party may
                  assign this  Agreement in whole or in part without the consent
                  of  Sunrise  Bank  and/or  First  Services,   L.P.,  provided,
                  however, that First Services,  L.P. may subcontract any or all
                  of the services to be performed  under this Agreement  without
                  the written  consent of Sunrise Bank. Any such  subcontractors
                  shall be required to comply with all of the  applicable  terms
                  and conditions of this Agreement.

         (B)      The parties agree that, in connection  with the performance of
                  their  obligations  hereunder,   they  will  comply  with  all
                  applicable  Federal,  State, and local laws including the laws
                  and regulations regarding Equal Employment Opportunities.

         (C)      First  Services,  L.P.   agrees   that  the  Office of  Thrift
                  Supervision,  FDIC, or other authority will have the authority
                  and  responsibility  provided to the other regulatory agencies
                  pursuant to the Bank Service Corporation  Act, 12 U.S.C. 1867 
                  (C)  relating  to service performed  by contract or otherwise.
                  First Services,  L.P., also agrees that its services shall be 
                  subject to  oversight  by  the O.C.C.,  FDIC or state  banking
                  departments as may be applicable  under laws and  regulations 
                  pertaining to Sunrise Bank's charter and shall, if applicable,
                  provide the O.T.S.  DistrictDirector  of the district in which
                  the data processing  center is located  and  other  state  and
                  federal  agencies  with  a  copy  of  First  Services,  L.P.'s
                  current  audit and  financial  statements  and a  copy of any 
                  current  third  party  review  report  when a review has been 
                  performed.

         (D)      Neither  party  shall be  liable  for any  errors,  delays  or
                  non-performance  due to events beyond its  reasonable  control
                  including,  but not limited to, acts of God,  failure or delay
                  of power or  communications,  changes in law or  regulation or
                  other  acts  of  governmental   authority,   strike,   weather
                  conditions or transpor- tation.

         (E)      All written notices  required to be given under this Agreement
                  shall be sent by Registered or Certified Mail,  Return Receipt
                  Requested,  postage prepaid,  or by confirmed facsimile to the
                  persons  and at the  addresses  listed  below or to such other
                  address or person as a party shall have designated in writing.

                  First Services, L.P.             Sunrise Bank
                  #l First Missouri Center         Five Sierragate Plaza
                  St. Louis, Missouri 63l4l        Roseveille, California 95678

         (F)      The  failure of either  party to  exercise  in any respect any
                  right  provided for herein shall not be deemed a waiver of any
                  rights.

         (G)      Each  party  acknowledges  that is has  read  this  Agreement,
                  understands  it,  and  agrees  that  it is  the  complete  and
                  exclusive  statement of the Agreement  between the parties and
                  supersedes  and  merges any prior or  simultaneous  proposals,
                  understandings  and all other  agreements  with respect to the
                  subject matter.  This Agreement may not be modified or altered
                  except by a written instrument duly executed by both parties.

         (H)      No  waiver  of any of the  terms  of this  Agreement  shall be
                  effective  unless in writing and signed by the duly authorized
                  representative  of the party charged  therewith.  No waiver of
                  any provision  hereof shall extend to or affect any obligation
                  not  expressly  waived,  impair any rights  consequent on such
                  obligation  or imply a subsequent  waiver of that or any other
                  provision.

         (I)      This Agreement shall be governed by, construed and interpreted

<PAGE>

                  in accordance with the laws of the State of Missouri.

         IN WITNESS  WHEREOF,  the parties have executed this Agreement the date
first above written.


Sunrise Bank                                 First Services, L.P.
Five Sierragate Plaza                        One First Missouri Center
Roseville, California 95678                  St. Louis, Missouri  63141



BY:/s/ Donald W. Williams                    BY:/s/ Thomas A. Bangert
-------------------------                    ------------------------
       Donald W. Williams                           Thomas A. Bangert
       Chairman                                    President



<PAGE>


                                  Attachment 1
                    Sunrise Bank - Product And Price Schedule

                                Effective 4/1/97

              DATA PROCESSING
<TABLE>
<CAPTION>

                            Accounts
<S>                         <C>                                 <C>                <C>  
                                    DDA                      10,000                   $0.50
                                    Savings                  10,000                   $0.50
                                    Time                     10,000                   $0.50
                                    Loans                    10,000                   $0.50
                            Transactions                    250,000                   $0.01
                            Terminal Management                  25                   $5.00
                            Branch Data Connection                                  Included
                            ATM Management                                          Included
                            Telephone Switch Mgmt                                   Included
                            Other Services                                          Included

              ITEM PROCESSING

                            Proof                           200,000                   $0.020
                            POD And EFT                     200,000                   $0.009
                            Inclearing and Transmission      50,000                   $0.009
                            Statements:
                                     DDA                                              $0.250
                                     Savings                                          $0.050
                                     Time                                             $0.100
                                     Loan                                             $0.100

                            Lockbox                                                   $0.020
                            Branch Courier Route                                      $17.00
                            Mail Services                                            $200.00

              DEPOSIT SERVICES

                            Customer Accounts               40,000                     $0.30
</TABLE>

<PAGE>


Included in Above:
<TABLE>
<CAPTION>

<S>            <C>                                                       <C>  
              Charge Backs                                               CIF Management
              Returns                                                    Exception Item Processing
              Stops                                                      Signature Verification
              Wire Transfers                                             Corporate Analysis
              ACH Incoming                                               Cash Management Support
              ACH Origination                                            FirstLink
              Official Checks                                            Control Disbursement
              Money Orders                                               Balance Reporting
              Savings Bonds                                              Research
              Funds Transfer                                             Adjustments
              B Notices 1099s                                            "Due From" Reconciliation
              Kiting                                                     "Due To" Reconciliation
              Holds                                                      FRB Reconciliation's
              Dormant Accounts                                           Application Balancing
              ATM Settlement                                             Records Management
              Debit Card Settlement                                      Savings Bonds

OTHER SERVICES
              Collection System (Cyber Resources)                        Cash Management System (FirstLink)
              Recovery System (Cyber Resources)                          Commercial Analysis
              Asset/Liability (Bankware)                                 Charge Back System
              Optical System (RVI)                                       Teller Platform (ISC)
              MCIF (OKRA)                                                ATM Support
              Loan Documentation (FTI/CFI)                               General Ledger
              Bank Audit                                                 Fixed Asset Interface
              Accounts Payable Interface                                 Interactive Voice
              Remote Laser Printing                                      Card Management System
              ACH Origination                                            Wire Transfer (Fundtec)
              Organization Profitability (IPS)                           NOW Reclassification
              Loan Tracking (Baker Hill)                                 Retrofit/New Releases
              Credit Scoring (Fair Issac)

</TABLE>


<PAGE>


                                  EXHIBIT 13.1
                                                 










                                FIRST BANKS, INC.

                               1997 ANNUAL REPORT









<PAGE>



                                FIRST BANKS, INC.

                                TABLE OF CONTENTS





                                                                         Page

LETTER TO SHAREHOLDERS...................................................  1

SELECTED CONSOLIDATED AND OTHER FINANCIAL DATA...........................  2

MANAGEMENT'S DISCUSSION AND ANALYSIS.....................................  3

QUARTERLY CONDENSED FINANCIAL DATA - UNAUDITED........................... 30

INDEPENDENT AUDITORS' REPORT............................................. 31

FINANCIAL STATEMENTS:

CONSOLIDATED BALANCE SHEETS.............................................. 32

CONSOLIDATED STATEMENTS OF INCOME........................................ 34

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY............... 35

CONSOLIDATED STATEMENTS OF CASH FLOWS.................................... 36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................... 37

DIRECTORS AND EXECUTIVE OFFICERS......................................... 56

INVESTOR INFORMATION..................................................... 57




<PAGE>


To our Valued Shareholders, Customers and Friends:


     We are pleased to report our  accomplishments and continued progress toward
furthering  First Banks' long term objective as a premier  provider of financial
services. To that end, First Banks will remain focused on generating progressive
and  profitable  growth  through  the  continued  development  of  our  existing
franchise, augmented by the acquisition of other financial institutions.

     Indicative  of our  recent  growth  is the  continuing  improvement  in our
operating results. For 1997, net income increased to $33.0 million,  compared to
$20.2  million  for 1996.  The  results of  operations  for 1996 were  adversely
affected by a one-time Savings Association  Insurance Fund special assessment of
$8.2 million or $5.3 million on an after-tax basis.

     Since 1992, First Banks has completed 15 acquisitions of banks and thrifts.
The  completion  of  these   acquisitions,   coupled  with  increased   business
development  activities,  fueled  asset growth from $2.0 billion at December 31,
1992 to $4.2 billion at December 31, 1997 and provided access into several major
markets.  The long term opportunities  provided by the entry into these markets,
including  Chicago,   Dallas,   Houston  and  southern,   central  and  northern
California,  represent  an  unprecedented  opportunity  for  First  Banks  and a
catalyst for future growth.

     Recognizing and acting upon  opportunities  has been present at First Banks
for years. Going back to 1982, when total assets were $325 million,  First Banks
embarked on a plan to expand  into  central and  southern  Illinois  and further
develop its  presence  in eastern  Missouri.  Reflective  of our success in this
endeavor is the position of First Banks' lead bank,  First Bank, with assets now
totaling $2.8 billion.  The  profitability  of First Bank during this time-frame
was the primary source for First Banks'  stockholders'  equity  increasing  from
$26.5 million at December 31, 1982 to $231.5 million by the end of 1997.

     With necessary capital,  technology and operational support, First Banks is
again  embarking  on the plan to  expand  and  develop  our  current  franchise.
Accepting the challenge, First Banks has been aggressively quantifying the needs
of the local businesses and consumers and adapting to the changing  requirements
of our existing customers. Furthering the plan is the effort and success of each
local market's  management team. Each team,  equipped with superior products and
services,  is  expanding  their  market  presence by  attracting  and  retaining
customers  through the development and addition of experienced  banking officers
and support  staff.  Surrounding  these efforts are the resources of First Banks
and our unconditional guarantee never to sell-out and desert our customers.

     As we  reflect  back over the past  century,  we are  reminded  of the many
challenges and successes at First Banks.  While those challenges are now history
and new  challenges  are now present,  First Banks'  mind-set and sound business
practices  will approach each new challenge  with optimism that a future success
lies within such challenges.

     In  closing,  I would  like to take this  opportunity  to  welcome  our new
shareholders,  joining us through the issuance of the Preferred Securities,  and
to extend our sincerest  appreciation  for the dedication of our employees,  the
loyalty of our customers and the continued support of our shareholders.

Sincerely,



James F. Dierberg
Chairman, President and
  Chief Executive Officer


<PAGE>
     The following table presents selected  consolidated  financial  information
for First Banks,  Inc. and  subsidiaries  (First Banks) for each of the years in
the five-year period ended December 31, 1997. The  comparability of the selected
data presented is affected by the  acquisitions of eleven banks and four thrifts
during the five-year period.  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
date of acquisition.
<TABLE>
<CAPTION>
                                                                            Year ended December 31,
                                                                            -----------------------
                                                             1997        1996        1995        1994        1993
                                                             ----        ----        ----        ----        ----
                                                           (dollars expressed in thousands, except per share data)
Income Statement Data:

<S>                                                     <C>            <C>         <C>         <C>          <C>    
    Interest income...................................  $  295,101     266,021     261,621     162,435      140,012
    Interest expense..................................     148,831     141,670     144,945      70,670       58,058
                                                        ----------     -------     -------     -------     --------
    Net interest income...............................     146,270     124,351     116,676      91,765       81,954
    Provision for possible loan losses................      11,300      11,494      10,361       1,858        4,456
                                                        ----------     -------     -------     -------     --------
    Net interest income after provision for
         possible loan losses.........................     134,970     112,857     106,315      89,907
      77,498
    Noninterest income................................      25,697      20,721      19,407      13,634        9,953
    Noninterest expense...............................     110,287     105,741      91,566      67,734       53,431
                                                        ----------     -------     -------     -------     --------
    Income before provision for income taxes,
      minority interest in (income) loss
      of subsidiaries and cumulative effect
      of change in accounting principle...............      50,380      27,837      34,156      35,807       34,020
    Provision for income taxes........................      16,083       6,960      11,038      12,012       11,592
                                                        ----------     -------     -------     -------     --------
    Income before minority interest in (income) 
       loss of subsidiaries and cumulative effect 
       of change in accounting principle..............      34,297      20,877      23,118      23,795       22,428
    Minority interest in (income) loss of subsidiaries      (1,270)       (659)      1,353         237           --
                                                        -----------    -------     -------     -------     --------
    Income before cumulative effect of change 
       in accounting principle.........................      33,027      20,218      24,471      24,032       22,428
    Cumulative effect of change in accounting
       principle.......................................          --          --          --          --          766
                                                        -----------     -------     -------     -------     -------- 
    Net income........................................  $    33,027      20,218      24,471      24,032       23,194
                                                        ===========     =======     =======     =======     ========
Dividends:
    Preferred stock...................................  $     5,067       5,728       5,736       5,735        5,766
    Common stock......................................           --          --          --          --           --
    Ratio of total dividends declared to net income...        15.34%      28.33%      23.44%      23.86%       24.86%
Per Share Data:
    Earnings per common share:
      Basic...........................................  $  1,181.69      612.46      791.82      773.31       741.69
      Diluted.........................................     1,134.28      596.83      759.09      735.28       696.30
    Weighted average shares of common stock
      outstanding.....................................       23,661      23,661      23,661      23,661       23,498
Balance Sheet Data (at year-end):
    Investment securities.............................  $   795,530     552,801     508,323     587,878      531,148
    Loans, net of unearned discount...................    3,002,200   2,767,969   2,744,219   2,073,570    1,362,018
    Total assets......................................    4,165,014   3,689,154   3,622,962   2,879,570    2,031,909
    Total deposits....................................    3,684,595   3,238,567   3,183,691   2,333,144    1,779,389
    Notes payable.....................................       55,144      76,330      88,135      46,203           --
    Common stockholders' equity.......................      218,474     184,439     166,542     149,249      133,781
    Total stockholders' equity........................      231,537     251,389     234,605     217,312      201,844
Earnings Ratios:
    Return on average total assets....................         0.87%       0.57%      0.70%       1.00%         1.16%
    Return on average total stockholders' equity......        12.91        8.43      10.79       11.48         12.27
Asset Quality Ratios:
    Allowance for possible loan losses to loans.......         1.68        1.69       1.92        1.37          1.69
    Nonperforming loans to loans (1)..................         0.80        1.09       1.44        0.78          0.90
    Allowance for possible loan losses to
      nonperforming loans (1).........................       209.88      154.55     133.70      175.37        188.50
    Nonperforming assets to loans and foreclosed 
     assets (2).......................................         1.04        1.47       1.71        1.10          1.08
    Net loan charge-offs to average loans.............         0.27        0.72       0.41        0.09          0.33
Capital Ratios:
    Average total stockholders' equity to
      average total assets............................         6.70        6.79       6.49        8.70          9.46
    Total risk-based capital ratio....................        10.26        9.23        9.34       12.68        16.90
    Leverage ratio....................................         6.80        5.99        5.32        7.54         9.30
----------------
(1)  Nonperforming  loans consist of nonaccrual loans and loans with restructured
     terms. 
(2)  Nonperforming  assets consist of nonperforming  loans and foreclosed
     assets.
</TABLE>



<PAGE>


      The discussion set forth in the Letter to  Shareholders  and  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
contains  certain  forward  looking  statements  with  respect to the  financial
condition,   results  of   operations   and  business  of  First  Banks.   These
forward-looking  statements are subject to certain risks and uncertainties,  not
all of which can be  predicted  or  anticipated.  Factors  that may cause actual
results to differ  materially  from those  contemplated  by the forward  looking
statements  herein  include  general  market  conditions  as well as  conditions
specifically  affecting  the banking  industry  generally  and factors  having a
specific  impact on First Banks,  including but not limited to  fluctuations  in
interest rates and in the economy; the impact of laws and regulations applicable
to First Banks and changes  therein;  competitive  conditions  in the markets in
which First Banks  conducts  its  operations;  and the ability of First Banks to
respond to changes in  technology.  With regard to First Banks'  efforts to grow
through acquisitions,  factors that could affect the accuracy or completeness of
forward-looking  statements  contained  herein  include the potential for higher
than acceptable  operating  costs arising from the geographic  dispersion of the
offices  of First  Banks,  as  compared  with  competitors  operating  solely in
contiguous  markets;  the competition of larger acquirers with greater resources
than First Banks; fluctuations in the prices at which acquisition targets may be
available  for sale and in the  market  for  First  Banks'  securities;  and the
potential  for  difficulty or  unanticipated  costs in realizing the benefits of
particular  acquisition  transactions.  Readers  of this  Annual  Report  should
therefore not place undue reliance on forward-looking statements.

Company Profile

     First Banks is a registered bank holding  company  incorporated in Missouri
and  headquartered  in St. Louis County,  Missouri.  At December 31, 1997, First
Banks had $4.17  billion in total assets,  $3.00 billion in total loans,  net of
unearned  discount,  $3.68 billion in total deposits and $231.5 million in total
stockholders'  equity.  First Banks operates  through its  subsidiary  financial
institutions and bank holding companies (Subsidiary Banks) as follows:

    First Bank, headquartered in  St. Louis County,   Missouri  (First Bank).
    First Banks America, Inc.,  headquartered in  St. Louis County,  Missouri
    (FBA), and its wholly owned subsidiaries:
         BankTEXAS  N. A.,  headquartered in     Houston,   Texas (BankTEXAS).
         First Bank of California, headquartered in    Roseville,  California 
          (FB California).
    CCB Bancorp, Inc., headquartered in Irvine,  California (CCB),   and  its 
         wholly  owned   subsidiary:   First  Bank  &  Trust,   headquartered
         in Irvine, California (FB&T).
    First  Commercial  Bancorp, Inc., headquartered in Sacramento, California 
     (FCB), and its wholly owned subsidiary:
         First Commercial Bank, headquartered in Sacramento, California (First
         Commercial).

     All of the Subsidiary  Banks are wholly owned by their  respective  parents
except FBA and FCB, which were 65.85% and 61.48% owned,  respectively,  by First
Banks at December 31, 1997. As discussed under  "--Acquisitions,"  FB California
is a  newly-formed  California  state bank  resulting from the merger of Sunrise
Bank of  California,  which was  acquired  by FBA on November 1, 1996 and Surety
Bank,  Vallejo,  California,  which was acquired by FBA on December 1, 1997.  In
February  1998,  FCB  was  acquired  by  FBA,  and its  subsidiary  bank,  First
Commercial, was merged into FB California.

     Through  the  Subsidiary  Banks,  First  Banks  offers  a  broad  range  of
commercial  and  personal  banking  services  including  certificate  of deposit
accounts,  individual  retirement and other time deposit accounts,  checking and
other demand deposit accounts,  interest checking accounts, savings accounts and
money market accounts.  Loans include  commercial,  financial and  agricultural,
real estate  construction  and  development,  commercial  and  residential  real
estate,  consumer and  installment,  student and Small  Business  Administration
loans. Other financial services include mortgage banking, credit cards, discount
brokerage,   credit-related  insurance,  automatic  teller  machines,  telephone
account access, safe deposit boxes, trust and private banking services, and cash
management services.

     First  Banks  centralizes  overall  corporate   policies,   procedures  and
administrative  and  operational  support  functions for the  Subsidiary  Banks.
Primary  responsibility  for managing the  Subsidiary  Banks  remains with their
officers and directors.

<PAGE>
>

     The following table lists the Subsidiary Banks at December 31, 1997:
<TABLE>
<CAPTION>

                                                                                        Loans, net of
                                                           Number of      Total           unearned          Total
     Subsidiary Banks                                      locations     assets           discount        deposits
     ----------------                                      ---------     ------           --------        --------
                                                                         (dollars expressed in thousands)

<S>                                                           <C>      <C>               <C>              <C>      
     First Bank......................................         98       $2,843,575        2,185,493        2,559,968
     FBA:
         BankTEXAS...................................          6          267,152          176,341          231,175
         FB California...............................          4          179,999          137,096          152,825
     CCB:
         FB&T........................................         17          672,410          385,251          598,560
     FCB:
         First Commercial............................          6          190,918          118,018          172,737
</TABLE>


     As  described  under  "--Financial  Condition  and  Average  Balances,"  on
February 3, 1997,  First  Preferred  Capital  Trust  (First  Trust),  a Delaware
statutory  business trust,  issued  3,450,000  shares of 9.25%  cumulative trust
preferred  securities  (Preferred  Securities) for $86.25 million.  In addition,
First Trust  issued $2.7 million of common  securities  which are owned by First
Banks. The Preferred Securities are publicly held and listed on the Nasdaq Stock
Market's National Market System. The Preferred  Securities have no voting rights
except in certain  limited  circumstances.  On  December  1, 1997,  First  Banks
redeemed all of the  outstanding  Class C, 9.00%  increasing  rate,  redeemable,
cumulative  preferred stock (Class C Preferred  Stock) which had previously been
publicly held and listed on the Nasdaq Stock Market's National Market System.

     The  voting  stock of First  Banks is owned by  various  trusts  which were
created by and are administered by and for the benefit of Mr. James F. Dierberg,
First Banks' Chairman of the Board,  President and Chief Executive Officer,  and
members  of  his  immediate  family.  Accordingly,  Mr.  Dierberg  controls  the
management and policies of First Banks and the election of its directors.

General

     In the development of its banking franchise,  First Banks has traditionally
placed primary  emphasis upon acquiring other financial  institutions as a means
of  achieving  its growth  objectives.  Acquisitions  may serve to  enhance  its
presence in a given market,  to expand the extent of its market area or to enter
new or noncontiguous markets. However, because First Banks has historically used
cash in its acquisitions,  the  characteristics  of the acquisition arena at any
given point in time may place it at a competitive disadvantage relative to other
acquirers  able to offer  stock  transactions.  This is the result of the market
attractiveness  of  other  financial  institutions'  stock,  the  advantages  of
tax-free  exchanges to the selling  shareholders,  and the  financial  reporting
flexibility  inherent in structuring  stock  transactions.  Consequently,  First
Banks'  acquisition   activities  are  somewhat  sporadic,   in  which  multiple
transactions are consummated in a particular  period,  followed by substantially
less active acquisition periods.  Furthermore, the intangible assets recorded in
conjunction with such 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,  First Banks has followed certain patterns in its
acquisitions. First, it tends to acquire several smaller institutions, sometimes
over an  extended  period of time,  rather  than a single  larger  one.  This is
attributable  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,  First Banks may
acquire  institutions  which have more  significant  problems which could reduce
their  attractiveness  to other potential  acquirers,  and therefore  reduce the
amount of  acquisition  premiums  required.  Finally,  First Banks realizes that

<PAGE>

various  acquisition  markets  may  become so  competitive  at times,  that cash
transactions are not  economically  viable,  thereby  requiring it to pursue its
acquisition  strategy in other geographic  areas, or pursue internal growth more
aggressively. These patterns have been evident in First Banks' growth during the
four years ended December 31, 1997.

     During 1995, First Banks completed seven acquisitions which increased total
assets from $2.88  billion on December 31, 1994 to $3.62 billion on December 31,
1995. These acquisitions provided First Banks with access into several new major
market areas and, accordingly,  an attractive  opportunity for future growth and
profitability.  However, in 1996 and 1997, as acquisition pricing in these areas
escalated  dramatically,  First Banks' acquisition activities were substantially
reduced.  In 1996, First Banks completed one  acquisition.  In 1997, First Banks
acquired one bank, as well as assuming the  liabilities  and purchasing  certain
assets of three branch offices of a savings bank.

     Anticipating  that  increasing  acquisition  pricing would  eventually make
growth solely by acquisition economically unfeasible, and recognizing that rapid
consolidation  within the banking industry would create new business development
opportunities,  beginning  in 1993 First  Banks began a  continuing  program for
substantial  enhancement  of its  capabilities  to achieve  and manage  internal
growth. This program required  significant  increases in the resources dedicated
to commercial and retail business  development,  financial  service product line
and delivery systems,  branch  development and training,  and administrative and
operational support. These efforts were manifested during this period in various
changes with the organization.

     Many of the acquired  loan  portfolios  exhibited  compositions  which were
skewed toward certain loan types which  reflected the abilities and  experiences
of their  management.  This was particularly  evident in acquisitions of savings
banks,  which  had  portfolios  heavily  concentrated  in single  family  and/or
multi-family  residential  real estate  lending,  and in BankTEXAS,  which had a
portfolio consisting primarily of indirect automobile loans. In order to achieve
a more diversified portfolio,  to address asset quality issues in the portfolios
and to  achieve  a  higher  level  interest  yield  on  the  loan  portfolio,  a
substantial  portion of the loans  which  were  acquired  during  this time were
reduced  through  payments,   refinancing  with  other  financial  institutions,
charge-offs,  and,  in two  instances,  sales.  As a result,  the  portfolio  of
one-to-four  family  residential real estate loans,  after reaching a maximum of
$1.20 billion at December 31, 1995, was reduced to $1.06 billion at December 31,
1996 and $915.2  million at December  31,  1997.  Similarly,  the  portfolio  of
consumer and installment loans, net of unearned discount,  the majority of which
is indirect automobile loans, decreased from $422.5 million at December 31, 1994
to $413.6 million,  $333.3 million and $279.3 million at December 31, 1995, 1996
and 1997, respectively.

     While First Banks' acquisitions in 1994 and 1995 introduced it to new major
market areas which offer significant long-term opportunities, these acquisitions
presented  several  immediate  challenges.  Many of the  acquired  institutions,
particularly  those in  California,  exhibited  some degree of distress prior to
their purchase by First Banks, generally including asset quality problems. While
these problems had been  identified and considered in the  acquisition  pricing,
this led to an increase in  non-performing  assets to $47.1  million at December
31,  1995 from $22.9  million at December  31,  1994.  As First Banks  worked to
correct these asset quality problems, total nonperforming assets were reduced to
$40.9 million at December 31, 1996 and $31.4 million at December 31, 1997.

     As these segments of the loan portfolio decreased,  they were replaced with
more diversified, better quality and higher yielding loans which were internally
generated by the business development function which had been established.  With
the acquisitions,  the business  development  function was expanded into the new
market areas in which First Banks was then operating.  Consequently, in spite of
relatively  large  reductions  in  acquired   portfolios,   the  aggregate  loan
portfolio,  net of unearned  discount,  increased from $2.07 billion at December
31, 1994 to $2.74 billion, $2.77 billion and $3.00 billion at December 31, 1995,
1996 and 1997, respectively.

     While this  restructuring of the loan portfolio was occurring,  First Banks
was also changing the composition of its deposits.  Several of the  institutions
which First Banks has  acquired  since 1990 were savings  banks.  Traditionally,
savings  banks have  placed  greater  reliance  on time  deposits as a source of
funding than their commercial banking  counterparts.  Although time deposits are
generally a stable source of funds, they are typically the highest cost deposits

<PAGE>

available,  the depositors tend to be relatively  sensitive to interest rates in
the market, and frequently the customers have no other banking relationship with
the  financial  institution.  These  characteristics  suggest that many of these
customers move their deposits between financial institutions fairly readily, and
have limited loyalty to any particular institution.  Consequently,  First Banks'
deposit  development  programs have been 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 by
cross  selling  them  through  packaging  various  account  types  and  offering
incentives to deposit customers on other deposit or non-deposit  services.  As a
result, the net growth in deposits has been focused in transaction,  rather than
time  accounts.  At December 31, 1995 and 1996,  total time  deposits were $1.80
billion and $1.81 billion,  or 56.4% and 55.9% of total deposits,  respectively.
Although the deposits included in acquisitions in 1997 were  predominately  time
deposits,  by December 31,  1997,  total time  deposits  had  increased to $1.90
billion, but decreased to 51.7% of total deposits.

     The  simultaneous  growth by acquisition of financial  institutions and the
building of the infrastructure  necessary to achieve significant internal growth
has had an adverse effect on the operating  results of First Banks.  The effects
of this were reflected in a lower net interest margin,  increased provisions for
possible loan losses and higher noninterest expenses.

     As discussed  previously,  savings  banks  generally  focus on  residential
mortgage loans and residential  mortgage-backed  securities to generate interest
income.  These  assets  tend to yield lower  interest  rates than other types of
loans.  At the same time,  their  reliance on time  deposits,  accompanied  by a
relatively small amount of noninterest-bearing  demand accounts, tends to result
in a deposit  cost  which is higher  than  commercial  banks.  This  results  in
generally  lower net  interest  margins  than those  experienced  by  comparable
commercial  banks.  The  acquisition of several savings banks by First Banks has
resulted  in a reduction  of its net  interest  margin  which has not been fully
mitigated.  Furthermore,  the efforts to change the overall deposit  composition
frequently  involves the payment of premium  interest  rates or other  incentive
costs for a period of time to  influence  the account  selection  by  customers.
Consequently,  while net interest  income  increased from $116.7 million for the
year ended  December 31, 1995 to $124.4 million and $146.3 million for the years
ended  December  31,  1996  and  1997,  respectively,  the net  interest  margin
reflected  relatively  modest  improvement from 3.60% in 1995 to 3.79% and 4.09%
for 1996 and 1997, respectively.

     Recognizing the acquisition  program  involved the assumption of additional
credit  risk,  First Banks  controlled  this  exposure by pursuing a strategy of
maintaining  higher than  average  asset  quality in its  Missouri  and Illinois
operations  through strict adherence to its lending policies and practices,  and
consistently building the allowance for possible loan losses through substantial
provisions.  First Banks  provided  $11.30  million,  $11.49  million and $10.36
million for possible loan losses for the years ended December 31, 1997, 1996 and
1995,  respectively.   At  the  same  time,  First  Banks  expanded  its  credit
administration  and loan review  functions to more  closely  monitor the overall
risk inherent in the loan portfolio.

     Finally,  most of the changes  described  above  contributed  to an overall
increase in noninterest  expenses.  The addition of a significant  number of new
banking  locations  through  acquisition  added new expenses for staffing,  bank
premises and equipment and other purposes  necessary to operate those locations.
In addition,  the time and  resources  needed to manage a  significantly  larger
portfolio of problem assets required  greater  dedication of personnel and third
party   assistance  than  had  previously  been  necessary.   Furthermore,   the
augmentation  of the  existing  organization  to provide  the ability to achieve
significant  internal  growth  and to operate  and manage a larger  organization
entailed  substantial   additional  expenses,   particularly  in  personnel  and
equipment. These increases in noninterest expenses were only partially offset by
the economies available as acquired entities were merged into First Banks' other
operations and systems. Consequently,  total noninterest expenses increased from
$67.73 million for the year ended December 31, 1994 to $91.57  million,  $105.74
million and $110.29  million for the years ended  December  31,  1995,  1996 and
1997,   respectively.   Included  in  noninterest  expenses  for  1996  was  the
nonrecurring  assessment to recapitalize the Savings Association  Insurance Fund
(SAIF) of the Federal Deposit Insurance Corporation (FDIC) of $8.2 million.



<PAGE>


Acquisitions

     Prior to 1994,  First Banks'  acquisitions  had been limited to its primary
market area of eastern Missouri and central and southern Illinois.  However, the
premiums  required  to  successfully  pursue  acquisitions  in this  area  began
escalating  sharply,  dramatically  reducing  the  economic  viability  of  many
potential  acquisitions  in that area.  Recognizing  this,  First Banks began to
expand the geographic area in which it approached acquisition  candidates.  As a
result,  while First Banks continued to pursue acquisitions within this area, it
then turned much of its  attention  to  institutions  which could be acquired at
more attractive  prices which were within major  metropolitan  areas outside its
immediate  market  area.  This  had  led  to  the  acquisition  of  a  financial
institution  which had offices in Dallas and Houston,  Texas in 1994 and several
acquisitions of financial institutions which had offices in Los Angeles,  Orange
County,  Santa Barbara,  San Francisco,  San Jose and Sacramento,  California in
1995, 1996 and 1997.
<TABLE>
<CAPTION>

     During the three years ended December 31, 1997,  First Banks completed nine
acquisitions  and two  deposit  purchases.  These  transactions,  as more  fully
described in Note 2 to the accompanying  consolidated financial statements,  are
summarized as follows:

                                                               Loans, net of                            Number of
                                                        Total     unearned    Investment                  banking
            Entity                    Date             assets     discount    securities    Deposits     locations
            ------                    ----             ------     --------    ----------    --------     ---------
                                                                   (dollars expressed in thousands)
             1995
QCB Bancorp
<S>                                               <C>              <C>          <C>          <C>              <C>
Long Beach, California (2).... November 30, 1995  $    56,200      35,100       10,700       50,200           3

La Cumbre Savings Bank F.S.B.
Santa Barbara, California (2). September 1, 1995      144,000     131,000        1,000      124,000           3

First Commercial Bancorp, Inc.
Sacramento, California........ August 23, 1995        169,000      84,600       30,700      163,600           7

Irvine City Financial
Irvine, California (2)........ May 31, 1995            83,300      68,700        7,500       61,600           2

HNB Financial Group
Huntington  Beach,
California (2)................ April 28, 1995          88,000      62,800       10,500       76,300           3

CCB Bancorp, Inc.
Santa Ana, California......... March 15, 1995         193,400     114,500       31,100      156,400           3

River Valley Holdings, Inc.
Chicago, Illinois (1)......... January 4, 1995        412,000     225,000      125,000      286,000          10
                                                  -----------    --------     --------      -------          --
                                                  $ 1,145,900     721,700      216,500      918,100          31
                                                  ===========    ========     ========      =======          ==

             1996
Sunrise Bancorp, Inc.
Roseville, California ........ November 1, 1996   $   110,800      61,100       18,100       92,000           3
                                                  ===========    ========     ========      =======         ===

</TABLE>



<PAGE>
<TABLE>
<CAPTION>


             1997
Surety Bank
<S>                                               <C>              <C>          <C>          <C>              <C>
Vallejo, California (4)....... December 1, 1997   $    72,800      54,400       11,800       67,500           2

Highland Federal Bank,
F.S.B., Woodland Hills,
California branch office (3).. September 30, 1997      42,400         100           --       42,400           1

Highland Federal Bank,
F.S.B., Long Beach,
California branch offices (3). March 31, 1997          40,400         100           --       40,400           2
                                                  -----------    --------     --------      -------         ---
                                                  $   155,600      54,600       11,800      150,300           5
                                                  ===========    ========     ========      =======         ===
</TABLE>
------------------
(1)  River Valley Holdings, Inc. nd its thrift subsidiary were merged into First
     Bank.
(2)  QCB Bancorp, La Cumbre Savings Bank, F.S.B.,  Irvine City Financial and HNB
     Financial Group and their respective  banking and thrift  subsidiaries were
     merged into CCB and its banking subsidiary, FB&T.
(3)  The  Woodland  Hills  branch  office and the Long Beach  branch  offices of
     Highland  Federal  Savings  Bank,  F.S.B.  were  acquired by FB&T through a
     purchase of certain  assets and  assumption of deposit  liabilities  of the
     branch  offices.  Total  assets  consist  primarily of cash  received  upon
     assumption of deposit liabilities.
(4)  Sunrise  Bancorp,  Inc.  and its banking  subsidiary,  and Surety Bank were
merged into FBA and its indirect banking subsidiary, FB California.

     Except for the acquisition of Surety Bank, these  acquisitions  were funded
by First  Banks  from  available  cash  reserves,  proceeds  from the  sales and
maturities  of  available-for-sale  investment  securities,  borrowing  under  a
promissory  note to a former  shareholder,  borrowing  under First Banks' credit
agreement with a group of unaffiliated banks (Credit Agreement) and the proceeds
of the Preferred Securities issued in February 1997. The 49% cash portion of the
acquisition of Surety Bank was funded from available cash. The remaining 51% was
acquired through an exchange of shares of common stock of FBA. See Note 2 to the
consolidated financial statements.

     On December 1, 1997, Sunrise Bank of California and Surety Bank were merged
into FB California,  a newly-formed California state bank. In February 1998, FCB
was acquired by FBA in an exchange of FBA common stock for FCB common stock.  In
connection with this transaction,  FCB was merged into a wholly owned subsidiary
of FBA, and First  Commercial  was merged into FB  California.  In addition,  on
February 2, 1998, FBA acquired  Pacific Bay Bank,  which was then merged into FB
California. As of December 31, 1997, Pacific Bay Bank had $37.5 million in total
assets, $29.3 million in total loans, net of unearned discount,  $1.9 million in
total  interest-bearing  deposits with other  financial  institutions  and $33.9
million  in total  deposits.  Pacific  Bay Bank  operates  through  one  banking
location in San Pablo,  California and one loan production  office in Lafayette,
California.

Financial Condition and Average Balances

     First Banks'  average  total  assets were $3.82  billion for the year ended
December 31,  1997,  compared to $3.53  billion and $3.50  billion for the years
ended  December  31, 1996 and 1995,  respectively.  Total assets at December 31,
1997 were $4.17  billion,  an increase  of $480  million,  or 13.0%,  over total
assets of $3.69  billion at December 31, 1996.  The increase in total assets was
primarily attributable to $72.8 million of assets provided in the acquisition of
Surety Bank, growth in total loans of $180 million,  excluding those acquired in
the  acquisition of Surety Bank of $54.4 million,  and an increase in investment
securities of $230.9 million,  excluding those  attributable to Surety Bank. The
increase in total  assets was  partially  offset by a decrease in Federal  Funds
sold of $50.6  million to $23.5  million from $74.1 million at December 31, 1997
and 1996, respectively.

     Loans, net of unearned discount, increased by $234 million to $3.00 billion
at December 31, 1997 from $2.77 billion at December 31, 1996. The acquisition of
Surety  Bank  provided  $54.4  million  of loans,  $31.7  million  of which were
one-to-four  family  residential  real estate loans. In addition to these loans,
$378.9  million of net loan growth was  provided by corporate  banking  business
development,  consisting  of  an  increase  of  $159.7  million  of  commercial,
financial and agricultural loans, $120.5 million of real estate construction and

<PAGE>

land development loans and $98.7 million of commercial real estate loans.  These
increases were  partially  offset by continuing  reductions in residential  real
estate loans of $144.7  million and in consumer and  installment  loans,  net of
unearned  discount,  which consists  primarily of indirect  automobile loans, of
$54.3  million.  These changes are the result of the focus which First Banks has
placed on its business development efforts and the portfolio reorientation which
began  in  1995.  This  reorientation  provided  that  substantially  all of the
conforming  residential mortgage loan production of First Banks would be sold in
the secondary mortgage market,  and that the origination of indirect  automobile
loans would be substantially reduced.  Tables summarizing the composition of the
loan portfolio are presented under "--Lending and Credit Management."

     The increase in assets was funded by an increase in total  deposits of $440
million to $3.68 billion at December 31, 1997 from $3.24 billion at December 31,
1996, an increase of 13.8%.  This increase  included the deposits of Surety Bank
of $67.5 million,  and the deposits of three branches of Highland  Federal Bank,
F.S.B.  of $82.8  million  which were  acquired  during the year.  Excluding the
acquired deposits, total deposits increased by $295.7 million for the year. This
is the result of First Banks' retail marketing efforts,  the commercial business
development program and the opening of two new branch offices during the year. A
summary of the composition of deposits is presented under "--Deposits."

     In January  1997,  First Banks  formed First  Trust,  a Delaware  statutory
business  trust,  for the purpose of conducting a public  offering of cumulative
trust securities.  First Banks owns all of the common securities of First Trust.
On  February  3, 1997,  First Trust  issued and sold,  pursuant to an  effective
registration  statement  filed  with the  Securities  and  Exchange  Commission,
3,450,000 shares of 9.25% Preferred Securities for $86.25 million. The Preferred
Securities,  which are publicly  held,  are listed on the Nasdaq Stock  Market's
National  Market  System and have no voting  rights  except in  certain  limited
circumstances.  After payment of offering expenses, the proceeds of the offering
were used to reduce  borrowings  under the Credit  Agreement,  for  purchases of
shares of Class C Preferred Stock, and for various short-term investments.

     On December 1, 1997, First Banks redeemed all of its remaining  outstanding
Class C Preferred  Stock for $47.1  million.  The effect of the redemption was a
reduction  of  First  Banks'  total   stockholders'   equity,  and  consequently
regulatory capital, by the amount of the redemption.  However,  the structure of
the Preferred Securities satisfies the regulatory requirements to be included in
First Banks' capital base in a manner identical to the Class C Preferred Stock.

     For the year ended  December  31,  1996,  total  average  assets were $3.53
billion  compared to $3.50 billion for the year ended  December 31, 1995.  Total
assets at December 31, 1996 were $3.69 billion,  an increase of $70 million from
total assets of $3.62  billion at December 31, 1995.  The increase was primarily
attributable to the acquisition of Sunrise Bancorp,  Inc., which provided $110.8
million in total assets.  This increase was partially  offset by a settlement in
January 1996 of the sale of $41.3  million of investment  securities  which were
reflected as a receivable at December 31, 1995. Loans, net of unearned discount,
increased to $2.77  billion at December 31, 1996 from $2.74  billion at December
31,  1995.  Included in this growth was $61.1  million of loans  provided by the
acquisition  of Sunrise  Bancorp,  Inc. and a net increase of $209.3  million in
loans through First Banks' commercial  business  development  efforts.  However,
this was  substantially  offset by  decreases  in  residential  real  estate and
consumer  and  installment  loans,  net  of  unearned  discount,  which  consist
primarily  of  indirect   automobile   loans,   of  $164.4  and  $82.2  million,
respectively.

     Deposits increased to $3.24 billion at December 31, 1996 from $3.18 billion
at December 31, 1995. The  acquisition  of Sunrise  Bancorp,  Inc.  provided $92
million of deposits,  which was partially offset by a decrease of $32 million in
time deposits of $100,000 or more to $169 million at December 31, 1996 from $201
million at December 31, 1995.


<PAGE>




     The  following  table  sets  forth,  on  a  tax-equivalent  basis,  certain
information  relating to First Banks' 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.
<TABLE>
<CAPTION>

                                                                         For the years ended December 31,
                                                ---------------------------------------------------------
                                                           1997                       1996                          1995
                                                ------------------------     ----------------------      ---------------
                                                         Interest                    Interest                     Interest
                                                Average   income/ Yield/     Average  income/ Yield/     Average   income/ Yield/
                   ASSETS                       balance   expense  rate      balance  expense  rate      balance   expense  rate
                                                                           (dollars expressed in thousands)
Interest-earning assets:
    Loans: (1) (2)
<S>                                          <C>         <C>        <C>   <C>         <C>       <C>    <C>        <C>       <C>  
       Taxable............................   $2,837,190  252,089    8.89% $2,714,387  236,527   8.71% $2,585,763  220,931   8.54%
       Tax-exempt (3).....................        8,967    1,042   11.62      11,910    1,311  11.01      13,173    1,543  11.71
    Investment securities:
       Taxable (4)........................      598,660   35,248    5.89     469,832   22,650   4.82     585,868   34,379   5.87
       Tax-exempt (3) (4).................       19,056    1,552    8.15      22,648    1,889   8.34      26,751    2,138   7.99
    Federal funds sold....................      125,825    5,322    4.23      63,802    3,352   5.25      52,208    2,905   5.56
    Other.................................       12,138      757    6.24      25,634    1,410   5.50      14,602    1,013   6.94
                                             ----------  -------          ----------  -------         ----------  -------
         Total interest-earning assets....    3,601,836  296,010    8.22   3,308,213  267,139   8.08   3,278,365  262,909   8.02
                                                         -------                      -------                     -------       
Nonearning assets.........................      215,890                      224,175                     219,445
                                             ----------                   ----------                 -----------
         Total assets.....................   $3,817,726                   $3,532,388                 $ 3,497,810
                                             ==========                   ==========                 ===========

               LIABILITIES AND
            STOCKHOLDERS' EQUITY

Interest-bearing liabilities:
    Interest bearing deposits:
       Interest-bearing demand deposits...   $  332,712     5,648   1.70% $  304,247    4,845   1.59%  $ 279,681    5,760   2.06%
       Savings deposits...................      761,052    27,383   3.60     683,009   21,769   3.19     663,870   22,737   3.42
       Time deposits of $100 or more (4)..      183,223    11,008   6.01     164,453    9,665   5.88     166,232    9,931   5.97
       Other time deposits (4)............    1,681,014   100,954   6.01   1,592,657   95,813   6.02   1,443,026   83,595   5.79
                                             ----------   -------         ----------  -------          ---------  -------
         Total interest-bearing deposits..    2,958,001   144,993   4.90   2,744,366  132,092   4.81   2,552,809  122,023   4.78
    Federal funds purchased, repurchase
     agreements and Federal Home Loan 
     Bank advances (4)....................       75,016     2,463   3.28      64,021    3,964   6.19     256,333   16,850   6.57
    Notes payable and other...............       17,883     1,375   7.69      76,892    5,614   7.30      83,068    6,072   7.31
                                             ----------    ------          ----------  -------         ---------  -------
         Total interest-bearing 
          liabilities.....................    3,050,900   148,831   4.88   2,885,279  141,670   4.91   2,892,210  144,945   5.01
                                                          -------                      -------                    -------       
Noninterest-bearing liabilities:
    Demand deposits.......................      394,580                      368,786                     345,397
    Other liabilities.....................      116,359                       38,413                      33,345
                                             ----------                   ----------                   ---------
         Total liabilities................    3,561,839                    3,292,478                   3,270,952
Stockholders' equity......................      255,887                      239,910                     226,858
                                             ----------                   ----------                   ---------
         Total liabilities and
           stockholders' equity...........   $3,817,726                   $3,532,388                  $3,497,810
                                             ==========                   ==========                  ==========
Net interest income.......................                147,179                     125,469                      117,964
                                                          =======                     =======                      =======
Interest rate spread......................                          3.34                        3.17                        3.01
Net interest margin.......................                          4.09%                       3.79%                       3.60%
                                                                    ====                        ====                        ====
-----------------
(1) For  purposes of these  computations,  nonaccrual  loans are included in the
    average loan  amounts.
(2) Interest  income on loans  includes  loan fees.  
(3) Information is presented on a  tax-equivalent  basis assuming a tax rate  of
    35%. The  tax-equivalent  adjustments  were  approximately  $909,000,   $1.1
    million  and $1.3  million  for  the years ended December 31, 1997, 1996 and
    1995, respectively.
(4) Includes the effects of interest rate exchange agreements.

</TABLE>

<PAGE>


     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.
<TABLE>
<CAPTION>

                                                         Increase (decrease) attributable to change in:
                                                         ----------------------------------------------
                                                  December 31, 1997 compared       December  31, 1996 compared
                                                     to December 31, 1996             to December 31, 1995
                                                ----------------------------       ----------------------------
                                                                          Net                                Net
                                               Volume        Rate       Change     Volume       Rate       Change
                                               ------        ----       ------     ------       ----       ------
                                                                   (dollars expressed in thousands)
Interest earned on:
    Loans: (1) (2)
<S>                                          <C>            <C>        <C>        <C>          <C>        <C>   
       Taxable...........................    $ 10,682       4,880      15,562     11,139       4,457      15,596
       Tax-exempt (3)....................        (347)         78        (269)      (143)        (89)       (232)
    Investment securities:
       Taxable (4).......................       6,962       5,636      12,598     (6,163)     (5,566)    (11,729)
       Tax-exempt (3) (4)................        (295)        (42)       (337)      (349)        100        (249)
    Federal funds sold...................       2,462        (492)      1,970        597        (150)        447
    Other................................        (877)        224        (653)       547        (150)        397
                                             --------      ------      ------      -----      ------      ------
           Total interest income.........    $ 18,587      10,284      28,871      5,628      (1,398)      4,230
                                             --------      ------      ------      -----      ------      ------
Interest paid on:
    Interest-bearing demand deposits.....    $    462         341         803        573      (1,488)       (915)
    Savings deposits.....................       2,642       2,972       5,614        678      (1,646)       (968)
    Time deposits of $100 or more........       1,125         218       1,343       (110)       (156)       (266)
    Other time deposits (4)..............       5,300        (159)      5,141      8,834       3,384      12,218
    Federal funds purchased, repur-
       chase agreements and Federal
       Home Loan Bank advances (4).......         864      (2,365)     (1,501)   (11,964)       (922)    (12,886)
    Notes payable and other..............      (4,556)        317      (4,239)      (450)         (8)       (458)
                                             --------      ------      ------      -----      ------      ------
           Total interest expense........    $  5,837       1,324       7,161     (2,439)       (836)     (3,275)
                                             --------      ------      ------      ------     ------      -------
           Net interest income...........    $ 12,750       8,960      21,710      8,067        (562)      7,505
                                             ========      ======      ======      =====      ======      ======
---------------
(1) For  purposes of these  computations,  nonaccrual  loans are included in the
average loan  amounts.  (2) Interest  income on loans  includes  loan fees.  (3)
Information is presented on a tax-equivalent basis assuming a tax rate of 35%.
(4) Includes the effect of interest rate exchange agreements.
</TABLE>

Net Interest Income

     First Banks' primary source of earnings is its net interest  income,  which
is the  difference  between the  interest  earned on its earning  assets and the
interest  paid  on  its  interest-bearing   liabilities.   Net  interest  income
(expressed on a  tax-equivalent  basis) increased to $147.2 million for the year
ended  December 31, 1997,  from $125.5  million and $118.0 million for the years
ended  December  31, 1996 and 1995,  respectively.  Although  both net  interest
income and net interest  margin,  which is net interest  income  (expressed on a
tax-equivalent basis) expressed as a percentage of interest-earning assets, have
increased  significantly  during  these  periods,  the net  interest  margin has
continued  to remain  below  average for  commercial  banks.  For the year ended
December 31, 1997,  net interest  margin was 4.09%,  compared to 3.79% and 3.60%
for the years ended December 31, 1996 and 1995, respectively.

     During periods of rapid growth through cash acquisitions,  the net interest
margin  frequently  decreases  because  the  reduction  of  interest  income  on
internally generated funds used in acquisitions and the interest expense on debt
incurred in the transactions offsets a portion of the net interest income of the
entities  acquired.  As a result,  during  this period  interest-earning  assets
increased more rapidly than net interest  income,  contributing to the lower net
interest margin in 1995. As discussed below, there were other additional factors
involved.
<TABLE>
<CAPTION>

     Since 1990,  First Banks has acquired ten thrifts in various  transactions.
As  previously  discussed,  both the  regulatory  requirements  and the historic
customer   bases  of  thrifts  tend  to  result  in  balance  sheets  which  are
predominately  comprised of residential mortgage loans,  frequently supplemented
by mortgage-backed  securities, for interest earning assets, and certificates of
deposit as a primary source of funds.  Because of the  competitive,  homogeneous
nature of residential  mortgage loans and certificates of deposit,  the interest
rate  spreads  between them tend to be more narrow than other types of loans and
funding sources. First Banks' average yield on residential real estate loans and
average cost of certificates of deposit,  compared to those of other segments of
its loan portfolio and interest-bearing deposits, respectively, were as follows:

                                                                                            Interest
                                                                   Average    Percent of     income/   Yield/
                                                                  balances       total       expense    rate
                                                                  --------       -----       -------    ----
                                                                       (dollars expressed in thousands)

     Year ended December 31, 1997:
<S>                                                             <C>             <C>       <C>           <C>  
         Residential mortgage loans...........................  $ 1,025,442     36.03%    $  83,248     8.12%
         Other loans..........................................    1,820,715     63.97       169,883     9.33
                                                                -----------   -------     ---------
             Total loans......................................  $ 2,846,157    100.00%    $ 253,131     8.89
                                                                ===========    ======     =========     ====

         Certificates of deposit..............................  $ 1,864,237     63.02%    $ 111,962     6.01%
         Other interest-bearing deposits......................    1,093,764     36.98        33,031     3.02
                                                                -----------   -------     ---------
           Total interest-bearing deposits....................  $ 2,958,001    100.00%    $ 144,993     4.90
                                                                ===========    ======     =========     ====

     Year ended December 31, 1996:
         Residential mortgage loans...........................  $ 1,154,231     42.34%    $  93,282     8.08%
         Other loans..........................................    1,572,066     57.66       144,556     9.20
                                                                -----------   -------     ---------
           Total loans........................................  $ 2,726,297    100.00%    $ 237,838     8.72
                                                                ===========   =======     =========     ====

         Certificates of deposit..............................  $ 1,757,110     64.03%    $ 105,478     6.00%
         Other interest-bearing deposits......................      987,256     35.97        26,614     2.70
                                                                -----------   -------     ---------
           Total interest-bearing deposits....................  $ 2,744,366    100.00%    $ 132,092     4.81
                                                                ===========    ======     =========     ====
</TABLE>

     In  addition  to the  narrow  interest  rate  spread  between  the yield on
residential  mortgage  loans  and the rates  paid on  certificates  of  deposit,
residential  mortgage  loans  introduce  various  prepayment   alternatives  for
borrowers  which,  when combined  with  inexpensive  refinancing  opportunities,
accelerate  principal repayments in periods of declining interest rates, thereby
exacerbating their inherent interest rate risk.

     In order to enhance its net interest income through increased yields on its
loan portfolio and to reduce the interest rate risk associated with  residential
mortgage  loans,  First  Banks  initiated  a plan  to  reduce  its  reliance  on
residential  mortgage loans within its  portfolio.  This change in the portfolio
composition required the concurrent internal generation of other types of loans,
particularly commercial and financial, real estate construction and development,
and commercial real estate loans, a process which had previously been initiated.
Consequently,  this  process  focused  on  continuing  to  build  this  business
development  function,  as well as the control and servicing  staff necessary to
support it. As the growth of other loans  developed,  First Banks  expanded  its
sale of conforming residential mortgage loans in the secondary market to include
essentially all new loan production. This process was expedited by the sale of a
portfolio of residential mortgage loans of $147 million in 1995. See "--Mortgage
Banking Activities" and "--Loans and Allowance for Possible Loan Losses."

     At the same time,  in order to limit its  interest  rate risk,  First Banks
expanded  its risk  management  capabilities  to  improve  its risk  measurement
techniques  and  reporting,  and increase its risk  control  alternatives.  This
included  initiating  a  program  of  substantial  use of  derivative  financial
instruments to reduce interest rate exposure.  First Banks uses a combination of
swaps,  caps  and  floors  to  reduce  its  exposure,   primarily  arising  from
residential  mortgage  loans  and  mortgage-backed  securities.  Although  these
financial  instruments are effective in reducing interest rate risk, the expense
associated with them has had a significant effect on net interest income.
<TABLE>
<CAPTION>
                                                   Cost of interest rate
                                                   ---------------------
                                                                   Swap, cap       Reduction       Effect on
                                               Futures and        and floor         of net       net interest
                                          options on futures      agreements    interest income   margin (1)
                                          ------------------      ----------    ---------------   ----------
                                                      (dollars expressed in thousands)          (expressed  in
          Year ended December 31:                                                                basis points)

<S>                                             <C>                  <C>             <C>           <C>   
               1997..........................   $    --              6,574           6,574         (0.18)
               1996..........................     3,875              7,623          11,498         (0.35)
               1995..........................     2,210              6,911           9,121         (0.28)
---------------
(1) Effect on net  interest  margin is  expressed  as  reduction of net interest
income divided by average earning assets.
</TABLE>
<PAGE>


Interest Rate Risk Management
     In 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,  relative to those within its deposit structure,  may
differ significantly.  This is influenced by the characteristics of the loan and
deposit markets within which First Banks operates, as well as its objectives for
business development within those markets at any point in time. In addition, the
ability of borrowers to repay loans and  depositors  to withdraw  funds prior to
stated maturity dates introduces divergent option  characteristics which 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 nature 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,  a fundamental  requirement  in managing a financial
institution is establishing effective control of the exposure of the institution
to changes in interest rates.

     First Banks  manages its interest  rate risk by: (1)  maintaining  an Asset
Liability  Committee  (ALCO)  responsible  to First Banks' Board of Directors to
review the overall  interest rate risk  management  activity and approve actions
taken to reduce risk; (2) maintaining an effective simulation model to determine
First  Banks'  exposure  to changes in  interest  rates;  (3)  coordinating  the
lending, investing and deposit-generating functions to control the assumption of
interest  rate  risk;  and (4)  employing  various  off-balance-sheet  financial
instruments to offset inherent interest rate risk when it becomes excessive. The
objective of these  procedures  is to limit the adverse  impact which changes in
interest rates may have on 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 the
Chairman and Chief  Executive  Officer,  the senior  executives of  investments,
credit,  retail  banking,  commercial  banking and  finance,  and certain  other
officers.  The ALCO is supported by the Asset Liability  Management  Group which
monitors  interest  rate  risk,  prepares  analyses  for  review by the ALCO and
implements  actions  which  are  either  specifically  directed  by the  ALCO or
established by policy guidelines.

     The objective and primary  focus of interest  sensitivity  management is to
optimize earnings results,  while managing,  within internal policy constraints,
interest  rate  risk.  First  Banks'  policy  on rate  sensitivity  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,  First Banks recalculates
its 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,  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,  First Banks  includes a forecast
based on actual  changes in interest  rates which have  occurred over a two-year
period,   simulating  both  a  declining  and  rising  interest  rate  scenario.
Consistent  with the table  presented  below,  which  indicates  First  Banks is
"asset-sensitive,"  First Banks'  simulation model indicates a loss of projected
net income should  interest rates decline.  While a decline in interest rates of
less  than  10% has a  diminutive  effect  on the  earnings  of First  Banks,  a
significant  decline in interest  rates,  resembling  the actual  decline  which
occurred over a two-year  period  commencing in March 1991,  indicates a loss of
net income  equivalent to  approximately  4% of net interest income for the year
ended December 31, 1997.

     As   discussed   previously,   First   Banks  has   expanded   its  use  of
off-balance-sheet  derivative financial  instruments to assist in the management
of the interest rate  sensitivity  inherent in its balance  sheet,  particularly
that   arising   from  its   portfolio  of   residential   mortgage   loans  and
mortgage-backed securities relative to its deposit structure.

<PAGE>

<TABLE>
<CAPTION>

These off-balance-sheet  derivative financial instruments effectively modify the
repricing,  maturity and option  characteristics  of its assets and liabilities.
See  Notes  1 and  11  to  the  consolidated  financial  statements.  Derivative
financial instruments held by First Banks for purposes of managing interest rate
risk are as follows:


                                                                                December 31,
                                                                                ------------
                                                                        1997                   1996
                                                                        ----                   ----
                                                                 Notional     Credit    Notional     Credit
                                                                  amount    exposure     amount    exposure
                                                                 --------    --------     ------    --------
                                                                      (dollars expressed in thousands)
<S>                                                             <C>             <C>      <C>            <C>
        Interest rate swap agreements.........................  $     --         --       70,000         --
        Interest rate floor agreements........................    70,000         26      105,000        141
        Interest rate cap agreements..........................    10,000        222       10,000        335
        Forward commitments to sell mortgage-backed securities    60,000         --       35,000        308
</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 derivative financial instruments.  The
amounts  exchanged are  determined by reference to the notional  amounts and the
other terms of the derivatives.

     First Banks uses  interest  rate swap  agreements  to extend the  repricing
characteristics  of certain  interest-bearing  liabilities  to  correspond  more
closely with its assets,  with the objective of stabilizing  net interest income
over time.  However,  the  utilization of swaps has decreased with the change in
the composition of its balance sheet, resulting in the termination or expiration
of all  remaining  swap  agreements  prior to December 31, 1997. At December 31,
1996 and 1995, there were interest rate swap agreements with notional amounts of
$70 million and $145 million  outstanding,  respectively.  The interest  expense
related to these agreements was $6.4 million,  $7.4 million and $6.6 million for
the years ended December 31, 1997, 1996 and 1995, respectively.

     In  connection  with  the  sale of a pool of $147  million  of  residential
mortgage loans and repayment of the related short-term borrowings,  in May 1995,
First Banks terminated a $100 million interest rate swap agreement  resulting in
a  loss  of  $3.3  million.  This  loss  on  termination  was  reflected  in the
consolidated  statement  of income  for the year ended  December  31,  1995.  In
addition,  the reduction in the  residential  mortgage  loan  portfolio has been
accompanied  by periods of increased  principal  prepayments  due to declines in
interest rates. These prepayments disproportionately shortened the expected life
of the loan  portfolio  relative  to the  effective  maturity  created  with the
interest rate swap agreements. Consequently, during July 1995, November 1996 and
July 1997, First Banks shortened the effective maturity of its  interest-bearing
liabilities  through  the  termination  of $225  million,  $75  million  and $35
million,  respectively,  of interest rate swap agreements resulting in losses of
$13.5 million,  $5.3 million and $1.4 million,  respectively.  These losses were
deferred  and  are  being  amortized  over  the  remaining  lives  of  the  swap
agreements.  If all or any portion of the underlying liabilities are repaid, the
related deferred losses are charged to operations.

     First Banks also uses interest  rate cap and floor  agreements to limit the
interest expense associated with certain of its interest-bearing liabilities and
the interest expense of certain interest rate swap agreements,  respectively. At
December  31, 1997 and 1996,  the  unamortized  costs of these  agreements  were
$290,000 and 433,000, respectively, and were included in other assets.

     As discussed under "--Mortgage Banking  Activities,"  derivative  financial
instruments issued by First Banks consist of commitments to originate fixed-rate
loans.   Commitments  to  originate   fixed-rate  loans  consist   primarily  of
residential  real  estate  loans.  These  loan  commitments,  net  of  estimated
underwriting  fallout, and loans held for sale are hedged with forward contracts
to sell mortgage-backed securities.


<PAGE>



     In addition to the simulation  model  employed by First Banks,  an interest
rate  sensitivity  position summary is prepared and reviewed in conjunction with
the results of the simulation  model. The following table presents the projected
maturities  and periods to repricing of First Banks'  rate-sensitive  assets and
liabilities as of December 31, 1997, adjusted to include prepayment assumptions:
<TABLE>
<CAPTION>

                                                                Over three  Over six
                                                     Three        through    through     Over one
                                                    months          six      twelve       through    Over five
                                                    or less       months     months     five years     years       Total
                                                    -------       ------     ------     ----------     -----       -----
                                                                    (dollars expressed in thousands)
Interest-earning assets:
<S>       <C>                                    <C>             <C>         <C>          <C>         <C>        <C>      
    Loans (1)..................................  $ 1,550,244     284,049     441,074      395,288     331,545    3,002,200
    Investment securities......................      191,300      37,794      56,840      374,683     134,913      795,530
    Federal funds sold.........................       23,515          --          --           --          --       23,515
    Interest-bearing deposits with other
      financial institutions...................        2,840          --          --           --          --        2,840
                                                 -----------    --------   ---------     --------    --------   ----------
        Total interest-earning assets..........  $ 1,767,899     321,843     497,914      769,971     466,458    3,824,085
                                                 ===========    ========   =========     ========    ========   ==========
Interest-bearing liabilities:
    Interest-bearing demand accounts...........  $   128,790      80,058      52,212       38,289      48,731      348,080
    Savings accounts...........................       96,873      79,912      68,496       97,036     228,320      570,637
    Money market demand accounts...............      376,392          --          --           --          --     376,392
    Time deposits..............................      466,143     415,455     536,528      222,233     263,905    1,904,264
    Other borrowed funds.......................      108,073         632          --          592          --      109,297
                                                 -----------    --------   ---------     --------    --------   ----------
        Total interest-bearing liabilities.....  $ 1,176,271     576,057     657,236      358,150     540,956    3,308,670
                                                 ===========     =======     =======     ========     =======    =========
Interest sensitivity gap:
    Periodic...................................  $   591,628    (254,214)    (159,322)    411,821     (74,498)
    515,415
    Cumulative.................................      591,628     337,414      178,092     589,913     515,415
                                                 ===========    ========    =========     ========    =======
Ratio of interest-sensitive assets to
    interest-sensitive liabilities:
      Periodic.................................         1.50         .56         .76         2.15         .86         1.16
                                                                                                                      ====
      Cumulative...............................         1.50        1.19        1.07         1.21        1.16
                                                        ====        ====        ====         ====        ====
------------------
(1)  Loans presented net of unearned discount.
</TABLE>

     Management  makes certain  assumptions in preparing the table above.  These
include the assumption that: (1) loans will repay at historic  repayment speeds;
(2)  interest-bearing  demand and savings  accounts are interest  sensitive at a
rate of 37% and 17%,  respectively,  of the  remaining  balance  for each period
presented:  and (3)  fixed  maturity  deposits  will not be  withdrawn  prior to
maturity.

     At  December  31,  1997 and 1996,  First  Banks was  asset  sensitive  on a
cumulative  basis through the  twelve-month  time horizon by $178.1 million,  or
4.28% of total assets,  and liability  sensitive by $115.9 million,  or 3.14% of
total assets,  respectively.  The increase in the  asset-sensitive  position for
1997  primarily  relates to the change in the  composition of the loan portfolio
and the issuance of the Preferred  Securities in February 1997, which provided a
long-term source of fixed-rate funding.

     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 First Banks' assets and  liabilities and
changes in interest rates. For this reason,  First Banks places greater emphasis
on a simulation model for monitoring its interest rate exposure.

Mortgage Banking Activities

     The mortgage banking  activities of First Banks consist of the origination,
purchase and servicing of residential  mortgage  loans.  Generally,  First Banks
sells  its  production  of  residential  mortgage  loans in the  secondary  loan
markets.  Servicing  rights are retained with respect to  conforming  fixed-rate
loans. Other loans are sold on a servicing released basis.
<PAGE>

     For the three years ended  December  31, 1997,  1996 and 1995,  First Banks
originated and purchased  loans for resale  totaling $174 million,  $136 million
and $67 million and sold loans  totaling  $148  million,  $113  million and $207
million,  respectively.  The  origination  and purchase of residential  mortgage
loans and the related  sale of the loans  provides  First Banks with  additional
sources of income  including  the interest  income earned while the loan is held
awaiting sale and ongoing loan servicing fees from the loans sold with servicing
rights retained.  Mortgage loans serviced for investors aggregated $784 million,
$847 million and $857 million at December 31, 1997, 1996 and 1995, respectively.
In  1995,  First  Banks  experienced  a  substantial  increase  in its  mortgage
servicing  portfolio as a result of the addition of loan servicing from acquired
companies and the expansion of its loan origination function into certain of the
markets of the acquired  entities.  In view of this  increase and the  favorable
sales prices  available in the market relative to the prospective  profitability
of the mortgage servicing rights, in July 1995, First Banks elected to sell $427
million of mortgage servicing rights, resulting in a gain of $3.8 million.

     The  interest  income on loans held for sale was $3.2 million for the years
ended  December 31, 1997,  1996 and 1995,  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 $35.4  million,  $36.3  million  and $36.8  million for the years ended
December 31, 1997,  1996 and 1995,  respectively.  On an annualized  basis,  the
yield on the portfolio of loans held for sale was 7.07%, 6.99% and 7.17% for the
years ended December 31, 1997, 1996 and 1995,  respectively.  This compares with
First  Banks'  cost  of  funds  as  a  percentage  of  average  interest-bearing
liabilities,  of 4.88%,  4.91% and 5.01% for the years ended  December 31, 1997,
1996 and 1995, respectively.

     Mortgage loan servicing fees are reported net of  mortgage-backed  security
guarantee fee expense, interest shortfall and amortization of mortgage servicing
rights.  Loan  servicing  fees,  net were $1.6  million,  $1.8  million and $2.9
million for the years ended December 31, 1997, 1996 and 1995, respectively.  The
decrease in loan servicing  fees of $200,000 for 1997 is primarily  attributable
to the sale of  adjustable  rate  residential  loan  production  on a  servicing
released  basis and a lower volume of  fixed-rate  residential  loan  production
which is  generally  sold with  servicing  retained.  For 1996,  the decrease is
primarily attributable to the sale of mortgage servicing rights.

     Ancillary  to the  origination  and  purchase of loans held for sale in the
secondary market are the realized and unrealized gains, net of losses,  incurred
during  the period  prior to sale.  These net gains or losses  include:  (1) the
adjustments  of the  carrying  values of loans held for sale to  current  market
values;  (2) the  adjustments  for any gains or losses on loan  commitments  for
which the interest rate has been  established,  net of anticipated  underwriting
"fallout";  and (3) the related cost of hedging the loans held for sale and loan
commitments  during the period First Banks is exposed to interest rate risk. The
gain on mortgage loans originated for resale,  including loans sold and held for
sale,  was $716,000 and $40,000 for the years ended  December 31, 1997 and 1996,
respectively.  For the year ended December 31, 1995, First Banks incurred a loss
on mortgage loans sold and held for sale of $608,000.

     As described under "--Interest Rate Risk Management," First Banks' interest
rate risk management  policy provides  certain hedging  parameters to reduce the
interest  rate  exposure  arising  from  changes in loan prices from the time of
commitment  until the sale of the  security or loan.  To reduce  this  exposure,
First  Banks  uses  forward  commitments  to  sell  fixed-rate   mortgage-backed
securities  at a specified  date in the future.  At December 31, 1997,  1996 and
1995,  First  Banks  had  $67.4  million,   $36.7  million  and  $42.4  million,
respectively,  of loans held for sale and related commitments,  net of committed
loan sales and estimated  underwriting  fallout,  of which $60.0 million,  $35.0
million and $42.0  million,  respectively,  were hedged  through the use of such
forward commitments.

Comparison of Results of Operations for 1997 and 1996

     Net  Income.  Net  income for the year ended  December  31,  1997 was $33.0
million,  compared  to $20.2  million  for  1996.  Excluding  the  effect of the
one-time Savings  Association  Insurance Fund (SAIF)  assessment of $8.2 million
($5.3  million  after the related  income tax  effect),  net income for the year
ended  December  31, 1996 would have been $25.5  million.  The return on average
assets for 1997 was 0.87%,  compared  with 0.57% for 1996 (0.72%  excluding  the
effect of the SAIF  assessment).  The improvement in operating  results for 1997
reflects  several  influences  which had various effects on income for the year,

<PAGE>

including:  (1) the continuation of the amalgamation of the entities acquired in
recent years into First Banks'  systems;  (2) the overall  improvement  in asset
quality,  particularly within the acquired entities in Texas and California; and
(3) the expansion of First Banks' internal business development capacity.

     During 1994 and 1995, First Banks completed twelve  acquisitions  which had
an aggregate of $1.96  billion in total  assets and 43 banking  locations.  This
acquisition activity decreased substantially in 1996 and 1997, during which time
management  focused on  continuing to meld these  entities into its  operations,
systems and culture,  and achieve the efficiencies and opportunities  envisioned
when the entities were acquired.  As discussed  under  "--General,"  most of the
acquired  institutions  exhibited  elements of financial distress prior to their
acquisitions  which  contributed to marginal  earnings  performance.  Generally,
these were the result of asset quality problems and/or high overhead expenses.

     Following   acquisition,   the  most  immediate  tasks  required  were  the
improvement  of asset  quality  and the  elimination  of  unnecessary  expenses.
Although many improvements were instituted  shortly after  acquisition,  many of
the problems which existed were indigenous,  requiring a much longer time period
to resolve.  This involved not only many problem  assets,  which had no apparent
short-term  solution,   but  also  other  elements  of  expense.  This  included
addressing  such  areas  as:  (1)  maintenance,  repairs  and,  in  some  cases,
refurbishing  of bank premises  necessitated by the deferral of such projects by
the acquired  entities;  (2) long-term  leases which provided space in excess of
that necessary for banking  activities  and/or rates in excess of current market
rates;  (3) relocation of branch  offices which were not adequate,  conducive or
convenient for retail banking  operations;  and (4) management of lawsuits which
had existed  with  respect to acquired  entities to minimize the overall cost of
negotiation, settlement or litigation.

     However,  the process which was required after acquisition was not only one
of reducing expenses and improving asset quality, but the combining of different
entities together to form a single cohesive  organization with common objectives
and focus. This involved a significant  post-acquisition investment of resources
by First  Banks  to  reorganize  staff,  recruit  personnel  where  needed,  and
establish  the  direction  and focus  necessary  for the combined  banks to take
advantage of the opportunities  available to them. While this contributed to the
increases  in  noninterest  expenses  during the three years ended  December 31,
1997, it also resulted in the creation of new banking entities which were unlike
any of the  merged  entities  individually.  These  banks  were able to convey a
consistent  image and quality of service,  provide a complete array of financial
products to their customers and compete effectively in their marketplaces,  even
in the presence of other financial institutions with much greater resources.
<TABLE>
<CAPTION>

     While  some  of  these  activities  did not  contribute  to  reductions  of
noninterest  expenses,  they  contributed to the commercial and retail  business
development efforts of the banks, and ultimately to their overall profitability.
As a result of this, the  contribution to  consolidated  net income by the Texas
and California banks escalated sharply in 1997, as indicated below:


                                                             California             Texas                Other
                                                            -------------       --------------     ----------------
                                                            1997     1996 (1)   1997     1996 (1)  1997     1996 (1)
                                                            --------------   -----------------   ------------------
                                                                    (dollars expressed in thousands)
     Year ended December 31:
<S>                                                     <C>          <C>       <C>         <C>     <C>        <C>   
         Equity in income of subsidiaries.............. $  7,488     5,259     1,675       806     31,686     24,542
         Average investment in subsidiaries............   76,330    54,114    25,178    23,202    220,134    212,850
              Return on average investment.............     9.81%     9.72%     6.65%     3.47%     14.39%     11.53%
---------
(1) Excludes the effect of the one-time FDIC special assessment,  net of related
tax benefits.
</TABLE>

     As this process was occurring in the acquired banks,  First Banks continued
the expansion of its business  development function throughout the organization.
As discussed under  "--Financial  Condition and Average Balances," this included
not only the addition of  commercial  business  development  and retail  banking
personnel, but also increases in the support and administrative staffs necessary
to  deliver,  control and manage the added  volume of  business.  Although  this
contributed to the increase in noninterest expenses, it also was the impetus for
the  internal  growth of First  Banks in 1996 and 1997,  as its  growth  through
acquisitions  decreased.  For the year ended  December 31, 1997,  the  corporate
banking business  development  function provided a net loan increase,  excluding
loans added through acquisitions, of $378.9 million. This increase was partially
offset by decreases  of $199.0 of  residential  real estate and  consumer  loans
reflecting the ongoing reorientation of the consolidated loan portfolio.
<PAGE>

     In February 1997, First Banks,  through First Trust, sold $86.25 million of
Trust  Securities,   as  described  under  "--Financial  Condition  and  Average
Balances."  Initially,  the  proceeds  of  this  offering  were  applied  to the
reduction  of First  Banks'  borrowing  under its Credit  Agreement  and to open
market  purchases and retirements of its Class C Preferred Stock. On December 1,
1997, First Banks redeemed all of the remaining Class C Preferred Stock. Because
the Preferred Securities represent debt under Internal Revenue Regulations,  but
are considered capital for purposes of bank regulatory requirements, payments to
security  holders  are  reflected  in the  accompanying  consolidated  financial
statements as a component of  noninterest  expense.  Consequently,  for the year
ended December 31, 1997, the expense  associated  with the Preferred  Securities
contributed to a reduction in interest expense, due to the repayment of borrowed
funds, and to an increase in noninterest expense. Furthermore, to the extent the
Class C  Preferred  Stock was  redeemed  prior to the payment of  dividends,  it
reduced  the  aggregate  dividends  for the  year,  which are  reflected  in the
consolidated  statements of income as a reduction from net income in arriving at
net income available to common stockholders.
<TABLE>
<CAPTION>

     Provision for Possible Loan Losses.  The provision for possible loan losses
was $11.3  million  for the year ended  December  31,  1997,  compared  to $11.5
million  for 1996.  Net loan  charge-offs  were $7.6  million for the year ended
December 31, 1997,  compared to $19.7 million for 1996.  Although  asset quality
has continued to improve,  particularly with respect to its Texas and California
banks,  First Banks has continued to provide for possible loan losses relatively
aggressively  in recognition of the overall growth in the loan portfolio as well
as  its  changing  composition.  As  the  portfolio  changes  from  one  with  a
significant  preponderance  in  residential  real  estate  loans,  to one having
substantial  portions of  commercial,  financial and  agricultural  loans,  real
estate  construction and development loans and commercial real estate loans, the
credit risk profile of the  portfolio  increases.  Typically,  residential  real
estate  lending  has  resulted  in  relatively  minor  credit  losses.  However,
commercial  lending carries with it greater credit risk which,  although managed
through  appropriate  loan  policies  and  procedures,  underwriting  and credit
administration, must be recognized through adequate allowances for possible loan
losses.  The following is a summary of loan loss  experience  and  nonperforming
assets by geographic area for the years ended December 31, 1997 and 1996:


                                            California             Texas                 Other                Total
                                          --------------       -------------       ----------------       ---------------
                                           1997     1996       1997     1996       1997       1996       1997        1996
                                           ----     ----       ----     ----       ----       ----       ----        ----

                                                                     (dollars expressed in thousands)

<S>                                   <C>         <C>        <C>      <C>      <C>        <C>         <C>        <C>      
    Total loans...................... $  640,366  467,233    176,341  180,068  2,185,493  2,120,668   3,002,200  2,767,969
    Total assets.....................  1,042,979  732,532    271,686  270,309  2,850,349  2,686,313   4,165,014  3,689,154
    Provision for possible
      loan losses....................      2,500    5,879      1,500    1,000      7,300      4,615      11,300     11,494
    Net loan charge-offs.............      1,510   11,765      1,091    2,677      5,001      5,274       7,602     19,716
    Net loan charge-offs as a percentage
       of average loans..............       0.30%    2.42%      0.63%    1.53%     0.23%       0.25%       0.27%      0.72%
    Nonperforming loans.............. $    5,548   14,726        211      164     18,307     15,379      24,066     30,269
    Nonperforming assets.............      7,717   18,402        296      835     23,377     21,639      31,390     40,876

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

     Noninterest  Income  and  Expense.  A summary  of  noninterest  income  and
noninterest  expense for the years  ended  December  31,  1997 and 1996  appears
below:
                                                                              December 31,       Increase (decrease)
                                                                              ------------       -------------------
                                                                           1997        1996      Amount        %
                                                                           ----        ----      ------     ------
                                                                               (dollars expressed in thousands)
Noninterest income:
<S>                                                                     <C>           <C>           <C>      <C>   
    Service charges on deposit accounts and customer service fees....   $ 12,491      12,521        (30)     (.24)%
    Credit card fees.................................................      2,914       2,475        439     17.74
    Loan servicing fees, net.........................................      1,628       1,837       (209)   (11.38)
    (Gain) loss on mortgage loans sold and held for sale.............        716          40        676  1,690.00
    Trust and brokerage fees.........................................        893         782        111     14.19
    Net gain (loss) on sales of securities...........................      2,456        (311)     2,767    889.71
    Other............................................................      4,599       3,377      1,222     36.19
                                                                        --------    --------     ------
            Total noninterest income.................................   $ 25,697      20,721      4,976     24.01
                                                                        ========    ========     ======    ======
Noninterest expense:
    Salaries and employee benefits...................................   $ 43,011      39,995      3,016      7.54%
    Occupancy, net of rental income..................................     10,617       9,758        859      8.80
    Furniture and equipment..........................................      7,618       7,218        400      5.54
    Federal Deposit Insurance Corporation premiums...................        804      11,715    (10,911)   (93.14)
    Postage, printing and supplies...................................      4,187       4,687       (500)   (10.67)
    Data processing fees.............................................      8,450       4,477      3,973     88.74
    Legal, examination and professional fees.........................      4,587       4,901       (314)    (6.41)
    Credit card expenses.............................................      3,343       2,913        430     14.76
    Communications...................................................      2,611       2,635        (24)     (.91)
    Advertising......................................................      4,054       2,224      1,830     82.28
    (Gain) loss on foreclosed real estate, net of expenses...........       (331)      1,927     (2,258)  (117.18)
    Guaranteed preferred debenture expense...........................      7,322          --      7,322        --
    Other............................................................     14,014      13,291        723      5.44
                                                                        --------    --------     ------
           Total noninterest expense.................................   $110,287     105,741      4,546      4.30
                                                                        ========    ========     ======    ======
</TABLE>


     Noninterest  income was $25.7 million for the year ended December 31, 1997,
compared to $20.7 million for 1996.  The increase is primarily  attributable  to
net gains on sales of securities,  an increase in the net gain on mortgage loans
sold and held for sale, and various  increases in other income.  Overall,  there
were no significant  changes in other  components of noninterest  income for the
year.

     Although the  acquisitions of Sunrise Bank in November 1996, three branches
of Highland Federal Bank,  F.S.B. in March and September 1997 and Surety Bank in
December  1997 added new customer  accounts on which  service  charges  could be
assessed,  overall customer service charges declined from $12.52 million for the
year ended  December 31, 1996 to $12.49  million in 1997.  This  reflects  three
factors.  First,  following an acquisition  and  subsequent  conversion to First
Banks' account  structure and data processing  system, a period of moratorium on
assessing of service charges is provided to allow customers to become acclimated
to the changes which have occurred and become familiar with First Banks.  During
this  period,  which may be as long as six months from the date of  acquisition,
service charges do not increase,  and may actually decrease.  Secondly,  part of
the retail  business  development  efforts during 1997 involved the marketing of
"packaged accounts." These accounts offer the customer several different banking
services  in an effort to achieve a stronger  relationship  with that  customer,
attract  the   customer   to   noninterest   bearing  and  lower  cost   account
relationships, and promote higher balance accounts. However, these accounts also
provide the banking  services for a fixed fee,  which  reduces as the  aggregate
customer  balances  increase,  in lieu of various  other  charges  for  specific
services.  In general,  these relationships result in a net reduction of service
charge  income but an  increase  in deposit  balances.  The extent to which this
occurs  is  dependent  upon  the  amount  of  migration  of  existing   customer
relationships  relative to the new customer relationships which are established.
Finally,  commercial  accounts are frequently assessed service charges on demand
accounts  based on an analysis  which takes into account an earnings  credit for
the balances  which the  customers  maintain in their  accounts  relative to the
service charges which would otherwise be assessed for the services provided.  As
interest  rates  have   generally   declined   during  1997,   the   alternative
opportunities  for  customers  to invest  their funds at yields in excess of the
earnings credits have also declined.  Consequently,  these commercial  customers
have tended to maintain  higher average  balances in their accounts during 1997,
offsetting a larger amount of service  charges which would  otherwise  have been
assessed.
<PAGE>

     In 1997,  First Banks realized a gain on the sale of three  mortgage-backed
residual securities which it had acquired through the acquisition of a thrift in
1995.  Because  of the  unique  structure  of  these  residuals,  at the date of
acquisition it appeared  unlikely that First Banks would receive  payment of all
of the remaining principal and interest.  Consequently,  the aggregate principal
of these securities had been written down to $250,000, which was the approximate
market  value at that  time,  and  recorded  as  securities  available-for-sale.
However,  as  residential  mortgage  rates  declined  in 1997,  the value of the
underlying pool of mortgages increased, increasing the value of these securities
significantly.
Recognizing this, First Banks sold these  securities,  realizing a gain of $2.24
million.

     Net gains on mortgage  loans sold and held for sale  increased  to $716,000
for the year ended  December 31, 1997 from $40,000 for 1996. As discussed  under
"--Mortgage Banking  Activities," the increase is attributable to an increase in
the sales of  adjustable-rate  residential loan production,  which are sold on a
servicing released basis, and First Banks' overall pricing practices.

     Other  noninterest  income  increased  to $4.6  million  for the year ended
December  31,  1997 from  $3.4  million  for 1996.  The  increase  is  primarily
attributable  to rental fees paid by First  Services,  L.P.  for the use of data
processing  and  other  equipment  owned  by  First  Banks.  See  Note 16 to the
consolidated financial statements.

     Noninterest expense increased to $110.3 million for the year ended December
31,  1997  from  $105.7  million  for  1996.  The most  significant  changes  in
noninterest expense were the reduction of Federal Deposit Insurance  Corporation
(FDIC)  premiums  from $11.7  million  for the year ended  December  31, 1996 to
$804,000 for 1997, and the expense associated with the Preferred Securities.  In
1996,  the FDIC  levied a special  deposit  insurance  assessment  to be used to
recapitalize  the SAIF of the FDIC  and to  bring it into  parity  with the Bank
Insurance  Fund (BIF).  As a result,  First Banks paid a one-time  charge to the
FDIC of $8.2 million.  However,  in recognition of this  recapitalization,  SAIF
premium rates were lower in 1997,  resulting in a further  reduction of the 1997
expense. Furthermore, the improving condition of the acquired banks allowed them
to  benefit  from  better  rate  classifications  and  consequently  lower  FDIC
premiums.

     In  connection  with the issuance of the  Preferred  Securities in February
1997,  First Banks incurred $7.32 million of expense for the year ended December
31, 1997. As discussed  above,  the proceeds from this issue were applied to the
repayment of borrowed funds and the purchase and redemption of Class C Preferred
Stock,  resulting in a reduction of both interest  expense and dividends  during
the year.

     Data processing  expenses for the year ended December 31, 1997 increased to
$8.45  million  from  $4.48  million  for  1996.  Prior to April 1,  1997,  data
processing,  item processing and operational  support  services were provided to
all of the Subsidiary Banks through FirstServ, Inc. (First Serv), a wholly owned
subsidiary of First Banks.  FirstServ in turn  contracted  with First  Services,
L.P.  under a  facilities  management  agreement  for these  services.  However,
FirstServ provided the equipment,  premises,  supplies, postage, telephone lines
and other non-personnel expenses associated with these services. First Services,
L.P. is owned indirectly by First Banks' voting shareholders. Effective April 1,
1997, FirstServ discontinued  operations,  transferring all of the functions and
expenses  which it had  previously  provided  to the  Subsidiary  Banks to First
Services,  L.P. As a result,  items which had  previously  been reflected in the
consolidated  financial  statements  in  various  expense  categories  were paid
directly by First  Services,  L.P., and then charged to the Subsidiary  Banks as
data processing expenses. This change in organizational structure had the effect
of reducing  various expenses for 1997 by the amounts assumed by First Services,
L.P., and increasing data processing expenses,  when compared with like expenses
in 1996.

<PAGE>

<TABLE>
<CAPTION>

     The noninterest  expenses of FirstServ for the year ended December 31, 1996
and the three  months  ended  March 31,  1997 which  were then  assumed by First
Services, L.P. were as follows:

                                                                       Three months ended     Year ended
                                                                         March 31, 1997    December 31, 1996
                                                                         --------------    -----------------
                                                                            (dollars expressed in thousands)
<S>                                                                        <C>                    <C>
              Occupancy, net of rental income..........................    $    41                162
              Furniture and equipment..................................        375                889
              Postage, printing and supplies...........................        169                459
              Communications...........................................        147                569
              Other expenses...........................................        151                593
                                                                           -------             ------
                  Total                                                    $   883              2,672
                                                                           =======             ======
</TABLE>

     In  connection  with its  increasing  emphasis  on  internal  growth  as an
alternative to  acquisitions,  First Banks'  advertising  expenses  increased to
$4.05 million for the year ended  December 31, 1997 from $2.22 million for 1996.
This reflected both  advertising  for specific  promotions  intended to increase
deposits,  and  general  image  advertising  intended  to  convey  First  Banks'
stability of ownership to its midwest  markets  where bank  consolidations  have
caused significant customer confusion and displacement.

     The sale of  foreclosed  real estate for the year ended  December  31, 1997
resulted in a gain,  net of expenses  of  $331,000,  compared to a loss of $1.93
million for 1996.  The loss for 1996  includes a provision  for loss of $747,000
due to a contingent liability with respect to a parcel of foreclosed real estate
in an acquired bank. The  contingent  liability  became more probable due to the
default on an agreement by a developer  through whom the Company was  attempting
to  dispose  of the  property.  The  gain for 1997  results  partially  from the
reduction in the amount of other real estate from $10.6  million at December 31,
1996 to $7.3 million at December 31, 1997. In addition,  it is indicative of the
effort of First Banks to  realistically  value its other real estate at the time
it is foreclosed or at the time banks are acquired.

     In addition,  noninterest expense for 1997 reflects the expenses associated
with Sunrise Bank,  which was acquired in November 1996, three branch offices of
Highland Federal Bank,  F.S.B.  which were acquired in March and September 1997,
and Surety Bank, which was acquired in December 1997.

Comparison of Results of Operations for 1996 and 1995

     Net Income.  Net income for the year ended  December 31, 1996 excluding the
effect of the one-time SAIF assessment of $8.2 million ($5.3 million on an after
tax-basis),  would have been $25.5 million,  compared to $24.5 million for 1995.
This  represents  a return  on  average  assets of 0.72% and 0.70% for the years
ended  December  31, 1996 and 1995,  respectively.  Including  the effect of the
assessment,  net income  for 1996 was $20.2  million,  representing  a return on
average assets of 0.57%.

     The  decline  in  operating  results  in  1996  and  1995  reflect  several
influences  which had  significant  adverse  effects on earnings  including  the
impact of 13  acquisitions  completed  during the three years ended December 31,
1996. As previously  discussed under "-- General" and "-- Acquisitions," most of
the acquired  institutions  exhibited  significant  financial  distress prior to
their  acquisition,  generally  related to asset  quality  problems  and/or high
operating expenses. Consequently, in the periods since their respective dates of
acquisition,  management  of First  Banks  has  worked  with  management  of the
institutions to completely  reorient their positions within their market places,
restructure  their balance sheets and revise their systems and procedures.  This
has required a significant dedication of resources by First Banks, both in terms
of  expenses  and  personnel.   Substantial   expenses  have  been  incurred  in
reorganizing, retraining and reducing staff, converting data processing systems,
instituting and controlling new policies and procedures,  and merging  corporate
cultures,  not  only  with  that of  First  Banks,  but  also  between  acquired
institutions.

     This process was  complicated  by the existence of what is  collectively  a
substantial  portfolio of problem assets. While the provisions for possible loan
losses in California and Texas have been  substantial,  this  represents  only a
portion of the cost of carrying the problem assets.  In addition to that expense

<PAGE>

is the loss of income on nonperforming  assets, the management,  legal and other
costs  associated with managing and collecting  problem loans,  and the expenses
incurred in  foreclosing,  operating,  holding and  disposing of real estate and
other collateral acquired from problem borrowers.
<TABLE>
<CAPTION>

     Although these factors were  anticipated  prior to the acquisitions and are
considered  acceptable  as costs of building the  long-term  franchise  value of
First Banks, they had a substantial effect on First Banks' profitability for the
years  ended   December  31,  1996  and  1995.  A  comparison  of  the  relative
profitability of First Banks' investment in bank and thrift subsidiaries by area
is as follows:

                                                           California               Texas                Other
                                                           ----------               -----                -----
                                                       1996(1)      1995       1996       1995    1996(1)    1995
                                                       -------      ----       ----       ----    -------    ----
                                                                     (dollars expressed in thousands)
     Year ended December 31:
<S>                                                  <C>           <C>       <C>       <C>       <C>        <C>   
         Equity in income of subsidiaries........... $  5,259      3,598        806     (2,766)    24,542    29,647
         Average investment in subsidiaries.........   54,114     43,539     23,202     27,250    212,850   230,776
         Return on average investment, annualized...     9.72%      8.26%      3.47%    (10.15)%    11.53%    12.85%
-----------------------
(1) Excludes the effect of the one-time FDIC special assessment,  net of related
tax benefit.
</TABLE>

     As  previously  discussed,  during 1994,  First Banks  expanded its hedging
activities  through the use of derivative  financial  instruments  as a means to
reduce its interest rate risk exposure.  The hedges were  generally  established
between  September  1994,  after a  significant  increase in interest  rates had
already occurred,  and March 1995, when interest rates began to decrease.  While
being  conceptually  appropriate in reducing interest rate risk,  because of its
timing,  this  hedging  process did not have an  opportunity  to  contribute  to
protecting  First Banks from the adverse  effects of increasing  interest rates,
but limited  substantially  its opportunity to benefit from decreasing  interest
rates.  The expense of such derivative  financial  instruments was $11.5 million
and $9.1 million for the years ended December 31, 1996 and 1995, respectively.

     The results of  operations  for the year ended  December 31, 1996 were also
adversely  affected by an $8.2 million charge for the one-time  special  deposit
insurance  assessment  passed by  Congress  and signed by  President  Clinton on
September 30, 1996. This special assessment was used to recapitalize the SAIF of
the FDIC in order to bring it into parity with the BIF of the FDIC.

     As previously discussed, net interest income (expressed on a tax-equivalent
basis) for the year ended  December  31,  1996 was $125.5  million,  or 3.79% of
average interest-earning assets, compared to $118.0 million, or 3.60% of average
interest-earning assets, for 1995.

     Provision for Possible Loan Losses.  The provision for possible loan losses
was $11.5  million and $10.4  million for the years ended  December 31, 1996 and
1995,  respectively,  while net loan  charge-offs  were $19.7  million and $10.8
million for the same periods.

     Several of First Banks' acquisitions in 1995 and 1994 included  significant
portfolios of problem  assets.  This is  particularly  evident in California and
Texas,  where the economies had been weak in recent years. Of First Banks' total
nonperforming  loans of $30.3 million at December 31, 1996,  $14.9  million,  or
49.1%,  were held by the  California and Texas banks.  As this would suggest,  a
substantial  portion of First Banks' net loan  charge-offs  and  provisions  for
possible loan losses related to loans in the California or Texas banks.


<PAGE>

<TABLE>
<CAPTION>

     The following is a summary of loan loss experience and nonperforming assets
by geographic area for the years ended December 31, 1996 and 1995:

                                            California            Texas                 Other                Total
                                         --------------       ------------         -------------       -----------------
                                         1996      1995       1996    1995         1996     1995        1996        1995
                                         ----      ----       ----    ----         ----     ----        ----        ----
                                                     (dollars expressed in thousands)

<S>                                   <C>        <C>        <C>      <C>       <C>        <C>         <C>        <C>      
    Total loans.......................$ 467,233  460,907    180,068  192,573   2,120,668  2,090,739   2,767,969  2,744,219
    Total assets......................  732,532  626,782    270,309  296,712   2,686,313  2,699,468   3,689,154  3,622,962
    Provisions for possible
      loan losses.....................    5,879    1,301      1,000    5,826       4,615      3,234      11,494     10,361
    Net loan charge-offs..............   11,765    5,980      2,677    3,355       5,274      1,426      19,716     10,761
    Net loan charge-offs as
      a percentage of average loans...     2.42%    1.95%      1.53%    1.63%       0.25%      0.07%       0.72%      0.41%
    Nonperforming loans............... $ 14,726   18,952        164      549      15,379     19,890      30,269     39,391
    Nonperforming assets..............   18,402   21,852        835    1,561      21,639     23,731      40,876     47,144
</TABLE>

     The provision for possible loan losses for the year ended December 31, 1996
reflects an additional  provision  attributable  to a single  commercial loan of
First Bank of approximately $3.7 million which was fully  charged-off.  The loan
was identified in 1995 as having potential  problems creating  uncertainty as to
its collectibility.  During 1996, the borrower failed to meet certain previously
agreed-upon financial measures and principal reductions.  As a result, it became
apparent the loan could not be  collected  in the normal  course of business and
was charged-off.

     The provision for possible loan losses for the year ended December 31, 1995
includes a special provision of $3.7 million.  This special provision related to
FBA's portfolio of automobile  loans which had experienced  increased  levels of
loan charge-offs and loans past due 30 days or more within that portfolio during
1995.

     Tables  summarizing  nonperforming  assets,  past-due  loans and charge-off
experience are presented under "--Loans and Allowance for Possible Loan Losses."

     Noninterest Income and Expense. The following table summarizes  noninterest
income and  noninterest  expense for the years ended December 31, 1996 and 1995,
respectively:
<TABLE>
<CAPTION>
                                                                              December 31,       Increase (decrease)
                                                                              ------------       -------------------
                                                                           1996        1995      Amount        %
                                                                           ----        ----      ------     ------
                                                                               (dollars expressed in thousands)
Noninterest income:
<S>                                                                     <C>           <C>         <C>        <C>  
    Service charges on deposit accounts and customer service fees....   $ 12,521      10,661      1,860      17.4%
    Credit card fees.................................................      2,475       2,179        296      13.6
    Loan servicing fees, net.........................................      1,837       2,932     (1,095)    (37.3)
    Gain (loss) on mortgage loans sold and held for sale:
      Originated for sale............................................         40        (324)       364     112.4
      Other loan sales...............................................         --        (284)       284        --
    Trust and brokerage fees.........................................        782         699         83      11.9
    Net loss on sales of securities..................................       (311)       (866)       555      64.1
    Gain on sale of mortgage loan servicing rights...................         --       3,843     (3,843)       --
    Loss on cancellation of interest rate swap agreements............         --      (3,342)     3,342        --
    Other............................................................      3,377       3,909       (532)   (13.61)
                                                                        --------     -------     ------
            Total noninterest income.................................   $ 20,721      19,407      1,314      6.77
                                                                        ========      ======     ======    ======
Noninterest expense:
    Salaries and employee benefits...................................   $ 39,995      37,941      2,054       5.4%
    Occupancy, net of rental income..................................      9,758       8,709      1,049      12.0
    Furniture and equipment..........................................      7,218       6,852        366       5.3
    Federal Deposit Insurance Corporation premiums...................     11,715       4,911      6,804     138.5
    Postage, printing and supplies...................................      4,687       4,678          9        .2
    Data processing fees.............................................      4,477       4,838       (361)     (7.5)
    Legal, examination and professional fees.........................      4,901       5,412       (511)     (9.4)
    Credit card expenses.............................................      2,913       2,490        423      17.0
    Communications...................................................      2,635       2,476        159       6.4
    Advertising......................................................      2,224       2,182         42       1.9
    (Gain) loss on foreclosed real estate, net of expenses...........      1,927       1,302        625      48.0
    Other............................................................     13,291       9,775      3,516      36.0
                                                                        --------     -------    -------
           Total noninterest expense.................................   $105,741      91,566     14,175      15.5
                                                                        ========      ======     ======    ======
</TABLE>
<PAGE>

     Noninterest  income was $20.7 million for the year ended December 31, 1996,
in  comparison  to $19.4  million  for 1995.  The  increase  for the year  ended
December 31, 1996 is primarily attributable to the additional noninterest income
generated from the acquisitions completed throughout 1995.

     The increase of $2.2 million in service charges,  customer service fees and
credit card fees for the year ended December 31, 1996, compared to 1995, relates
primarily to the aforementioned acquisitions.

     For the year ended December 31, 1996, loan servicing  fees, net,  decreased
by $1.1  million,  in  comparison  to 1995.  As more fully  described  under "--
Mortgage  Banking  Activities," the decrease is attributable to the sale of $427
million of mortgage loan servicing  rights during July 1995. First Banks decided
to sell the mortgage  servicing rights due to favorable pricing available in the
marketplace at that time. This sale resulted in a gain of $3.8 million.

     In addition,  First Banks sold $147 million of  residential  mortgage loans
during the year ended  December  31, 1995,  resulting in a loss of $284,000.  In
connection with the sale of these loans, First Banks terminated an interest rate
swap agreement,  resulting in a loss of $3.3 million for the year ended December
31, 1995.

     Noninterest  income  also  includes  net  loss on sales  of  securities  of
$311,000  for the year ended  December 31, 1996,  in  comparison  to net loss on
sales of securities of $866,000 for 1995. The securities sold were classified as
available for sale within the investment security portfolio.

     Noninterest  expense  was $105.7  million  and $91.6  million for the years
ended December 31, 1996 and 1995, respectively. The increase of $14.1 million is
primarily  attributable to the one-time special  assessment  discussed below and
incremental  operating expenses of the seven acquisitions  completed  throughout
1995. In particular, salaries and employee benefits increased by $2.1 million to
$40.0 million from $37.9 million for the years ended December 31, 1996 and 1995,
respectively.  In addition,  occupancy expense, net increased by $1.1 million to
$9.8 million  from $8.7 million for the years ended  December 31, 1996 and 1995,
respectively.

     FDIC premiums expense for the year ended December 31, 1996 includes an $8.2
million charge for the one-time special deposit  insurance  assessment passed by
Congress and signed by President  Clinton on  September  30, 1996.  This special
assessment  was used to  recapitalize  the  SAIF of the  FDIC and  bring it into
parity with the BIF of the FDIC.

Loans and Allowance for Possible Loan Losses

     Interest  earned on the loan portfolio  represents the principal  source of
income for First Banks and its Subsidiary Banks. Interest and fees on loans were
85.7%, 89.2% and 84.8% of total interest income for the years ended December 31,
1997, 1996 and 1995, respectively.  Loans, net of unearned discount, were 72.1%,
75.0%  and  75.7%  of  total  assets  at  December  31,  1997,  1996  and  1995,
respectively.  Consequently,  First Banks views the quality, yield and growth of
the loan portfolio to be primary objectives in its growth and profitability.

     During the three  years  ended  December  31,  1997,  total  loans,  net of
unearned  discount,  increased  44.8% from $2.07 billion at December 31, 1994 to
$3.00  billion at December 31, 1997.  As discussed  under  "--General,"  in 1993
First Banks  began a process of  substantially  enhancing  its  capabilities  to
achieve  and manage  internal  growth.  A key  element of this  process  was the
expansion of the corporate  business  development staff which is responsible for
the internal development of both loan and deposit  relationships with commercial
customers.  These customers  require loans  categorized by type of collateral as
commercial,  financial and agricultural loans, real estate construction and land
development loans and commercial real estate loans.

     While this process was occurring, in order to achieve more diversification,
a higher level of interest  yield and a reduction  in interest  rate risk within
its loan portfolio,  in 1995 First Banks began  reorienting its portfolio.  This
reorientation  provided  that  as  the  corporate  business  development  effort
continued to originate a substantial  volume of new loans,  substantially all of
the conforming residential mortgage loan production of First Banks would be sold
in the secondary  mortgage  market,  and the origination of indirect  automobile
loans  would  be  substantially  reduced.  Consequently,  these  sectors  of the

<PAGE>

portfolio began to decline  substantially.  This process was accelerated in 1995
by the sale of $147 million of residential real estate loans from the portfolio.
As a result, much of the growth in corporate lending was offset by reductions in
residential real estate and indirect automobile lending.

     In addition, First Banks' acquisitions during this period added substantial
portfolios of new loans. However, many of these portfolios contained significant
loan  problems.  As these banks  resolved  their  asset  quality  issues,  those
portfolios tended to decline because many of the resources which would otherwise
be directed  toward  generating  new loans were  concentrated  on  improving  or
eliminating old ones.
<TABLE>
<CAPTION>

     A summary of the  effects of these  factors on the loan  portfolio  for the
three years ended December 31, 1997 follows:

                                                                              Increase (decrease) in loans for
                                                                                 the year ended December 31,
                                                                                 ---------------------------
                                                                               1997         1996        1995
                                                                               ----         ----        ----
                                                                              (dollars expressed in thousands)
        Internal loan volumes:
<S>                                                                        <C>            <C>         <C>    
             Commercial lending..........................................  $  378,882     209,251     119,017
             Residential real estate lending.............................    (144,707)   (164,400)   (127,648)
             Consumer lending, net of unearned discount..................     (54,305)    (82,231)    (42,453)

        Loans provided by acquisitions...................................      54,361      61,130     721,733
                                                                           ----------   ---------   ---------
             Total increase in loans.....................................  $  234,231      23,750     670,649
                                                                           ==========   =========   =========

        Increase (decrease) in potential problem loans (1)...............  $   (7,600)    (25,500)     52,700
                                                                           ==========   =========   =========
---------------------
(1)  Potential  problem  loans  include  nonperforming  loans  and  other  loans
identified by management as having potential credit problems.
</TABLE>

     First Banks' lending strategy stresses quality,  growth and diversification
by collateral, geography and industry. A common credit underwriting structure is
in place  throughout First Banks.  The commercial  lenders focus  principally on
small  to  middle-market   companies.   Retail  lenders  focus   principally  on
residential loans,  including home equity loans,  automobile financing and other
consumer financing needs arising out of First Banks' branch banking network.

     Commercial,   financial,   agricultural   and  municipal   and   industrial
development  loans include loans that are made primarily based on the borrowers'
general credit strength and ability to generate repayment cash flows from income
sources  even  though such loans and bonds may also be secured by real estate or
other assets. Real estate construction and development loans, primarily relating
to residential  properties,  represent  interim 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  loans  pending  sale in the
secondary  mortgage  market  in the form of a  mortgage-backed  security,  or to
various private third-party investors.



<PAGE>
<TABLE>
<CAPTION>


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

                                                                                December 31,
                                             -----------------------------------------------------------------------------------
                                                   1997              1996             1995            1994             1993
                                             --------------    -------------     -------------    ------------     -------------
                                               Amount     %     Amount     %     Amount      %     Amount    %     Amount     %
                                                                         (dollars expressed in thousands)

<S>                                       <C>         <C>    <C>        <C>   <C>         <C>  <C>         <C>   <C>         <C>  
Commercial, financial and agricultural..  $  621,618  21.1%  $ 457,186  16.7% $ 364,018   13.5%$  208,649  10.2% $ 160,211   12.8%
Real estate construction and development     413,107  14.0     289,378  10.5    209,802    7.8    122,912   6.0     76,049    6.1
Real estate mortgage:
    One-to-four-family residential loans     915,205  31.1   1,059,770  38.7  1,199,491   44.4    967,129  47.1    584,868   46.6
    Other real estate loans.............     713,910  24.3     600,810  21.9    512,264   19.0    332,075  16.1    243,382   19.4
Consumer and installment, net of
    unearned discount...................     279,279   9.5     333,340  12.2    413,609   15.3    422,461  20.6    189,851   15.1
                                          ----------  ----   ---------  ----    -------   ----  ---------  ----  ---------   ----
         Total loans, excluding
            loans held for sale.........   2,943,119 100.0%  2,740,484 100.0% 2,699,184  100.0% 2,053,226 100.0% 1,254,361  100.0%
                                                     =====             =====             =====            =====            =====
Loans held for sale.....................      59,081            27,485           45,035            20,344          107,657
                                          ----------         ---------          -------         ---------        ---------
         Total loans....................  $3,002,200        $2,767,969       $2,744,219        $2,073,570       $1,362,018
                                          ==========        ==========       ==========        ==========        ==========
</TABLE>

<TABLE>
<CAPTION>

     Loans at December 31, 1997 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................ $   492,939   100,011     22,141     4,483   2,044     621,618
Real estate construction and development..............     392,117    13,571      6,957       115     347     413,107
Real estate mortgage  ................................     858,676   343,837    280,855   134,189  11,558   1,629,115
Consumer and installment, net of unearned discount....      76,381   191,042        223    11,633      --     279,279
Loans held for sale...................................      59,081        --         --        --      --      59,081
                                                       -----------   -------    -------  -------- -------  ----------
         Total loans.................................. $ 1,879,194   648,461    310,176   150,420  13,949   3,002,200
                                                       ===========   =======  =========  ======== =======  ==========
</TABLE>



<PAGE>

<TABLE>
<CAPTION>

       Following is a summary of loan loss  experience  for the five years ended
December 31, 1997:

                                                                               December 31,
                                                          --------------------------------------------------------
                                                           1997        1996        1995         1994         1993
                                                           ----        ----        ----         ----         ----
                                                                       (dollars expressed in thousands)

<S>                                                      <C>        <C>           <C>       <C>            <C>   
Allowance for possible loan losses, beginning of
      period........................................  $   46,781      52,665      28,410       23,053        20,897
Acquired allowances for possible loan losses.........         30       2,338      24,655        5,026         2,079
                                                      ----------  ----------    --------    ---------     ---------
                                                          46,811      55,003      53,065       28,079        22,976
                                                      ----------  ----------    --------    ---------     ---------
Loans charged-off:
    Commercial, financial and agricultural...........     (2,308)     (8,918)     (2,337)        (813)       (2,023)
    Real estate construction and development.........     (2,242)     (1,241)       (275)        (119)          (19)
    Real estate mortgage.............................     (6,250)    (10,308)     (5,948)      (1,282)       (2,212)
    Consumer and installment.........................     (6,032)     (8,549)     (7,060)      (4,482)       (5,277)
                                                      ----------  -----------   --------    ---------     ---------
            Total....................................    (16,832)    (29,016)    (15,620)      (6,696)       (9,531)
                                                      ----------  -----------   --------    ---------     ---------
Recoveries of loans previously charged-off:
    Commercial, financial and agricultural...........      2,146       2,642       1,714          831         1,191
    Real estate construction and development.........        269         495         666          401           241
    Real estate mortgage.............................      3,666       3,255         290          840         1,396
    Consumer and installment.........................      3,149       2,908       2,189        3,097         2,324
                                                      ----------  ----------    --------    ---------     ---------
            Total....................................      9,230       9,300       4,859        5,169         5,152
                                                      ----------  ----------    --------    ---------     ---------
            Net loans charged-off....................     (7,602)    (19,716)    (10,761)      (1,527)       (4,379)
                                                      ----------  ----------    --------    ---------     ---------
Provision for possible loan losses...................     11,300      11,494      10,361        1,858         4,456
                                                      ----------  ----------    --------    ---------     ---------
Allowance for possible loan losses, end of period.... $   50,509      46,781      52,665       28,410        23,053
                                                      ==========  ==========    ========    ==========    =========
Loans outstanding:
    Average.......................................... $2,846,157   2,726,297   2,598,936    1,616,634     1,340,641
    End of period....................................  3,002,200   2,767,969   2,744,219    2,073,570     1,362,018
    End of period, excluding loans held for sale.....  2,943,119   2,740,484    2,699,184   2,053,226     1,254,361
                                                      ==========  ==========    =========   =========     =========
    Ratio of allowance for possible loan losses
      to loans outstanding:
         Average.....................................       1.77%        1.72%       2.03%       1.76%        1.72%
         End of period...............................       1.68         1.69        1.92        1.37         1.69
         End of period, excluding loans
           held for sale.............................       1.72        1.71        1.95         1.38         1.84
    Ratio of net charge-offs to average loans
      outstanding....................................       0.27        0.72        0.41         0.09         0.33
                                                      ==========   =========    ========    =========     ========
Allocation of allowance for possible loan losses
   at end of period:
    Commercial, financial and agricultural........... $   14,879      13,579      12,501        4,160        3,531
    Real estate construction and development.........      7,148       4,584       4,665        2,440        2,867
    Real estate mortgage.............................     18,317      14,081      19,849        8,051        6,712
    Consumer and installment.........................      5,089      10,296      10,016        6,225        2,925
    Unallocated......................................      5,076       4,241       5,634        7,534        7,018
                                                      ----------   ---------    --------    ---------     --------
            Total.................................... $   50,509      46,781      52,665       28,410       23,053
                                                      ==========   =========    ========    =========     ========
Percent of categories to loans, net of 
  unearned discount:
    Commercial, financial and agricultural...........       20.71%     16.52%      13.27%        10.06%      11.76%
    Real estate construction and development.........       13.76      10.45        7.65          5.93        5.58
    Real estate mortgage.............................       54.26      60.00       62.49         62.66       60.81
    Consumer and installment.........................        9.30      12.04       14.95         20.37       13.94
    Loans held for sale..............................        1.97       0.99        1.64          0.98        7.91
                                                      -----------  ---------    --------    ----------    --------
            Total....................................      100.00%    100.00%     100.00%       100.00%     100.00%
                                                      ===========  =========    ========    ==========    ========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


       Following is a summary of nonperforming assets by category:

                                                                                   December 31,
                                                              -----------------------------------------------------
                                                              1997        1996          1995        1994       1993
                                                              ----        ----          ----        ----       ----
                                                                        (dollars expressed in thousands)
Commercial, financial and agricultural:
<S>                                                    <C>               <C>           <C>         <C>        <C>  
    Nonaccrual.......................................  $     4,017       4,113         9,930       2,540      4,278
    Restructured terms...............................           --         130            --          60         60
Real estate construction and development:
    Nonaccrual.......................................        4,097         817         2,002       1,448         70
Real estate mortgage:
    Nonaccrual.......................................       10,402      24,486        27,159      11,637      7,546
    Restructured terms...............................        5,456         278            --         222        227
Consumer and installment:
    Nonaccrual.......................................           94         440           300         293         49
    Restructured terms...............................           --           5            --          --         --
                                                       -----------    --------    ----------   ---------  ---------
          Total nonperforming loans..................       24,066      30,269        39,391      16,200     12,230
Other real estate....................................        7,324      10,607         7,753       6,740      2,529
                                                       -----------   ---------    ----------   ---------  ---------
          Total nonperforming  assets................  $    31,390      40,876        47,144      22,940     14,759
                                                       ===========   =========    ==========   =========  =========

Loans, net of unearned discount......................  $ 3,002,200   2,767,969     2,744,219   2,073,570  1,362,018
                                                       ===========   =========    ==========   =========  =========
Loans past due 90 days or more and still accruing....  $     2,725       3,779         8,474       1,885      1,199
                                                       ===========   =========    ==========   =========  =========

Allowance for possible loan losses to loans..........         1.68%       1.69%         1.92%       1.37%      1.69%
Nonperforming loans to loans.........................         0.80        1.09          1.44        0.78       0.90
Allowance for possible loan losses to
    nonperforming loans..............................       209.88      154.55        133.70      175.37     188.50
Nonperforming assets to loans and
    foreclosed assets................................         1.04        1.47          1.71        1.10       1.08
                                                       ===========   =========    ==========   =========  =========
</TABLE>

     As of  December  31,  1997 and  1996,  $30.7  million  and  $31.5  million,
respectively,  of loans not  included  in the table  above  were  identified  by
management as having  potential  credit  problems  which raised doubts as to the
ability of the borrowers to comply with the present loan repayment terms.

     First Banks' credit  management policy 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.  Basically,  the system requires rating
all loans at the time they are made, except for homogeneous categories of loans,
such as residential  real estate mortgage loans,  indirect  automobile loans and
credit card loans.  These homogeneous loans are assigned an initial rating based
on First Banks' experience with each type of loan.  Adjustments to these ratings
are based on payment experience subsequent to their origination.

     Adversely rated credits,  including loans requiring close  monitoring which
would not normally be considered criticized credits by regulators,  are included
on a monthly  loan watch list.  Loans may be added to the watch list for reasons
which 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. This could be initiated by the
delinquency  of a scheduled  loan payment,  a  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. Loans on the watch list
require detailed loan status reports  prepared by the responsible  officer every
four months,  which are then  discussed in formal  meetings with the loan review
and  credit  administration  staffs.  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 the loan  review  and credit
administration  staffs  generally  at the time of the formal  watch list  review
meetings.
<PAGE>


     Each month,  credit  administration  provides First Banks'  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,  the overall  increases or decreases in the levels of risk
in the  portfolios  are monitored  continually.  Factors are applied to the loan
portfolios  for each  category of loan risk to  determine  acceptable  levels of
allowance for possible loan losses. These factors are derived primarily from the
actual loss  experience  of the  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  judgment in its  analysis of  determining  the
overall  level of the  allowance  for  possible  loan losses.  In its  analysis,
management  considers  the  change  in  the  portfolio,   including  growth  and
composition,  and the  economic  conditions  of the regions in which First Banks
operates. Based on this quantitative and qualitative analysis, the allowance for
possible  loan  losses  is  adjusted.  Such  adjustments  are  reflected  in the
consolidated statements of income.

     First Banks does not engage in foreign lending.  Additionally,  First Banks
does not have any concentrations of loans exceeding 10% of total loans which are
not otherwise  disclosed in the loan portfolio  composition  table.  First Banks
does not have a material amount of interest-bearing assets which would have been
included  in  nonaccrual,  past due or  restructured  loans if such  assets were
loans.

Deposits

     Deposits are the primary  source of funds for the Subsidiary  Banks.  First
Banks' deposits consist  principally of core deposits from its Subsidiary Banks'
local market areas.  The following  table sets forth the  distribution  of First
Banks' deposit  accounts at the dates indicated and the weighted average nominal
interest rates on each category of deposit:
<TABLE>
<CAPTION>

                                                                      December 31,
                                                                      ------------
                                              1997                        1996                       1995
                                     ----------------------   -------------------------     ------------------------
                                             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>
Demand deposits................. $  485,222    13.17%   --   $418,193    12.91%     --  $     389,658   12.24%    --
Interest-bearing demand 
   deposits.....................    348,080     9.45  1.76    337,618    10.42       1.73     307,584    9.66   1.89
Savings deposits................    947,029    25.70  3.68    671,286    20.73       3.07     690,902   21.70   3.16
Time deposits of $100,000 
   or more......................    219,417     5.95  5.63    169,057     5.22       5.64     201,025    6.31   5.69
Other time deposits.............  1,684,847   45.73   5.66  1,642,413    50.72       5.69   1,594,522   50.09   5.72
                                 ----------  ------   ====  ---------   ------       ==== -----------  ------   ====
         Total deposits......... $3,684,595  100.00%       $3,238,567   100.00%           $ 3,183,691  100.00%
                                 ==========  ======        ==========   ======            ===========  ======
</TABLE>

Capital and Dividends

     Historically,   First  Banks  has   accumulated   capital  to  support  its
acquisitions by retaining most of its earnings.  Relatively  small dividends are
paid on the Class A convertible, adjustable rate preferred stock and the Class B
adjustable rate preferred stock,  totaling $786,000 for the years ended December
31, 1997,  1996 and 1995. The dividends paid on the Class C Preferred Stock were
$4.28 million,  $4.94 million and $4.95 million for the years ended December 31,
1997,  1996 and 1995,  respectively.  First  Banks has  never  paid,  and has no
present intention to pay, dividends on its common stock.

     As discussed under "--Company Profile" and "Financial Condition and Average
Balances,"  in 1997 First  Banks  formed  First Trust for the purpose of issuing
$86.25  million of Preferred  Securities.  First Banks received the proceeds and
issued a  subordinated  debenture to First Trust.  The Preferred  Securities are
considered Tier 1 capital for regulatory purposes.
See Note 18 to the consolidated financial statements.



<PAGE>


Liquidity

     The  liquidity  of First Banks and its  Subsidiary  Banks is the ability to
maintain a cash flow which is  adequate  to fund  operations,  service  its debt
obligations and meet other  commitments on a timely basis. The Subsidiary Banks'
primary sources for liquidity are customer deposits,  loan payments,  maturities
and  sales of  investments  and  earnings.  In  addition,  First  Banks  and its
Subsidiary  Banks may avail themselves of more volatile sources of funds through
issuance  of  certificates  of deposit in  denominations  of  $100,000  or more,
federal  funds  borrowed,   securities  sold  under  agreements  to  repurchase,
borrowings  from the  Federal  Home Loan  Banks  (FHLB)  and  other  borrowings,
including  First  Banks' $90  million  Credit  Agreement.  The  aggregate  funds
acquired from those sources were $328.7  million and $315.4  million at December
31, 1997 and 1996, respectively.

     At December 31, 1997, First Banks' more volatile sources of funds mature as
follows:

                                                           (dollars expressed in
                                                                  thousands)

 Three months or less.........................................   $  122,622
 Over three months through six months.........................       52,921
 Over six months through twelve months........................       55,701
 Over twelve months...........................................       97,470
                                                                 ----------
          Total...............................................   $  328,714
                                                                 ==========

     Management believes the earnings of its Subsidiary Banks will be sufficient
to provide funds for growth and to permit the distribution of dividends to First
Banks  sufficient to meet First Banks'  operating and debt service  requirements
both  on a  short-term  and  long-term  basis  and to pay the  dividends  on the
Preferred Securities issued in February 1997.

Year 2000 Compatibility

     First Banks has significant  dependence on various  computer  equipment and
software  for its  daily  operations.  Most  software  systems  were  originally
designed to operate  using date fields which contain two digits to correspond to
the last two digits of the year. With the  approaching  change to the Year 2000,
this limitation in these systems could cause the computers to misinterpret years
beginning  with  "20"  as  instead  being  years  beginning  with  "19".  If not
corrected,  this could cause miscalculation of data for financial purposes,  and
operating  failure of equipment which is date dependent.  While the most obvious
location of this problem is the mainframe computer system,  there are many other
potential ramifications. These can be categorized as: (1) the ancillary software
systems  which are used for various  other  purposes  throughout  First Banks on
secondary mainframe computers,  personal computers or intelligent terminals; (2)
other  types of  equipment  which are not  related to or  connected  to computer
equipment,  such  as  vault  time  locks,  elevators,   security  equipment  and
heating/air  conditioning  systems,  which are used in bank branches for various
purposes;  and (3) the effects which the transition to the Year 2000 may have on
external  suppliers and servicers,  as well as the loan and deposit customers of
First Banks.

     Recognizing  this,  First Banks has  established an operating  committee to
identify all of the various Year 2000 problems which may arise and work with the
various  departments  within First Banks to address these issues.  Since most of
the software used by First Banks is purchased from outside vendors,  First Banks
has been  working  with  these  vendors  to  ensure  that the  issues  are being
corrected.  In a few instances,  there are particular systems or equipment which
the  vendors  do not  intend to  convert  to Year 2000  compatibility.  However,
generally  these are  items  which  are at the end of their  economic  lives and
scheduled for replacement.  Consequently,  First Banks believes its cost of Year
2000  compliance  will not be material to its  financial  position or results of
operation. These costs are expensed as they occur.

     First Banks' Subsidiary Banks are subject to risks associated with the Year
2000 software problem, a term which refers to uncertainties about the ability of
various software systems to interpret dates correctly after the beginning of the
Year 2000.  First Banks'  process of evaluating  potential  effects of Year 2000

<PAGE>

issues on customers of the  Subsidiary  Banks is in its early stages,  and it is
therefore  impossible to quantify the potential  adverse effects of incompatible
software systems on loan customers of First Banks' Subsidiary Banks. The failure
of a commercial bank customer to prepare  adequately for Year 2000 compatibility
could  have a  significant  adverse  effect  on  such  customer  operations  and
profitability,  in turn inhibiting its ability to repay loans in accordance with
their terms.  Until sufficient  information is accumulated from customers of the
Subsidiary  Banks to enable First Banks to assess the degree to which customers'
operations are susceptible to potential problems,  First Banks will be unable to
quantify the potential for losses from loans to commercial customers.

Effects of New Accounting Standards

     During  1997,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  of  Financial   Accounting  Standards  (SFAS)  No.  130  -  Reporting
Comprehensive  Income.  The  statement  establishes  standards for reporting and
displaying income and its components (revenues, gains, and losses) in a full set
of general purpose financial  statements.  The statement requires all items that
are  required to be  recognized  under  accounting  standards as  components  of
comprehensive income be reported in a financial statement that is displayed with
the same  prominence as other  financial  statements.  Although the statement is
effective for fiscal years beginning  after December 15, 1997,  First Banks does
not  believe  the SFAS will have a material  impact to the  Company's  financial
statements.

     In addition,  the FASB issued SFAS No. 131 - Disclosures  about Segments of
an Enterprise and Related Information.  The statement  establishes standards for
the way public business  enterprises report information about operating segments
in annual financial  statements and requires those  enterprises  report selected
information  about  operating  segments in interim  financial  reports issued to
shareholders.  Additionally,  the  statement  establishes  standards for related
disclosures  about products and services,  geographic areas, and major customers
superseding  SFAS No.  14 -  Financial  Reporting  for  Segments  of a  Business
Enterprise.  First Banks is  currently  evaluating  information  required in the
statement and believes  expanded  disclosure  information will be required to be
included in First Banks' financial statements beginning in 1998.

Effects of Inflation

     Financial  institutions  are less affected by inflation than other types of
companies.   Financial   institutions  make  relatively  few  significant  asset
acquisitions which 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,  First Banks  believes  this is  generally
manageable through its asset/liability management program.


<PAGE>
<TABLE>
<CAPTION>


                                  Quarterly Condensed Financial Data (Unaudited)

                                                                                   1997 Quarter Ended
                                                                                   ------------------
                                                                                              Septem-     Decem-
                                                                     March 31     June 30     ber 30      ber 31
                                                                     --------     -------     ------      ------
                                                                           (dollars expressed in thousands,
                                                                                except per share data)

<S>                                                                  <C>           <C>        <C>         <C>   
Interest income.................................................     $ 69,300      72,779     74,740      78,282
Interest expense................................................       34,756      35,338     39,071      39,666
                                                                     --------     -------    -------    --------
                Net interest income.............................       34,544      37,441     35,669      38,616
Provision for possible loan losses..............................        2,850       3,175      3,100       2,175
                                                                     --------     -------    -------    --------
                Net interest income after provision
                  for possible loan losses......................       31,694      34,266     32,569      36,441
Noninterest income..............................................        5,209       5,706      8,829       5,953
Noninterest expense.............................................       25,152      27,682     27,862      29,591
                                                                     --------     -------    -------    --------
                Income before provision for income taxes
                  and minority interest in (income) loss
                  of subsidiaries...............................       11,751      12,290     13,536      12,803
Provision for income taxes......................................        3,714       4,051      4,632       3,686
                                                                     --------     -------    -------    --------
                Income before minority interest in
                  income of subsidiaries........................        8,037       8,239      8,904       9,117
Minority interest in income of subsidiaries.....................         (201)       (376)      (363)       (330)
                                                                     --------     -------    -------    --------
                Net income......................................     $  7,836       7,863      8,541       8,787
                                                                     ========     =======    =======    ========
Earnings per share:.............................................
    Basic.......................................................     $ 277.11      281.23     307.87      315.49
    Diluted.....................................................       266.69      268.02     295.45      306.11
                                                                     ========     =======    =======    ========


                                                                                   1996 Quarter Ended
                                                                                   ------------------
                                                                                              Septem-     Decem-
                                                                      March 31     June 30    ber 30      ber 31
                                                                      --------     -------    ------      ------
                                                                            (dollars expressed in thousands
                                                                                except per share data)

Interest income.................................................     $ 66,656      65,453     64,899      69,013
Interest expense................................................       36,551      35,317     34,712      35,090
                                                                     --------     -------    -------     -------
                Net interest income.............................       30,105      30,136     30,187      33,923
Provision for possible loan losses..............................        3,104       3,100      2,570       2,720
                                                                     --------     -------    -------     -------
                Net interest income after provision
                  for possible loan losses......................       27,001      27,036     27,617      31,203
Noninterest income..............................................        5,119       5,169      5,510       4,923
Noninterest expense.............................................       25,037      24,043     32,157      24,504
                                                                     --------     -------    -------     -------
                Income before provision (benefit) for income taxes
                  and minority interest in income
                  of subsidiaries...............................        7,083       8,162        970      11,622
Provision (benefit) for income taxes............................        2,564       2,554       (814)      2,656
                                                                     --------     -------    -------     -------
                Income before minority interest in
                  income of subsidiaries........................        4,519       5,608      1,784       8,966
Minority interest in income of subsidiaries.....................          (82)       (138)      (252)       (187)
                                                                     --------     -------    -------     -------
                Net income......................................     $  4,437       5,470      1,532       8,779
                                                                     ========     =======    =======     =======
Earnings per share:.............................................
    Basic.......................................................     $ 126.92      173.34       4.14      308.05
    Diluted.....................................................       125.39      166.96       4.14      296.09
                                                                     ========     =======    =======     =======

</TABLE>

<PAGE>



KPMG Peat Marwick LLP











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, 1997 and 1996,  and the
related consolidated  statements of income, changes in stockholders' equity, and
cash flows for each of the years in the  three-year  period  ended  December 31,
1997. 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  generally   accepted  auditing
standards.  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,  1997 and 1996,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.



                                                /s/KPMG Peat Marwick LLP


St. Louis, Missouri
March 6, 1998


<PAGE>

                           Consolidated Balance Sheets
             (dollars expressed in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                                 ------------
                                                                                            1997            1996
                                                                                            ----            ----
                                             ASSETS
                                             ------

Cash and cash equivalents:
<S>                                                                                    <C>                 <C>    
    Cash and due from banks........................................................    $   142,125         147,804
    Interest-bearing deposits with other financial institutions -
      with maturities of three months or less......................................          2,840           6,050
    Federal funds sold.............................................................         23,515          74,100
                                                                                       -----------       ---------
               Total cash and cash equivalents.....................................        168,480         227,954
                                                                                       -----------       ---------

Investment securities:
    Trading, at fair value.........................................................          3,110              --
    Available for sale, at fair value..............................................        773,271         532,605
    Held to maturity, at amortized cost (fair value of $19,835 and
      $20,611 at December 31, 1997 and 1996, respectively).........................         19,149          20,196
                                                                                       -----------       ---------
               Total investment securities.........................................        795,530         552,801
                                                                                       -----------       ---------

Loans:
    Commercial, financial and agricultural.........................................        621,618         457,186
    Real estate construction and development.......................................        413,107         289,378
    Real estate mortgage...........................................................      1,629,115       1,660,580
    Consumer and installment.......................................................        287,752         341,154
    Loans held for sale............................................................         59,081          27,485
                                                                                       -----------       ---------
               Total loans.........................................................      3,010,673       2,775,783
    Unearned discount..............................................................         (8,473)         (7,814)
    Allowance for possible loan losses.............................................        (50,509)        (46,781)
                                                                                       -----------       ---------
               Net loans...........................................................      2,951,691       2,721,188
                                                                                       -----------       ---------

Bank premises and equipment, net of accumulated
    depreciation and amortization..................................................         51,505          48,078
Intangibles associated with the purchase of subsidiaries...........................         25,835          23,303
Mortgage servicing rights, net of amortization.....................................          9,046          10,230
Accrued interest receivable........................................................         28,358          23,250
Other real estate..................................................................          7,324          10,607
Deferred income taxes..............................................................         43,355          43,406
Other assets.......................................................................         83,890          28,337
                                                                                       -----------       ---------
               Total assets........................................................    $ 4,165,014       3,689,154
                                                                                       ===========       =========


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 per share data)


                                                                                                 December 31,
                                                                                                 ------------
                                                                                            1997            1996
                                                                                            ----            ----
                                           LIABILITIES
                                           -----------
Deposits:
    Demand:
<S>                                                                                    <C>                 <C>    
      Non-interest-bearing........................................................     $   485,222         418,193
      Interest-bearing............................................................         348,080         337,618
    Savings.......................................................................         947,029         671,286
    Time:
      Time deposits of $100 or more...............................................         219,417         169,057
      Other time deposits.........................................................       1,684,847       1,642,413
                                                                                       -----------      ----------
          Total deposits..........................................................       3,684,595       3,238,567
Other borrowings..................................................................          54,153          69,982
Notes payable.....................................................................          55,144          76,330
Accrued interest payable..........................................................           9,976          10,288
Deferred income taxes.............................................................           9,029           6,194
Accrued and other liabilities.....................................................          20,990          23,521
Minority interest in subsidiaries.................................................          16,407          12,883
                                                                                       -----------      ----------
          Total liabilities.......................................................       3,850,294       3,437,765
                                                                                       -----------      ----------

Guaranteed preferred beneficial interests in First Banks, Inc.
    subordinated debenture........................................................          83,183              --
                                                                                       -----------      ----------


                                      STOCKHOLDERS' EQUITY

Preferred stock:
    Preferred stock,  $1.00 par value;  5,000,000 shares  authorized;  no shares
      issued and  outstanding  at December  31, 1997;  Class C 9.00%  increasing
      rate, redeemable, cumulative, $25.00 stated value;
      2,155,500 shares issued and outstanding at December 31, 1996................              --          53,887
    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
Capital surplus...................................................................           3,978           3,289
Retained earnings.................................................................         199,143         171,182
Net fair value adjustment for securities available for sale.......................           9,438           4,053
                                                                                       -----------      ----------
          Total stockholders' equity..............................................         231,537         251,389
                                                                                       -----------      ----------
          Total liabilities and stockholders' equity..............................     $ 4,165,014       3,689,154
                                                                                       ===========      ==========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                        Consolidated Statements of Income

             (dollars expressed in thousands, except per share data)


                                                                                      Years ended December 31,
                                                                                      ------------------------
                                                                                   1997         1996        1995
                                                                                   ----         ----        ----
Interest income:
<S>                                                                             <C>           <C>          <C>    
    Interest and fees on loans...............................................   $252,766      237,379      221,934
    Investment securities:
       Taxable...............................................................     35,248       22,639       34,379
       Nontaxable............................................................      1,008        1,240        1,390
    Federal funds sold and other.............................................      6,079        4,763        3,918
                                                                                --------       ------      -------
         Total interest income...............................................    295,101       266,021     261,621
                                                                                --------       -------     -------
Interest expense:
    Deposits:
       Interest-bearing demand...............................................      5,648        4,845        5,760
       Savings...............................................................     27,383       22,687       22,737
       Time deposits of $100 or more.........................................     10,386        8,977        9,315
       Other time deposits...................................................     95,244       88,228       78,250
    Interest rate exchange agreements, net...................................      6,574        7,623        6,911
    Notes payable and other borrowings.......................................      3,596        9,310       21,972
                                                                                --------       ------      -------
         Total interest expense..............................................    148,831      141,670      144,945
                                                                                --------      -------      -------
         Net interest income.................................................    146,270      124,351      116,676
Provision for possible loan losses...........................................     11,300       11,494       10,361
                                                                                --------       -------     -------
         Net interest income after provision for possible loan losses........    134,970       112,857     106,315
                                                                                --------       -------     -------
Noninterest income:
    Service charges on deposit accounts and customer service fees............     12,491       12,521       10,661
    Credit card fees.........................................................      2,914        2,475        2,179
    Loan servicing fees, net.................................................      1,628        1,837        2,932
    Gain (loss) on mortgage loans sold and held for sale.....................        716           40         (608)
    Net gain (loss) on sales of securities...................................       2,335        (311)        (866)
    Net gain on sales of trading securities..................................        121           --           --
    Gain on sale of mortgage loan servicing rights...........................         --           --        3,843
    Loss on cancellation of interest rate swap agreement.....................         --           --       (3,342)
    Other income.............................................................      5,492        4,159        4,608
                                                                                --------       ------      -------
         Total noninterest income............................................     25,697       20,721       19,407
                                                                                --------       ------      -------
Noninterest expense:
    Salaries and employee benefits...........................................     43,011       39,995       37,941
    Occupancy, net of rental income..........................................     10,617        9,758        8,709
    Furniture and equipment..................................................      7,618        7,218        6,852
    Federal Deposit Insurance Corporation premiums...........................        804       11,715        4,911
    Postage, printing and supplies...........................................      4,187        4,687        4,678
    Data processing fees.....................................................      8,450        4,477        4,838
    Legal, examination and professional fees.................................      4,587        4,901        5,412
    Credit card expenses.....................................................      3,343        2,913        2,490
    Communications...........................................................      2,611        2,635        2,476
    Advertising..............................................................      4,054        2,224        2,182
    (Gain) loss on foreclosed real estate, net of expenses...................       (331)       1,927        1,302
    Guaranteed preferred debenture expense...................................      7,322           --           --
    Other expenses...........................................................     14,014       13,291        9,775
                                                                                --------       -------     -------
         Total noninterest expense...........................................    110,287       105,741      91,566
                                                                                --------       -------     -------
         Income before provision for income taxes and minority interest
               in  (income) loss of subsidiaries.............................     50,380       27,837       34,156
Provision for income taxes...................................................     16,083        6,960       11,038
                                                                                --------       ------      -------
         Income before minority interest in (income) loss of subsidiaries....     34,297       20,877       23,118
Minority interest in (income) loss of subsidiaries...........................     (1,270)        (659)       1,353
                                                                                --------       ------      -------
         Net income..........................................................     33,027       20,218       24,471
Preferred stock dividends....................................................      5,067        5,728        5,736
                                                                                --------       ------      -------
         Net income available to common stockholders.........................   $ 27,960        14,490      18,735
                                                                                ========       =======     =======
Earnings per common share:
    Basic....................................................................   $1,181.69      612.46       791.82
    Diluted..................................................................   $1,134.28      596.83       759.09
                                                                                =========      ======      =======

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
                                   (dollars expressed in thousands, except per share data)

                                             Three years ended December 31, 1997


                                                   Class C                                                    Net fair
                                                  preferred     Adjustable rate                                 value 
                                                   stock,       preferred stock                              adjustment  Total
                                                                ---------------                                  for             
                                                 increasing   Class A                                         securities stock-
                                                    rate,     conver-             Common    Capital  Retained available  holders'
                                                 redeemable    tible    Class B    stock    surplus  earnings  for sale  equity
                                                 ----------    -----    -------    -----    -------  --------  --------  -------

<S>                                               <C>         <C>          <C>     <C>       <C>      <C>          <C>   <C>    
Consolidated balances, January 1, 1995........... $ 55,000    12,822      241     5,915     4,479    137,957      898   217,312

Year ended December 31, 1995:
  Consolidated net income........................       --        --       --        --        --     24,471       --    24,471
  Class C preferred stock dividends, $2.25 
      per share..................................       --        --       --        --        --     (4,950)      --    (4,950)
  Class A preferred stock dividends, $1.20 
     per share...................................       --        --       --        --        --       (769)      --      (769)
  Class B preferred stock dividends, $.11
      per share..................................       --        --       --        --        --        (17)      --       (17)
  Effect of capital stock transactions of
     majority-owned subsidiary...................       --        --       --        --      (172)        --       --      (172)
   Net fair value adjustment for securities 
     available for sale..........................       --        --       --        --        --         --   (1,270)   (1,270)
                                                  --------    ------      ---     -----     -----   --------    -----   -------
Consolidated balances, December 31, 1995.........   55,000    12,822      241     5,915     4,307    156,692     (372)  234,605

Year ended December 31, 1996:
    Consolidated net income......................       --        --       --       --        --     20,218       --    20,218
    Class C preferred stock dividends, $2.25
      per share..................................       --        --       --       --        --     (4,942)      --    (4,942)
    Class A preferred stock dividends, $1.20
      per share..................................       --        --       --        --        --      (769)       --      (769)
    Class B preferred stock dividends, $.11 
     per share...................................       --        --       --        --        --       (17)       --       (17)
    Purchase and retirement of Class C
       preferred shares..........................   (1,113)       --       --        --       (26)        --       --    (1,139)
    Effect of capital stock transactions of
       majority-owned subsidiary.................       --        --       --        --      (992)        --       --      (992)
    Net fair value adjustment for securities
       available for sale........................       --        --       --        --        --         --    4,425     4,425
                                                  --------    ------       ---     -----     -----   --------    -----   -------
Consolidated balances, December 31, 1996.........   53,887    12,822      241     5,915     3,289    171,182    4,053   251,389

Year ended December 31, 1997:
    Consolidated net income......................       --       --        --        --        --     33,027      --     33,027
    Class C preferred stock dividends, $2.25
      per share..................................       --       --        --        --        --     (4,280)     --    (4,280)
    Class A preferred stock dividends, $1.20
      per share..................................       --       --        --        --        --       (769)     --      (769)
    Class B preferred stock dividends, $.11
      per share..................................       --       --        --        --        --        (17)     --       (17)
    Purchase and retirement of Class C
       preferred shares..........................   (6,774)      --        --        --      (161)        --       --    (6,935)
    Redemption of Class C preferred shares.......  (47,113)      --        --        --        --         --       --   (47,113)
    Effect of capital stock transactions of
       majority-owned subsidiary.................       --       --        --        --       850         --       --       850
    Net fair value adjustment for securities
       available for sale........................       --       --        --        --        --         --    5,385     5,385
                                                  --------    -----      ----      ----      ----   --------    -----   -------
Consolidated balances, December 31, 1997......... $     --    12,822      241     5,915     3,978    199,143    9,438   231,537
                                                  ========    ======     ====     =====     =====   ========    =====   =======

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


<PAGE>

<TABLE>
<CAPTION>




                      Consolidated Statements of Cash Flows
                        (dollars expressed in thousands)


                                                                                        Years ended December 31,
                                                                                        ------------------------
                                                                                      1997       1996        1995
                                                                                      ----       ----        ----
Cash flows from operating activities:
<S>                                                                               <C>          <C>          <C>   
    Net income..................................................................  $ 33,027     20,218       24,471
    Adjustments to reconcile net income to net cash provided by operating
      activities:
       Depreciation and amortization of bank premises and equipment.............     5,687      5,784        5,534
       Amortization, net of accretion...........................................     9,512     12,481        4,520
       Originations and purchases of loans held for sale........................  (174,330)  (135,792)     (67,005)
       Proceeds from the sale of loans held for sale............................   148,350    113,074      207,077
       Provision for possible loan losses.......................................    11,300     11,494       10,361
       Provision for income taxes...............................................    16,083      6,960       11,039
       Payments of income taxes.................................................   (17,976)    (7,655)      (1,105)
       (Increase) decrease in accrued interest receivable.......................    (5,107)      (623)       1,320
       Net increase in trading securities.......................................    (3,110)        --           --
       Interest accrued on liabilities..........................................   148,831    141,670      144,946
       Payments of interest on liabilities......................................  (149,380)  (142,210)    (145,066)
       Other operating activities, net..........................................    (7,284)    (6,637)      (5,190)
       Minority interest in income (loss) of subsidiaries.......................     1,270        659       (1,353)
                                                                                  --------    -------     --------
          Net cash provided by operating activities.............................    16,873     19,423      189,549
                                                                                  --------    -------     --------

Cash flows from investing activities:
    Cash paid for acquired entities, net of cash and cash equivalents received..    84,556     10,715       54,458
    Sales of investment securities of acquired entity...........................        --         --       88,334
    Sales of investment securities available for sale...........................    20,930     91,147      279,537
    Maturities of investment securities available for sale......................   447,547    440,314      147,395
    Maturities of investment securities held to maturity........................     1,804     14,643       36,469
    Purchases of investment securities available for sale.......................  (686,474)  (527,091)    (282,599)
    Purchases of investment securities held to maturity.........................      (844)      (916)      (2,397)
    Net (increase) decrease in loans............................................  (174,804)    20,350      (71,211)
    Recoveries of loans previously charged-off..................................     9,230      9,300        4,859
    Purchases of bank premises and equipment....................................    (6,413)    (3,299)      (5,337)
    Interest rate futures contracts, net........................................        --         --      (22,167)
    Other investing activities..................................................   (54,681)    10,657        3,946
                                                                                  ---------    ------     --------
          Net cash provided by (used in) investing activities...................  (359,149)    65,820      231,287
                                                                                  ---------    ------     --------

Cash flows from financing activities:
       Increase (decrease) in demand and savings deposits.......................   304,193    (20,466)    (123,260)
       Increase (decrease) in time deposits.....................................    (8,348)   (15,804)      55,885
       Decrease in federal funds purchased......................................        --     (3,000)     (67,300)
       Decrease in Federal Home Loan Bank advances..............................   (37,218)   (10,606)    (170,644)
       Increase (decrease) in securities sold under agreements to repurchase....    21,390     13,525      (55,615)
       Increase (decrease) in notes payable.....................................   (21,186)   (13,284)      13,751
       Purchase and retirement of Class C preferred shares......................   (54,048)    (1,139)          --
       Proceeds from issuance of guaranteed preferred subordinated debenture....    83,086         --           --
       Payment of preferred stock dividends.....................................    (5,067)    (5,728)      (5,736)
          Net cash provided by (used in) financing activities...................   282,802    (56,502)    (352,919)
                                                                                  --------     -------    --------
          Net increase (decrease) in cash and cash equivalents..................   (59,474)    28,741       67,917
Cash and cash equivalents, beginning of year....................................   227,954    199,213      131,296
                                                                                  --------    -------     --------
Cash and cash equivalents, end of year..........................................  $168,480    227,954      199,213
                                                                                  ========    =======     ========

Noncash investing and financing activities:
    Loans transferred to foreclosed real estate.................................  $  4,295     10,451        5,395
    Loans to facilitate sales of foreclosed real estate.........................        --         --          587
    Investment securities transferred to available for sale.....................        --         --      174,113
    Receivable from sale of investment securities...............................        --         --       41,265
    Loans transferred to held for sale..........................................        --     39,996      146,991
                                                                                  ========     ======     ========


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


<PAGE>



44

 (1)  Summary of Significant Accounting Policies

     The accompanying consolidated financial statements of First Banks, Inc. and
subsidiaries  (First  Banks) have been  prepared in  accordance  with  generally
accepted  accounting   principles  and  conform  to  practices  prevalent  among
financial  institutions.  The  following  is a summary  of the more  significant
policies followed by First Banks:

     Basis of Presentation. The consolidated financial statements of First Banks
have been prepared in accordance with generally accepted  accounting  principles
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
generally accepted accounting principles. Actual results could differ from those
estimates.  Certain 1996 and 1995 amounts have been reclassified to conform with
the classifications and format used for 1997.

     Principles of Consolidation.  The consolidated financial statements include
the accounts of First Banks, Inc. and all of its  subsidiaries,  net of minority
interest,  as more fully described below. All significant  intercompany accounts
and  transactions  have been eliminated in  consolidation.  First Banks operates
through  its  subsidiary  bank  holding  companies  and  financial  institutions
(Subsidiary Banks) as follows:

    First Bank, headquartered in St. Louis County, Missouri (First Bank).
    First Banks America, Inc.,  headquartered in St. Louis County, Missouri
    (FBA), and its holly owned subsidiaries:
         BankTEXAS N. A., headquartered in Houston, Texas (BankTEXAS).
         First Bank of California, headquartered in Roseville, California 
         (FB California).
    CCB  Bancorp, Inc., headquartered in Irvine, California (CCB), and
         its   wholly   owned   subsidiary:
         First   Bank  &   Trust, headquartered in Irvine, California (FB&T).
    FirstCommercial  Bancorp,   Inc.,   headquartered  in  Sacramento,
         California  (FCB),  and its wholly  owned  subsidiary:  First
         Commercial  Bank,  headquartered  in  Sacramento,  California
         (First Commercial).

     All of the Subsidiary  Banks are wholly owned by their  respective  parents
except FBA and FCB, which were 65.85% and 61.48% owned,  respectively,  by First
Banks at December 31, 1997. As discussed under  "--Acquisitions,"  FB California
is a  newly-formed  California  state bank  resulting from the merger of Sunrise
Bank of  California,  which was  acquired  by FBA on November 1, 1996 and Surety
Bank,  Vallejo,  California,  which was acquired by FBA on December 1, 1997.  In
February  1998,  FCB  was  acquired  by  FBA,  and its  subsidiary  bank,  First
Commercial, was merged into FB California.

      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.  The
reserve balances maintained in accordance with such requirements at December 31,
1997 and 1996 were $31.3 million and $41.4 million, respectively.

     Investment  Securities.  The  classification  of  investment  securities as
trading,  available  for sale or held to maturity is  determined  at the date of
purchase.  Investment  securities  designated  as  trading,  which  include  any
security  held for near term  sale,  are  valued  at fair  value.  Realized  and
unrealized gains and losses are included in noninterest income.

     Investment  securities  designated as available for sale, which include any
security  which 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 a separate
component of stockholders'  equity. All previous fair value adjustments included
in the separate component of stockholders' equity are reversed upon sale.
<PAGE>

     Investment  securities  designated  as held to maturity,  which include any
security  for which 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.

     Loans Held for  Portfolio.  Loans held for  portfolio  are carried at cost,
adjusted for  amortization of premiums and accretion of discounts using a method
which  approximates  the  level  yield  method.  Interest  and fees on loans are
recognized  as income 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  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 a creditor 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 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 the creditor determines 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.  First Banks  continues  to use its existing  nonaccrual  methods for
recognizing interest income on impaired loans.

     Loans Held for Sale.  Mortgage loans held for sale are carried at the lower
of cost or market value which is determined on an individual  loan basis.  Gains
or  losses  on the sale of loans  held for  sale are  determined  on a  specific
identification method.

     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 the  cost  of loan
servicing rights. The fees are generally calculated on the outstanding principal
balance of the loans serviced and are recorded as income when earned.

     Allowance for Possible Loan Losses.  The allowance for possible loan losses
is maintained at a level  considered  adequate to provide for potential  losses.
The provision  for possible  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 and payment experience. In
addition to the allowance for estimated  losses on identified  problem loans, an
overall unallocated  allowance is established to provide for unidentified credit
losses which are inherent in the  portfolio.  As adjustments  become  necessary,
they are  reflected  in the results of  operations  in the periods in which they
become known.

     Bank Premises and Equipment. Bank premises and equipment are stated at cost
less  accumulated  depreciation  and  amortization.   Depreciation  is  computed
primarily 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 two to ten years.

     Intangibles  Associated  With the  Purchase  of  Subsidiaries.  Intangibles
associated  with the purchase of  subsidiaries  include  excess of cost over net
assets  acquired  and deposit base  premium.  The excess of cost over net assets
acquired of purchased  subsidiaries is amortized using the straight-line  method
over the estimated periods to be benefited, which range from approximately 10 to
15 years.

<PAGE>

     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 12
years.

     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
fair value less  applicable  selling  costs or cost at the time the  property is
acquired. The excess of cost over fair value of other real estate at the date of
acquisition  is charged to the allowance  for possible  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.  First  Banks,  Inc. and its  eligible  subsidiaries  file a
consolidated  federal income tax return and unitary or consolidated state income
tax returns in  California,  Illinois and Missouri.  In addition,  First Bank is
subject to a financial institutions tax which is based on income.  Additionally,
included  in the  unitary  Illinois  and  California  income tax  returns is the
investment  in FBA as First  Banks'  ownership  is greater than 50%. FBA and its
eligible  subsidiaries  file a  consolidated  federal income tax return which is
separate from that of First Banks.

     Earnings Per Common Share.  First Banks adopted the provisions of SFAS 128,
Earnings Per Share (SFAS 128), on a  retroactive  basis  effective  December 31,
1997.  Accordingly,  earnings per common  share (EPS) data has been  restated to
conform with the provisions of SFAS 128.

     SFAS 128 provides for the calculation of a "Basic" and "Diluted" EPS. Basic
EPS is 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.  The  implementation  of SFAS  128 did not  have a
material impact on the calculation of EPS.

     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. Risk that interest rates may move
unfavorably  from the  perspective  of First Banks is defined as  interest  rate
risk. The risk that a counterparty  to an agreement  entered into by First Banks
may default is defined as credit risk.  These  financial  instruments  currently
include  interest rate floor and cap  agreements  and forward  contracts to sell
mortgage-backed securities.

      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.

     Interest Rate Swap, Floor and Cap Agreements. Interest rate swap, floor and
cap  agreements  are  accounted  for on an accrual  basis with the net  interest
differential  being  recognized  as an  adjustment  to  interest  expense of the
related  liability.  Premiums and fees paid upon the  purchase of interest  rate
swap,  floor and cap agreements are amortized to interest  expense over the life
of the agreement using the interest method. In the event of early termination of
these derivative  financial  instruments,  the net proceeds received or paid are
deferred and amortized  over the shorter of the  remaining  contract life of the
derivative  financial  instrument or the maturity of the related liability.  If,
however, the amount of the underlying hedged liability is repaid, then the gains

<PAGE>

or losses on the  agreements  are  recognized  immediately  in the  consolidated
statements of income. The unamortized premiums, fees paid and deferred losses on
early terminations are included in other assets in the accompanying consolidated
balance sheets.

     Interest Rate Futures Contracts. Gains and losses on interest rate futures,
which qualify as hedges, are deferred. Amortization of the net deferred gains or
losses is applied to the interest  income of the  securities  available-for-sale
portfolio using the straight-line  method. The net deferred gains and losses are
applied to the carrying value of the securities  available-for-sale portfolio as
part of the mark-to-market  valuation.  In the event the hedged assets are sold,
the related gain or loss of the interest rate futures  contracts is  immediately
recognized in the consolidated statements of income.

     Forward Contracts to Sell Mortgage-Backed  Securities.  Gains and losses on
forward contracts,  which qualify as hedges,  are deferred.  The net unamortized
balance of such  deferred  gains and losses is applied to the carrying  value of
the loans held for sale as part of the lower of cost or market valuation.

 (2)  Acquisitions

     On January 4, 1995,  First Banks  completed its acquisition of River Valley
Holdings,  Inc. and its wholly owned  subsidiary,  River  Valley  Savings  Bank,
F.S.B.  (River  Valley),  for a purchase price of $37.4 million.  River Valley's
total assets were $412 million,  consisting  primarily of  residential  loans of
$225 million and investment securities of $125 million.  River Valley was merged
with First Bank. In addition,  River Valley operated a mortgage banking division
which serviced  approximately $669 million of residential loans for others which
was merged into and  centralized  with First Banks'  mortgage  banking  division
effective upon  completion of the  acquisition.  The excess of the cost over the
fair value of the net assets  acquired was  approximately  $11.5  million and is
being amortized over 15 years.

     On March 15, 1995,  First Banks  completed its  acquisition  of CCB and its
wholly owned  subsidiary,  Commercial Center Bank, in exchange for $30.4 million
in cash.  CCB was  headquartered  in Santa Ana,  California  and operated  three
banking  locations in Santa Ana, San Jose and Walnut Creek.  The  acquisition of
CCB represents First Banks' initial entry into the southern  California  market.
CCB's total  assets  were  $193.4  million,  consisting  primarily  of loans and
investment  securities of $114.5  million and $31.1 million,  respectively.  The
excess  of the  fair  value  of the  net  assets  acquired  over  the  cost  was
approximately $3.3 million and is being accreted to income over 10 years.

     On April 28, 1995,  First Banks  completed its acquisition of HNB Financial
Group,  Huntington  Beach,  California  (HNB) and its wholly  owned  subsidiary,
Huntington  National  Bank, in exchange for $10.9  million in cash.  HNB's total
assets  were  $88.0  million,  consisting  primarily  of  loans  and  investment
securities of $62.8 million and $10.5 million,  respectively.  The excess of the
cost over the fair  value of the net  assets  acquired  was  approximately  $1.1
million and is being amortized over 10 years.

     On May 31,  1995,  First Banks  completed  its  acquisition  of Irvine City
Financial,  Irvine, California (Irvine) and its wholly owned subsidiary,  Irvine
City Bank,  f.s.b., in exchange for $4.2 million in cash.  Irvine's total assets
were  $83.3  million,  consisting  primarily  of  loans  of  $68.7  million  and
investment securities and federal funds sold of $10.6 million.
The purchase price approximated the fair value of the net assets acquired.

     During 1995,  First Banks  completed its investment in QCB Bancorp (QCB), a
California  corporation  and sole  shareholder  of Queen City Bank,  N.A.,  Long
Beach, California.  QCB's total assets were $56.2 million,  consisting primarily
of  loans of  $35.1  million  and  cash  and  cash  equivalents  and  investment
securities of $20.5  million.  The excess of the cost over the fair value of the
net assets  acquired was  approximately  $465,000 and is being amortized over 10
years.

     On August 7, 1995,  First  Banks  executed an Amended  and  Restated  Stock
Purchase  Agreement  (FCB  Agreement)  with  FCB.  Under the FCB  Agreement  and
subsequent  agreements  entered  into with FCB,  FCB and its  subsidiary,  First
Commercial, were recapitalized through a series of transactions.  As a result of
these transactions,  First Banks owned 93.29% of the outstanding common stock of

<PAGE>

FCB and $6.5 million of convertible  debentures maturing in October and December
2000.  The  debentures  bear interest at 12%  annually.  FCB's total assets were
$169.0 million,  consisting  primarily of loans,  cash and cash  equivalents and
investment  securities  of $84.6  million,  $50.3  million  and  $30.7  million,
respectively.  The  excess  of the cost  over the fair  value of the net  assets
acquired was approximately $2.4 million and is being amortized over 10 years.

     The FCB Agreement also provided for FCB to offer to its shareholders, other
than First  Banks,  rights to acquire an  aggregate  of $400,000 of newly issued
common stock at $12.50 per share.  FCB  completed  the offering  during 1996 and
issued  approximately  288,000  shares in exchange for $2.97 million in cash and
$643,000 of outstanding dividend obligations. As a result of the offering, First
Banks' ownership was reduced to 61.48% at December 31, 1997.

     On September 1, 1995,  First Banks  completed its  acquisition of La Cumbre
Savings  Bank  F.S.B.  (La  Cumbre) in  exchange  for $5.5  million in cash.  La
Cumbre's total assets were $144 million,  consisting  primarily of loans of $131
million and cash and cash equivalents and investment securities of $7.6 million.
The  excess  of the cost  over the fair  value of the net  assets  acquired  was
approximately $697,000 and is being amortized over 10 years.

     On  November 1, 1996,  First Banks  completed  its  acquisition  of Sunrise
Bancorp, a California  corporation  (Sunrise),  and its wholly owned subsidiary,
Sunrise Bank, a state  chartered bank, in exchange for $17.5 million in cash. At
the time of the transaction,  Sunrise had $110.8 million in total assets;  $45.5
million in cash and cash equivalents and investment securities; $61.1 million in
total loans, net of unearned discount;  and $91.1 million in total deposits. The
acquisition was funded from available cash and borrowings of $14.0 million.  The
excess  of the cost  over the fair  value of the net  assets  acquired  was $3.2
million and is being amortized to expense over 15 years.

     On December 1, 1997,  First Banks  completed its acquisition of Surety Bank
in exchange for 264,622 shares of FBA common stock and cash of $3.8 million. The
cash portion of this transaction was funded in January 1998 with available cash.
At the time of the transaction,  Surety had $72.8 million in total assets; $14.9
million in cash and cash equivalents and investment securities; $54.4 million in
total loans net of unearned discount;  and $67.5 million in total deposits.  The
excess  of the cost  over the fair  value of the net  assets  acquired  was $3.3
million and is being amortized over 15 years.

     During  1997,  First Banks  completed  its  assumption  of the deposits and
purchase of selected assets of three banking locations of Highland Federal Bank,
FSB. The  transaction  resulted in the acquisition of $82.8 million in deposits.
The banking  locations  operate as branches of FB&T. The excess of the cost over
the  fair  value  of the net  assets  acquired  was  $1.4  million  and is being
amortized 10 years.

     The  aforementioned  acquisitions  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  period
subsequent to the  acquisition  date,  and the assets  acquired and  liabilities
assumed were recorded at fair value at the  acquisition  date. The  acquisitions
were  funded  by  available  cash,  proceeds  from the  maturity  of  short-term
investments, borrowings under First Banks' credit agreement and notes payable to
former shareholders.



<PAGE>

<TABLE>
<CAPTION>

(3)  Investments in Debt and Equity Securities

     Securities  Available for Sale. The amortized cost,  contractual  maturity,
unrealized  gains and losses and fair value of investment  securities  available
for sale at December 31, 1997 and 1996 were as follows:

                                                        Maturity                      Total
                                                        --------                      -----
                                                                           After      amor-          Gross                Weighted
                                         1 Year        1-5       5-10       10        tized        unrealized      Fair    average
                                         or less      years      years     years      cost       Gains   Losses    value    yield
                                         -------      -----      -----     -----      ----       -----   ------    -----    -----
                                                                      (dollars expressed in thousands)
 December 31, 1997:
    Carrying value:
<S>                                     <C>           <C>            <C>   <C>        <C>       <C>        <C>   <C>        <C>  
       U.S. Treasury..................  $  62,537     216,594        --        --     279,131   1,580      (39)  280,672    5.94%
       U.S. government agencies
         and corporations:
          Mortgage-backed.............        674      51,692    23,856    108,275    184,497     427     (493)  184,431    6.38
          Other.......................     60,719     183,652    18,056         --    262,427     381     (183)  262,625    6.11
       Other..........................        256          --        --          9        265       1       (6)      260    6.31
       Equity investments in other
         financial institutions.......      8,255          --        --         --      8,255  13,025       --    21,280    4.93
       Federal Home Loan Bank and
         Federal Reserve Bank stock...     24,003          --        --         --     24,003      --       --    24,003    6.76
                                        ---------    --------   -------    -------    -------   -----    -----    ------
                Total.................  $ 156,444     451,938    41,912    108,284    758,578   15,414    (721)   773,271   6.12
                                        =========    ========   =======    =======    =======   ======   =====    ======= ======
    Market value:
       Debt securities................  $ 124,195     453,470    41,920    108,403
       Equity securities..............     45,283          --        --         -- 
                                        ---------    --------   -------    ------- 
                Total.................  $ 169,478     453,470    41,920    108,403
                                        =========    ========   =======    =======

    Weighted average yield............       5.82%       6.07%     6.32%     6.70%
                                             ====        ====      ====      ====

 December 31, 1996:
    Carrying value:
       U.S. Treasury..................  $ 115,675      31,259         --        --    146,934     166      (73)   147,027  5.38%
       U.S. government agencies
         and corporations:
          Mortgage-backed.............      1,504      70,953    26,500    106,223    205,180     416   (1,383)   204,213
    6.11
          Other.......................     65,351      81,722        --         --    147,073     496     (220)   147,349   5.73
       Other..........................         28         704        --         10        742       2       (2)       742
    5.89
       Equity investments in other
         financial institutions.......      5,256          --        --         --      5,256   6,808       --     12,064
    4.93
       Federal Home Loan Bank and
         Federal Reserve Bank stock...     21,210          --        --         --     21,210      --       --     21,210
                                        ---------    --------   -------    -------    -------    ----    -----    -------
    6.92
                Total.................  $ 209,024     184,638    26,500    106,233    526,395    7,888   (1,678)  532,605
                                        =========    ========   =======    =======    =======    =====   ======   =======
    5.82
    Market value:
       Debt securities................  $ 182,629     184,361    26,320    106,021
       Equity securities..............     33,274          --        --         -- 
                                        ---------    ---------  --------   --------
                Total.................  $ 215,903     184,361    26,320    106,021
                                        =========    ========   =======    =======

    Weighted average yield............       5.44%       5.93%     5.88%      6.37%
                                             ====        ====      ====       ====
</TABLE>


<PAGE>



<TABLE>
<CAPTION>


     Securities  Held to Maturity.  The amortized  cost,  contractual  maturity,
unrealized  gains and  losses and fair value of  investment  securities  held to
maturity at December 31, 1997 and 1996 were as follows:

                                                      Maturity               Total
                                                      --------               -----
                                                                    After    amor-        Gross          Weighted
                                        1 Year     1-5      5-10      10     tized     unrealized       Fair   average
                                        or less  years     years    years     cost    Gains  Losses     value   yield
                                        -------  -----     -----    -----     ----    -----  ------    ------   -----
                                                              (dollars expressed in thousands)
 December 31, 1997:
    Carrying value :
<S>                                      <C>       <C>     <C>       <C>     <C>      <C>     <C>      <C>      <C>  
     State and political subdivisions..  $1,093    5,324   10,422    2,310   19,149   690     (4)      19,835   5.65%
                                         ======    =====   ======  =======   ======   ===     ===      ======   =====               
    Market value :
     Debt securities...................  $1,111    5,431   10,677    2,616
                                         ======    =====   ======    =====

 Weighted average yield................    7.09%    5.38%    5.33%    7.03%
                                           =====   =====   ======    =====

 December 31, 1996:
    Carrying value :
     State and political 
         subdivisions..................  $ 589     4,033   13,171    2,403   20,196   485    (70)     20,611    5.56%
                                          =====   ======   ======    =====   ======  ====    ====     ======    ==== 
    Market value :
       Debt securities.................  $  592    4,098   13,360    2,561
                                         ======    =====   ======    =====

 Weighted average yield................    5.88%    5.82%    5.20%    7.01%
                                           ====     ====    =====    =====
</TABLE>

     The  expected   maturities  of  investment   securities   may  differ  from
contractual  maturities  since  borrowers  have the right to call or prepay  the
obligations with or without prepayment penalties.

     Proceeds  from sales of  securities  designated  as available for sale were
$18.6 million for the year ended December 31, 1997.  Gross gains of $2.3 million
were realized on these sales. No losses were realized in 1997.

     Proceeds from the sales of debt securities classified as available for sale
during 1996 were $100.0  million.  Gross gains of $556,000  and gross  losses of
$166,000  were  realized on these sales.  The gross gains,  net of gross losses,
were offset by the recognition of $701,000 of hedging losses.

     Proceeds from the sales of debt securities classified as available for sale
during 1995 were $388.0 million. Gross gains of $9.1 million and gross losses of
$900,000  were  realized on those sales.  The gross gains,  net of gross losses,
were offset by the recognition of $10.1 million of hedging losses. Proceeds from
the sales of equity securities classified as available for sale during 1995 were
$20.5  million.  Gross gains of $1.3 million and gross  losses of $200,000  were
realized on those sales.

     Various  subsidiaries  of First Banks  maintain  investments in the Federal
Home Loan Bank (FHLB) or the Federal Reserve Bank (FRB).  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,  FB&T and  BankTEXAS  are  members of the FHLB  system.  The
investment in the FRB stock is  maintained at a minimum of 6% of the  applicable
Subsidiary  Bank's capital stock and capital  surplus.  First Bank and BankTEXAS
are members of the FRB system.

     Investment securities with a carrying value of approximately $209.1 million
and $212.1 million were pledged in connection  with deposits of public and trust
funds and for other  purposes as required by law at December  31, 1997 and 1996,
respectively.


<PAGE>


(4)  Loans
<TABLE>
<CAPTION>

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

                                                                       1997      1996       1995
                                                                       ----      ----       ----
                                                                   (dollars expressed in thousands)

<S>                                                                 <C>          <C>        <C>   
        Balance, January 1.....................................     $ 46,781     52,665     28,410
        Acquired allowances for possible loan losses...........           30      2,338     24,655
                                                                    --------   --------    -------
                                                                      46,811     55,003     53,065
                                                                    --------   --------    -------
        Loans charged-off......................................      (16,832)   (29,016)   (15,620)
        Recoveries of loans previously charged-off.............        9,230      9,300      4,859
                                                                    --------   --------    -------
        Net loans charged-off..................................       (7,602)   (19,716)   (10,761)
                                                                    --------   --------     ------
        Provision charged to operations........................       11,300     11,494     10,361
                                                                    --------   --------    -------
        Balance, December 31...................................     $ 50,509     46,781     52,665
                                                                    ========   ========    =======
</TABLE>

     At  December  31, 1997 and 1996,  First  Banks had $19.7  million and $30.3
million,  respectively,  of loans on nonaccrual  status.  Interest on nonaccrual
loans, which would have been recorded under the original terms of the loans, was
$4.7 million for the year ended December 31, 1997 and $4.2 million for the years
ended December 31, 1996 and 1995. Of these amounts,  $2.0 million,  $2.7 million
and $1.9  million  were  actually  recorded as interest  income on such loans in
1997, 1996 and 1995,  respectively.  At December 31, 1997 and 1996,  First Banks
had  impaired   loans  in  the  amount  of  $29.2  million  and  $30.3  million,
respectively,  consisting  of  $19.7  million  and  $30.3  million  of  loans on
nonaccrual  status,  respectively.  At December  31, 1997,  impaired  loans also
include $5.5 million of restructured  loans. The impaired loans in the amount of
$4.7  million had specific  reserves of $1.7  million at December 31, 1997.  The
impaired  loans had no  specific  reserves  at December  31,  1996.  The average
recorded  investment  in impaired  loans was $28.3 million and $36.2 million for
the years ended December 31, 1997 and 1996, respectively. The amount of interest
income  recognized using a cash basis method of accounting during the time these
loans  were  impaired  was $2.4  million  and  $2.7  million  in 1997 and  1996,
respectively.

     First Banks' primary market areas are the states of Missouri,  Illinois and
California.  At December 31, 1997 and 1996,  88% of the total loan portfolio and
93% and 92% of the commercial, financial and agricultural loan portfolio were to
borrowers within these regions, respectively.

     Real estate lending constituted the only other significant concentration of
credit risk. Real estate loans comprised  approximately  70% and 67% of the loan
portfolio at December 31, 1997 and 1996, respectively, of which 48% and 51% were
consumer-related  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, 1997 and
1996,  96%  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.

(5)  Mortgage Banking Activities
      At December  31,  1997 and 1996,  First  Banks  serviced  loans for others
amounting  to $784 million and $847  million,  respectively.  Borrowers'  escrow
balances held by First Banks on such loans were $2.2 million and $4.2 million at
December 31, 1997 and 1996, respectively.

     Changes in the mortgage  servicing  rights for the years ended  December 31
were as follows:

                                                             1997       1996
                                                             ----       ----
                                                         (dollars expressed in
                                                               thousands)

   Balance, January 1...................................  $ 10,230      12,122
   Originated mortgage servicing rights.................       718         --
   Purchases of mortgage servicing rights...............         5          65
   Amortization.........................................    (1,907)     (1,957)
                                                          --------     -------
   Balance, December 31.................................  $  9,046      10,230
                                                          ========     =======



<PAGE>


(6)  Bank Premises and Equipment

     Bank premises and equipment were comprised of the following at December 31:

                                                              1997        1996
                                                              ----        ----
                                                             (dollars expressed
                                                                in thousands)

     Land................................................ $  14,213      13,431
     Buildings and improvements..........................    39,922      39,256
     Furniture, fixtures and equipment...................    37,597      36,329
     Leasehold improvements..............................     6,851       6,916
     Construction in progress............................     3,536       2,149
                                                          ---------     -------
                                                            102,119      98,081
     Less accumulated depreciation and amortization......    50,614      50,003
                                                          ---------     -------
         Bank premises and equipment, net................ $  51,505      48,078
                                                          =========     =======

     Total rent expense was $5.0 million,  $4.2 million and $3.2 million for the
years ended December 31, 1997, 1996 and 1995, respectively.

(7)  Notes Payable

     Notes payable  include a Revolving Line and Term Credit  Agreement  (Credit
Agreement)  and  promissory  notes  payable to former  shareholders  of acquired
entities.

     First Banks'  Credit  Agreement,  dated  November  24,  1997,  replaced the
revolving credit agreement outstanding dated July 18, 1996. The Credit Agreement
provides a $40 million  revolving  loan  commitment and a $50 million term loan.
Interest under the revolving loan commitment and the term loan is payable at the
lead bank's  corporate base rate or, at the option of First Banks, is payable at
the Eurodollar Rate plus 1.25%, respectively,  and is paid monthly. Loans may be
made under the revolving loan commitment  until November 23, 1998, at which date
the  principal and accrued  interest is due and payable.  The term loan requires
quarterly  principal  payments of $2.5 million and matures on November 22, 2002,
at which date the remaining  principal and accrued  interest is due and payable.
Loans  under  the  Credit  Agreement  are  secured  by all of the  stock  of the
Subsidiary Banks which is owned by First Banks. Under the Credit Agreement there
were $55.0  million in  outstanding  borrowings  at December  31, 1997 and $75.0
million at December 31, 1996.

     The Credit Agreement requires maintenance of certain minimum capital ratios
for each financial institution subsidiary. In addition, it prohibits the payment
of dividends on First Banks' common stock. At December 31, 1997 and 1996,  First
Banks and the  Subsidiary  Banks were in compliance  with all  restrictions  and
requirements in the Credit Agreement.

     The promissory notes totaled $144,000 and $1.3 million at December 31, 1997
and 1996,  respectively.  Interest under the promissory  notes are payable under
similar terms as the Credit Agreement.

     The  average  balance and maximum  month-end  balance of the notes  payable
outstanding for the years ended December 31 were as follows: 
                                                               1997       1996 
                                                             (dollars expressed
                                                                in thousands)

         Average balance..................................  $ 17,883     76,739
         Maximum month-end balance........................    75,213     86,899
                                                            ========     ======

     The average rates paid on notes payable  outstanding during the years ended
December 31, 1997, 1996 and 1995 were 7.10%, 7.15% and 7.22%, respectively.



<PAGE>


(8)  Guaranteed Preferred Beneficial Interests in First Banks, Inc. Subordinated
     Debentures

    On February 4, 1997,  First  Preferred  Capital  Trust  (First  Capital),  a
newly-formed  Delaware  business  trust  subsidiary of First Banks,  issued 3.45
million  shares  of  9.25%  Cumulative  Trust  Preferred  Securities  (Preferred
Securities) at $25 per share in an unwritten public offering, and issued 106,702
shares of common  securities  to First Banks at $25 per share.  First Banks owns
all of First  Capital's  common  securities.  The gross proceeds of the offering
were used by First  Capital to  purchase  $88.9  million  of 9.25%  Subordinated
Debentures  (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 no later than March 31,  2046 if certain  conditions
and regulatory approval are met. The Subordinated  Debentures are the sole asset
of First Capital.  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 Capital under the Preferred Securities.  First Banks' proceeds from the
issuance of the  Subordinated  Debentures to First Capital,  net of underwriting
fees and offering  expenses,  were $83.1 million.  Distributions  payable on the
Preferred  Securities were $7.3 million for the year ended December 31, 1997 and
included in noninterest expense in the consolidated financial statements.

<TABLE>
<CAPTION>

     (9) Income Taxes Income tax expense  attributable to income from continuing
operations for the years ended December 31 consists of : 

                                                                          Years ended December 31,
                                                                          ------------------------
                                                                          1997       1996      1995
                                                                          ----       ----      ----
                                                                       (dollars expressed in thousands)
   Current income taxes:
<S>                                                                    <C>           <C>       <C>  
       Federal.....................................................    $ 15,062      6,106     2,638
       State.......................................................         169      1,068       870
                                                                       --------    -------   -------
                                                                         15,231      7,174     3,508
                                                                       --------    -------   -------
         Deferred income tax expense (benefit):
             Federal...............................................       2,608      1,837     8,584
             State.................................................          24      3,192       (94)
                                                                       --------    -------   -------
                                                                          2,632      5,029     8,490
                                                                       --------    -------   -------
         Reduction in valuation allowance..........................      (1,780)    (5,243)     (960)
                                                                       --------    -------   -------
                     Total.........................................    $ 16,083      6,960    11,038
                                                                       ========    =======   =======
</TABLE>

<TABLE>
<CAPTION>

     The federal income tax rates and amounts are reconciled  with the effective
income tax rates and amounts as follows:
                                                                             Years ended December 31,
                                                                   1997                1996                1995
                                                            ---------------       --------------     ----------
                                                                        % of                % of                % of
                                                                       pretax              pretax              pretax
                                                            Amount     income     Amount   income     Amount   income
                                                            ------     ------     ------   ------     ------   ------
                                                                         (dollars expressed in thousands)
         Income before provision for income taxes and
            minority interest in (income) loss of
<S>                                                        <C>          <C>      <C>        <C>     <C>         <C>
               subsidiaries.............................   $50,380               $27,837            $ 34,156
                                                           =======               =======            ========

         Taxes on income calculated at statutory rates..    17,633      35.0%      9,743    35.0%     11,955     35.0%
         Effects of differences in tax reporting:
            Tax-exempt interest income..................      (576)     (1.1)       (730)   (2.6)       (817)    (2.4)
            Tax preference adjustment of
               interest income..........................        69       0.1          82     0.3          99      0.3
            Amortization of excess cost.................       754       1.5         729     2.6         645      1.8
            State income taxes..........................       126       0.3         715     2.6         504      1.5
            Change in deferred valuation allowance......    (1,780)     (3.5)     (5,243)  (18.8)       (960)    (2.8)
            Other, net..................................      (143)     (0.4)      1,664     5.9        (388)    (1.1)
                                                           -------     -----     -------   -----    --------     ----
                    Provision for income taxes..........   $16,083      31.9%    $ 6,960    25.0%   $ 11,038     32.3%
                                                           =======     =====     =======    ====    ========     ====
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

     The tax  effects of  temporary  differences  that give rise to  significant
portions of the  deferred tax assets and  deferred  tax  liabilities,  including
amounts  attributable to entities  acquired in purchase  transactions are listed
below.

                                                                                           December 31,
                                                                                           ------------
                                                                                        1997         1996
                                                                                        ----         ----
                                                                                 (dollars expressed in thousands)
         Deferred tax assets:
<S>                                                                                   <C>           <C>   
            Allowance for possible loan losses....................................    $ 19,665      19,421
            Other real estate.....................................................         971       2,179
            Alternative minimum tax credits.......................................       2,067       2,102
            Book losses on investment securities currently not allowable
               for tax purposes...................................................       1,958       1,134
            Net operating loss carryforwards......................................      33,080      33,821
            Other.................................................................       3,361       4,276
                                                                                      --------    --------
                    Total gross deferred tax assets...............................      61,102      62,933
            Less valuation allowance..............................................     (17,747)    (19,527)
                                                                                      --------    --------
                    Gross deferred tax assets, net of valuation allowance.........      43,355      43,406
                                                                                      --------    --------
         Deferred tax liabilities:
            Depreciation on bank premises and equipment...........................       1,860       2,231
            FHLB stock dividends..................................................       1,269       1,063
            State taxes...........................................................         307         354
            Net fair value adjustment for securities available for sale...........       5,142       2,207
            Other.................................................................         451         339
                                                                                      --------    --------
                    Total gross deferred tax liabilities..........................       9,029       6,194
                                                                                      --------    --------
                    Net deferred tax assets.......................................    $ 34,326      37,212
                                                                                      ========    ========
</TABLE>

     At December 31, 1997 and 1996,  for federal  income taxes  purposes,  First
Banks had net operating loss (NOL)  carryforwards of approximately $57.3 million
and $60.1 million, respectively, exclusive of the NOL carryforwards available to
FBA and FCB as further  described below. The NOL  carryforwards  for First Banks
expire as follows:

                                                            (dollars expressed 
                                                               in thousands)
   Year ending December 31:
       2002.................................................   $   3,244
       2003.................................................       7,470
       2004.................................................       7,516
       2005.................................................      12,928
       2006 - 2009..........................................      26,189
                                                               ---------
                                                               $  57,347
                                                               =========

     With  the  completion  of the  acquisition  of FBA,  the NOL  carryforwards
generated  prior to the  transaction  are  subject  to an annual  limitation  in
subsequent tax years. The following schedule reflects the NOL carryforwards that
will be available to offset future  taxable  income of FBA and do not affect the
taxable income of First Banks.

      At December 31, 1997 and 1996,  for federal  income tax purposes,  FBA had
NOL   carryforwards   of   approximately   $34.3  million  and  $35.4   million,
respectively. The NOL carryforwards at December 31, 1997 expire as follows:
                                                    
                                                            (dollars expressed
                                                               in thousands)
    Year ending December 31:
        1998...................................................  $  4,140
        1999...................................................     2,641
        2000...................................................       103
        2001 - 2010............................................    27,417
                                                                   ------
                                                                 $ 34,301
                                                                 ========
<PAGE>

     The  remaining  net deferred tax assets of FBA were  evaluated to determine
whether it is more likely than not the deferred tax assets will be recognized in
the future. Taking all positive and negative criteria into consideration, it was
determined  the valuation  allowance  established  for FBA should remain at $3.4
million.

     With  the  completion  of the  acquisition  of FCB,  the NOL  carryforwards
generated  prior to the  transaction  were  subject to an annual  limitation  in
subsequent tax years. The following schedule reflects the NOL carryforwards that
will be available to offset future  taxable  income of FCB and do not affect the
taxable income of First Banks.

     At December 31, 1997 and 1996, for federal income tax purposes, FCB had NOL
carryforwards of approximately $2.9 million and $1.1 million,  respectively. The
NOL carryforwards at December 31, 1997 expire as follows:

                                                          (dollars expressed
                                                             in thousands)
    Year ending December 31:
        2008..................................................  $  394
        2009..................................................     747
        2011..................................................     660
        2017..................................................   1,064
                                                                ------
                                                                $2,865
                                                                ======

     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 asset of $34.3 million.  The net change
in the valuation  allowance,  related to deferred tax assets,  was a decrease of
$1.8 million for the year ended December 31, 1997. The decrease was comprised of
the  following  components:  (1) a  reduction  of $2.2  million  related  to the
recognition  of deferred tax assets for certain loans and  foreclosed  property;
and (2) the establishment of $372,000 of additional valuation reserves resulting
from tax net operating losses at First Commercial Bancorp, Inc. First Commercial
Bancorp, Inc. files a separate tax return and based on the surrounding facts and
circumstances, management believes the realization of the tax benefit related to
these tax losses is not likely to occur.
<TABLE>
<CAPTION>

     Changes to the deferred tax assets valuation allowance are as follows:
                                                                                   Years ended December 31,
                                                                                   ------------------------
                                                                                       1997       1996
                                                                                       ----       ----
                                                                             (dollars expressed in thousands)

<S>                                                                                  <C>          <C>   
       Balance, beginning of year................................................    $ 19,527     24,111
       Current year deferred provision, change in
           deferred tax valuation allowance......................................      (1,780)    (5,243)
       Purchase acquisitions.....................................................          --        659
                                                                                     --------    -------
       Balance, end of year......................................................    $ 17,747     19,527
                                                                                     ========    =======
</TABLE>

     The  valuation  allowance  for deferred tax assets at December 31, 1997 and
1996  includes  $2.0  million  and  $1.9  million,   respectively,   which  when
recognized,  will be credited to  intangibles  associated  with the  purchase of
subsidiaries.  The  valuation  allowance for deferred tax assets at December 31,
1997 and 1996 includes $6.0 million and $5.9 million,  respectively,  which when
recognized  will  be  credited  to  capital  surplus  under  the  terms  of  the
quasi-reorganizations  implemented  for FBA and FCB as of December  31, 1994 and
1996, respectively.
<PAGE>

(10)  Earnings Per Share

     The  following   represents  a   reconciliation   of  the   numerators  and
denominators  of  the  basic  and  diluted  EPS  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, 1997:
<S>                                                                  <C>               <C>        <C>       
     Basic EPS-income available to common stockholders.........      $ 27,960          23,661     $ 1,181.69
                                                                                                  ==========
     Effect of dilutive securities:
         Class A convertible preferred stock...................           769           1,645
         Subsidiary bank stock options.........................           (25)             --
                                                                     --------        --------
     Diluted EPS-income available to common stockholders.......      $ 28,704          25,306     $ 1,134.28
                                                                     ========        ========     ==========

Year ended December 31, 1996:
     Basic EPS-income available to common stockholders.........      $ 14,490          23,661     $   612.46
                                                                                                  ==========
     Effect of dilutive securities:
       Class A convertible preferred stock.....................           769           1,822
       Subsidiary bank stock options and warrants..............           (50)             --
                                                                     ---------       --------
     Diluted EPS-income available to common stockholders.......      $ 15,209          25,483     $   596.83
                                                                     ========        ========     ==========

Year ended December 31, 1995:
     Basic EPS--income available to common stockholders........      $ 18,735          23,661     $   791.82
                                                                                                  ==========
     Effect of dilutive securities:
       Class A convertible preferred stock.....................           769           2,033
                                                                     --------        --------
     Diluted EPS-income available to common stockholders.......      $ 19,504          25,694     $   759.09
                                                                     ========        ========     ==========
</TABLE>

(11)  Interest Rate Risk Management and Derivative  Financial  Instruments  With
      Off-Balance-Sheet Risk
     
     First  Banks  periodically  uses  off-balance-sheet   derivative  financial
instruments  to assist in the  management  of interest rate  sensitivity.  These
off-balance-sheet  derivative  financial  instruments are utilized to modify the
repricing,  maturity and option  characteristics of on-balance-sheet  assets and
liabilities.  The use of  such  derivative  financial  instruments  is  strictly
limited to reducing the interest rate exposure of First Banks.
<TABLE>
<CAPTION>

     Derivative  financial  instruments  held by First Banks are  summarized  as
follows:
                                                                           December 31,
                                                                           ------------
                                                                 1997                         1996
                                                                 ----                         ----
                                                         Notional       Credit       Notional        Credit
                                                          amount       exposure       amount        exposure
                                                          ------       --------       ------        --------
                                                                   (dollars expressed in thousands)
<S>                                                       <C>               <C>      <C>               <C>   
         Interest rate swap agreements.................   $    --            --      70,000             --
         Interest rate floor agreements ...............    70,000            26      05,000            141
         Interest rate cap agreements .................    10,000           222      10,000            335
         Forward commitments to sell
              mortgage-backed securities ..............    60,000            --      35,000            308
</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 derivative financial instruments.  The
amounts  exchanged are  determined by reference to the notional  amounts and the
other terms of the derivatives.

     Previously,  First Banks sold interest rate futures contracts and purchased
options on interest  rate futures  contracts to hedge the interest  rate risk of
its  available-for-sale  securities  portfolio.  There were no  unamortized  net
deferred losses on interest rate futures contract remaining at December 31, 1997
or 1996. The unamortized balance of net deferred losses on interest rate futures
contracts  of $4.6  million at December  31,  1995,  was applied to the carrying
value  of  the   available-for-sale   securities   portfolio   as  part  of  the
mark-to-market  valuation.  Of the remaining balance of $4.6 million at December
31, 1995,  $3.9 million was amortized  against  interest income and $701,000 was
realized in connection with sales of investment securities during the year ended
December 31, 1996.

     Interest  rate  swap  agreements  were  utilized  to extend  the  repricing
characteristics  of certain  interest-bearing  liabilities  to  correspond  more
closely with the assets of First Banks,  with the objective of  stabilizing  net
interest  income over time.  The net interest  expense for these  agreements was
$6.4  million,  $7.4 million and $6.6  million for the years ended  December 31,

<PAGE>

1997,  1996 and  1995,  respectively.  The  maturity  dates,  notional  amounts,
interest  rates  paid and  received,  and fair  values  of  interest  rate  swap
agreements outstanding as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
                                                                                                    Fair value
                                                           Notional   Interest rate Interest rate      gain
                                                            amount        paid        received        (loss)
                                                            ------        ----        --------        ------
                                                                   (dollars expressed in thousands)

<S>                    <C> <C>                            <C>             <C>          <C>         <C>      
             September 30, 1997........................   $ 35,000        7.04%        5.59%       $   (417)
             September 30, 1999........................     35,000        7.32         5.59          (1,160)
                                                          --------                                 --------
                                                          $ 70,000        7.18         5.59        $ (1,577)
                                                          ========       =====         ====        ========
</TABLE>

     In  connection  with the sale of  certain  residential  mortgage  loans and
repayment of certain borrowings,  on May 25, 1995, First Banks terminated a $100
million  interest rate swap agreement  resulting in a loss of $3.3 million.  The
loss on the  termination  of the $100 million  interest rate swap  agreement was
reflected in the  consolidated  statement of income for the year ended  December
31, 1995.

     In addition,  First Banks  experienced a shortening of the expected life of
its loan  portfolio.  This shortening  resulted from the significant  decline in
interest  rates during  1995,  which  caused an increase in the  projections  of
principal  prepayments of residential mortgage loans. These increased prepayment
projections  and  the  overall  reduction  in  the  residential  loan  portfolio
disproportionately  shortened  the  expected  life  of  the  loan  portfolio  in
comparison  to the  effective  maturity  created  with the  interest  rate  swap
agreements.  As a result,  during July 1995,  November 1996 and July 1997, First
Banks  shortened the maturity of its  interest-bearing  liabilities  through the
termination  of $225 million,  $75 million and $35 million of interest rate swap
agreements resulting in losses of $13.5 million,  $5.3 million and $1.4 million,
respectively.  These losses have been deferred and are being  amortized over the
remaining lives of the agreements, unless the underlying liabilities are repaid.
The  unamortized  balance of these losses was $9.4 million and $13.4  million at
December 31, 1997 and 1996, respectively, and is included in other assets.

      First Banks also has interest  rate cap and floor  agreements to limit the
interest expense associated with certain of its interest-bearing liabilities and
the net interest expense of certain interest rate swap agreements, respectively.
At December 31, 1997 and 1996, the unamortized  costs for these  agreements were
$290,000 and $433,000, respectively, and were included in other assets.

      Derivative  financial   instruments  issued  by  First  Banks  consist  of
commitments to originate  fixed-rate loans.  Commitments to originate fixed-rate
loans  consist   primarily  of  residential   real  estate  loans.   These  loan
commitments, net of estimated underwriting fallout, and loans held for sale were
$67.4  million and $36.7  million at December  31, 1997 and 1996,  respectively.
These net loan  commitments  and loans  held for sale are  hedged  with  forward
contracts to sell  mortgage-backed  securities of $60 million and $35 million at
December  31,  1997 and  1996,  respectively.  Gains  and  losses  from  forward
contracts are deferred and included in the cost basis of loans held for sale. At
December  31,  1997 and 1996,  the net  unamortized  losses  were  $783,000  and
$452,000,  respectively,  which were applied to the carrying  value of the loans
held for sale as part of the lower of cost or market valuation.

(12)  Credit Commitments

     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.
<PAGE>

     The interest rate risk  associated  with these credit  commitments  relates
primarily to the commitments to originate residential  fixed-rate loans. As more
fully  discussed  in  Note  11  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
<TABLE>
<CAPTION>

     Commitments to extend credit at December 31 are as follows:

                                                                                          December 31,
                                                                                          ------------
                                                                                       1997         1996
                                                                                       ----         ----
                                                                               (dollars expressed in thousands)

<S>                                                                                 <C>            <C>    
         Commitments to extend credit.............................................  $ 898,723      716,967
         Commercial and standby letters of credit.................................     33,672       25,256
                                                                                    ---------     --------
                                                                                    $ 932,395      742,223
                                                                                    =========      =======
</TABLE>

     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. Since certain of the commitments are expected
to expire  without  being  drawn  upon,  the  total  commitment  amounts  do not
necessarily represent future cash requirements.


     First Banks  evaluates each customer's  creditworthiness  on a case-by-case
basis. The amount of collateral obtained if deemed necessary by First Banks upon
extension  of  credit  is  based  on  management's   credit  evaluation  of  the
counterparty.   Collateral  held  varies,   but  is  generally   residential  or
income-producing commercial property.

     Commercial and standby letters of credit are conditional commitments issued
to guarantee the  performance of a customer to a third party.  Those  guarantees
are  primarily  issued to support  public and  private  borrowing  arrangements,
including commercial paper, bond financing and similar transactions.  The credit
risk  involved  in  issuing  letters of credit is  essentially  the same as that
involved in extending loan facilities to customers.  First Banks generally holds
real property as collateral supporting those commitments for which collateral is
deemed necessary.

(13)  Fair Value of Financial Instruments

     Fair  values of  financial  instruments  are  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,  premises and  equipment and goodwill.
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.
<PAGE>

<TABLE>
<CAPTION>

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

                                                                      1997                        1996
                                                              --------------------       -----------------------
                                                            Carrying     Estimated      Carrying       Estimated
                                                              value     fair value        value       fair value
  Financial assets:
<S>                                                       <C>            <C>             <C>            <C>    
       Cash and cash equivalents......................    $ 168,480      168,480         227,954        227,954
       Investment securities:
          Trading.....................................        3,110        3,110              --             --  
          Available for sale..........................      773,271      773,271         532,605        532,605
          Held to maturity............................       19,149       19,835          20,196         20,611
       Net loans......................................    2,951,691    2,964,115       2,721,188      2,744,737
       Accrued interest receivable....................       28,358       28,358          23,250         23,250
                                                          =========    =========       =========       ========

  Financial liabilities:
       Deposits:
          Demand:
             Non-interest-bearing.....................      485,222      485,222         418,193        418,193
             Interest-bearing.........................      348,080      348,080         337,618        337,618
             Savings and money market.................      947,029      947,029         671,286        671,286
          Time deposits...............................    1,904,264    1,912,461       1,811,470      1,815,779
       Borrowings.....................................      109,297      109,297         146,312        146,312
       Accrued interest payable.......................        9,976        9,976          10,288         10,288
                                                          =========     ========       =========       ========

  Off-balance-sheet:
       Interest rate swap, cap and floor agreements...        9,689          248          14,702         (1,101)
       Forward contracts to sell mortgage-backed
          securities..................................         (341)        (341)            308            308
       Credit commitments.............................           --           --              --             --
                                                          =========     ========       =========       ========
</TABLE>

     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:  Fair value for trading  securities  and securities
available for sale are the amounts reported in the consolidated  balance sheets,
and  securities  held to  maturity  are  based on  quoted  market  prices  where
available. If quoted market prices are not available, fair values are based upon
quoted market prices of comparable instruments.

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

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. Fair values for certificates of deposit are estimated using a discounted
cash flow  calculation  that applies  interest rates  currently being offered on
similar  certificates  to a schedule of  aggregated  monthly  maturities of time
deposits.

     Borrowings and accrued  interest  payable:  The carrying values reported in
the consolidated balance sheets approximate fair value.
<PAGE>

Off-Balance-Sheet:

     Interest rate swap, cap and floor  agreements:  The fair values of interest
rate swap, cap and floor  agreements are estimated by comparing the  contractual
rates  First  Banks is paying  to market  rates  quoted on new  agreements  with
similar creditworthiness.

     Forward contracts to sell mortgage-backed  securities:  The fair values for
forward  contracts  to sell  mortgage-backed  securities  are 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 as part of the lower of cost or market valuation.

     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 approximates fair value.

(14)  Employee Benefits
     First  Banks'  profit-sharing  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  an  employee's
compensation,  not to exceed $9,500 for 1997. Total employer contributions under
the plan were  $506,000,  $576,000 and $448,000 for the years ended December 31,
1997, 1996 and 1995, respectively.

     Postretirement benefits other than pensions and postemployment benefits are
generally not provided for First Banks' employees.

(15)  Preferred Stock

      First Banks had three classes of preferred  stock  outstanding  during the
years ended December 31, 1997 and 1996.

      On  September  15,  1992,  First  Banks  issued and sold,  pursuant  to an
effective  registration  statement  under the Securities Act of 1933,  2,200,000
shares of Class C 9% cumulative  increasing rate,  redeemable,  preferred stock.
Class C preferred stock ranks senior to both the Class A preferred stock and the
Class B preferred stock in terms of dividend and liquidation rights.  Holders of
the Class C  preferred  stock do not have any  voting  rights  except in limited
circumstances  or as  expressly  required by law. 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% nor more than 12%
on  Class A  preferred  stock,  or less  than 7% nor  more  than  15% on Class B
preferred  stock.  Dividends  on the Class C  preferred  stock  were 9%  through
November  30,  1997.  On  December  1, 1997,  First  Banks  redeemed  all of the
outstanding Class C preferred stock.

     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% of par value.  Class B
preferred  stock may not be redeemed or  converted.  Redemption  of any issue of
preferred stock requires the prior approval of the Federal Reserve Board.
<PAGE>

     The annual dividend rates were as follows:
                                                       1997      1996     1995
                                                       ----      ----     ----

   Class C preferred stock (1).......................   9.0%      9.0%     9.0%
   Class A preferred stock...........................   6.0       6.0      6.0
   Class B preferred stock...........................   7.0       7.0      7.0
---------------
(1) Redeemed on December 1, 1997.

(16)  Transactions With Related Parties

      Outside of normal  customer  relationships,  no  directors  or officers of
First Banks, no stockholders  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  relationship with First Banks
or its  subsidiaries,  other than such as arises by virtue of such  position  or
ownership  interest in First Banks or its  subsidiaries,  except as described in
the following paragraphs.

     During 1997, 1996 and 1995, Tidal Insurance Limited (Tidal),  a corporation
owned   indirectly  by  First  Banks'   Chairman  and  his  children,   received
approximately  $214,000,  $326,000  and  $192,000,  respectively,  in  insurance
premiums for  accident,  health and life  insurance  policies  purchased by loan
customers of First Banks.  The insurance  policies are issued by an unaffiliated
company and then ceded to Tidal.  First Banks  believes the premiums paid by the
loan  customers of First Banks are  comparable to those that such loan customers
would have paid if the premiums were subsequently being ceded to an unaffiliated
third-party  insurer.  In addition,  for the years ended December 31, 1997, 1996
and 1995, First Securities America, Inc., doing business as First Banc Insurors,
received  approximately  $206,000,  $231,000  and  $196,000,   respectively,  in
commissions  or  insurance  premiums  for  policies  purchased by First Banks or
customers of the Subsidiary Banks from the unaffiliated, third-party insurors to
which First Banc Insurors placed such policies.  First Banc Insurors received an
additional  $136,000 and  $999,000 in annuity  sales  commissions  for the years
ended December 31, 1996 and 1995,  respectively.  In addition,  First  Brokerage
L.P. received  approximately  $707,000 and $822,000 for the years ended December
31, 1997 and 1996, respectively, in commissions and lease payments in connection
with  annuities  and  securities  and other  insurance  product  sales  services
provided to certain customers of the Subsidiary Banks.  Commissions  received by
First Banc Insurors and First  Brokerage  L.P. in  connection  with the purchase
and/or  sale of such  annuities  and  securities  were paid by an  unaffiliated,
third-party company. First Securities America, Inc. and First Brokerage L.P. are
owned by a trust  established  and  administered by and for the benefit of First
Banks' Chairman and members of his immediate family.  The insurance  premiums on
which the  aforementioned  commissions  were earned were  competitively  bid and
First Banks deems the commissions First Banc Insurors earned to be comparable to
those which would have been earned by an unaffiliated third-party agent.

     First  Services,  L.P.,  a limited  partnership  indirectly  owned by First
Banks'  Chairman  and his  children  through  its General  Partners  and Limited
Partners,  provides data processing  services and operational  support for First
Banks and its subsidiaries. Fees paid under the agreement to First Services L.P.
were $6.4  million,  $3.2 million and $2.9 million for the years ended  December
31, 1997, 1996 and 1995,  respectively.  During 1997, First Services,  L.P. paid
First Banks $1.1 million in rental fees for the use of data processing and other
equipment owned by First Banks.


(17)  Capital Stock of Subsidiaries

     First Banks owns all of the Class B common stock of FBA representing 65.85%
and 68.82% of all classes of  outstanding  voting stock at December 31, 1997 and
1996,  respectively.  FBA common stock, which is publicly traded on the New York
Stock  Exchange,  is the only other class of voting  stock.  In addition,  First
Banks owns 61.48% of all  outstanding  voting  stock of FCB at December 31, 1997
and 1996.
<PAGE>

     On  February  2,  1998,  FBA and FCB were  merged.  Under  the terms of the
Agreement  and Plan of Merger  (Agreement),  FCB was merged into FBA,  and First
Commercial was merged into FB California.  The FCB  shareholders  received .8888
shares of FBA common stock for each share of FCB common stock that they held. In
total,  FCB  shareholders  received  approximately  751,728 shares of FBA common
stock, of which 462,176 shares were issued to First Banks.  The transaction also
provided  for First  Banks to  receive  804,000  shares of FBA  common  stock in
exchange for $10.0 million  advanced to FBA under a promissory note payable.  In
addition, FCB's convertible debentures of $6.5 million, which are owned by First
Banks,  were exchanged for comparable  debentures in FBA. First Banks' ownership
interest in FBA would have been 70.4% of the outstanding  voting stock of FBA at
December 31, 1997,  had the  acquisition of FCB been completed on that date. The
merger  of FBA and FCB will  not  have a  significant  impact  on the  financial
condition or results of operations of First Banks.

(18)   Regulatory Capital

     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 the Subsidiary  Banks'  financial  statements.  Under capital
adequacy  guidelines and the regulatory  framework for Prompt Corrective Action,
the  Subsidiary  Banks  must  meet  specific  capital  guidelines  that  involve
quantitative measures of the Subsidiary Banks' assets, liabilities,  and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Subsidiary  Banks'  capital  amounts  and  classification  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 the Subsidiary Banks to maintain certain minimum ratios.  The Subsidiary
Banks are  required to maintain a minimum  risk-based  capital to  risk-weighted
assets  ratio of 8.0%,  with at least 4.0% being "Tier 1" capital (as defined in
the regulations). In addition, a minimum leverage ratio (Tier 1 capital to total
assets)  of 3.0%  plus an  additional  cushion  of 100 to 200  basis  points  is
expected.  In order to be considered well  capitalized  under Prompt  Corrective
Action provisions, a bank is required to maintain a risk weighted asset ratio of
at least  10%,  a Tier 1 to risk  weighted  assets  ratio of at least 6%,  and a
leverage  ratio of at least 5%. As of December  31,  1996,  the date of the most
recent notification from First Banks' primary regulator,  each of the Subsidiary
Banks were  categorized as well capitalized  under the regulatory  framework for
prompt corrective action.  Management believes, as of December 31, 1997, each of
the Subsidiary  Banks' were well  capitalized as defined by the FDIC Improvement
Act.
<TABLE>
<CAPTION>

     At December 31, 1997 and 1996,  First Banks' and the subsidiary  depository
institutions' capital ratios were as follows:
                                                               Risk-based capital ratios
                                                               -------------------------
                                                               Total               Tier   1        Leverage ratio
                                                               -----               ----   -        --------------
                                                          1997       1996       1997      1996      1997     1996
                                                          ----       ----       ----      ----      ----     ----

<S>                                                      <C>         <C>        <C>      <C>        <C>      <C>  
     First Banks....................................     10.26%      9.23%      8.78%    7.92%      6.80%    5.99%
     First Bank.....................................     10.78      10.47       9.52     9.21       7.19     7.25
     First Bank Illinois (1)........................        --      11.06         --     9.88         --     7.17
     First Bank FSB (1).............................        --      11.00         --     9.75         --     6.45
     FB&T...........................................     12.71      16.45      11.45    15.18       7.70    11.43
     BankTEXAS......................................     12.26      10.29      11.00     9.04       8.90     7.53
     FB California..................................     13.03         --      11.77       --      13.80       --  
     Sunrise Bank (2)...............................        --      17.67         --    16.39         --    10.88
     First Commercial...............................     11.89      13.13      10.61    11.84       8.43     8.87
----------------
(1) Merged  into First  Bank  effective  November  1, 1997.  (2) Merged  into FB
California effective December 1, 1997.
</TABLE>
<PAGE>

(19)  Distribution of Earnings of Subsidiaries

     The   Subsidiary   Banks  are  restricted  by  various  state  and  federal
regulations,  as well as by the terms of the Credit Agreement  described in Note
7, in the amount of  dividends  which is  available  for payment of dividends to
First Banks, Inc. Under the most restrictive of these  requirements,  the future
payment  of  dividends  from  subsidiary  financial  institutions  is limited to
approximately   $29.7  million,   unless  prior  permission  of  the  regulatory
authorities or the lending banks is obtained.

(20)  Parent Company Only Financial Information
<TABLE>
<CAPTION>

      Following are condensed balance sheets of First Banks, Inc. as of December
31, 1997 and 1996,  and  condensed  statements  of income and cash flows for the
years ended December 31, 1997, 1996 and 1995:

                            CONDENSED BALANCE SHEETS
                                                                                               December 31,
                                                                                               ------------
                                       Assets                                                1997        1996
                                       ------                                                ----        ----
                                                                                     (dollars expressed in thousands)

<S>                                                                                      <C>              <C>  
Cash deposited in subsidiary banks....................................................   $    8,327       3,887
Investment in subsidiaries, at equity.................................................      317,092     290,305
Investment securities.................................................................       27,781      18,564
Other assets..........................................................................       32,408      19,933
                                                                                         ----------    --------
           Total assets...............................................................   $  385,608     332,689
                                                                                         ==========    ========

                        Liabilities and Stockholders' Equity

Notes payable.........................................................................   $   55,144      76,330
Long term debt........................................................................       88,918          -- 
Accrued expenses and other liabilities................................................       10,009       4,970
                                                                                         ----------    --------
           Total liabilities..........................................................      154,071      81,300
Stockholders' equity..................................................................      231,537     251,389
                                                                                         ----------    --------
           Total liabilities and stockholders' equity.................................    $ 385,608     332,689
                                                                                          =========    ========
</TABLE>

<TABLE>
<CAPTION>

                         CONDENSED STATEMENTS OF INCOME

                                                                                    Years ended December 31,
                                                                                    ------------------------
                                                                                  1997        1996        1995
                                                                                  ----        ----        ----
                                                                                (dollars expressed in thousands)
Income:
<S>                                                                           <C>            <C>         <C>   
    Dividends from subsidiaries...........................................    $  17,221      20,714      57,901
    Management fees from subsidiaries.....................................        9,010       7,393       5,108
    Other income..........................................................        3,094       1,684       2,015
                                                                              ---------      ------     -------
       Total income.......................................................       29,325      29,791      65,024
                                                                              ---------      ------     -------
Expenses:
    Interest expense......................................................        8,815       5,461       5,861
    Salaries and employee benefits........................................        7,072       5,538       4,597
    Legal and professional fees...........................................        1,765       1,978       2,426
    Other expenses........................................................        5,221       3,415       3,035
                                                                              ---------      ------     -------
       Total expenses.....................................................       22,873      16,392      15,919
                                                                              ---------      ------     -------
       Income before income tax benefit and equity in undistributed
         earnings (loss) of subsidiaries..................................        6,452      13,399      49,105
Income tax benefit........................................................       (2,831)     (1,880)     (2,007)
                                                                              ---------      ------     -------
       Income before equity in undistributed earnings 
          (loss) of subsidiaries..........................................        9,283      15,279      51,112
Equity in undistributed earnings (loss) of subsidiaries, 
   net of dividends paid..................................................       23,744       4,939     (26,641)
                                                                                 ------     -------     -------
       Net income.........................................................    $  33,027      20,218      24,471
                                                                              =========      ======     =======
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                       CONDENSED STATEMENTS OF CASH FLOWS

                                                                                   Years ended December 31,
                                                                                   ------------------------
                                                                              1997          1996           1995
                                                                              ----          ----           ----
                                                                               (dollars expressed in thousands)

Cash flows from operating activities:
<S>                                                                       <C>              <C>            <C>   
    Net income.........................................................   $  33,027        20,218         24,471
    Adjustments to reconcile net income to net cash provided by
       operating activities:
         Net income of subsidiaries....................................     (41,015)      (25,610)       (30,973)
         Dividends from subsidiaries...................................      17,221        20,714         57,901
         Other, net....................................................      (2,773)         (998)            58
                                                                          ---------      --------        -------
           Net cash provided by operating activities...................       6,460        14,324         51,457
                                                                          ---------      --------        -------
Cash flows from investing activities:
    (Increase) decrease in investment securities.......................      (3,000)           --          2,420
    Investment in common securities of First Trust.....................      (2,668)           --             -- 
    Acquisitions of subsidiaries.......................................          --            --        (49,996)
    Capital contributions to subsidiaries..............................        (190)         (200)       (44,329)
    Return of subsidiary capital.......................................       2,000         7,786         12,149
    Decrease in advances to subsidiaries...............................        (121)         (950)       (13,529)
    Other, net.........................................................      (6,659)          268         (1,011)
                                                                          ---------      --------        -------
           Net cash provided by (used in) investing activities.........     (10,638)        6,904        (94,296)
                                                                          ---------      --------         ------
Cash flows from financing activities:
    Increase (decrease) in notes payable...............................     (21,186)      (11,805)        41,932
    Increase in long term debt.........................................      88,918            --             -- 
    Payment of preferred stock dividends...............................      (5,066)       (5,728)        (5,736)
    Purchase and retirement of Class C preferred stock.................     (54,048)       (1,139)            --
                                                                          ---------      --------         ------
           Net cash provided by (used in) financing activities.........       8,618       (18,672)        36,196
                                                                          ---------      --------        -------
           Net increase (decrease) in cash and cash equivalents........       4,440         2,556         (6,643)
Cash and cash equivalents, beginning of year...........................       3,887         1,331          7,974
                                                                          ---------      --------        -------
Cash and cash equivalents, end of year.................................   $   8,327         3,887          1,331
                                                                          =========      ========        =======
</TABLE>

(21)  Contingent Liabilities

      In the ordinary  course of business,  there are various legal  proceedings
pending against First Banks. Management,  after consultation with legal counsel,
is of the opinion the  ultimate  resolution  of these  proceedings  will have no
material effect on the consolidated  financial position or results of operations
of First Banks.





<PAGE>




<TABLE>
<CAPTION>



                                               DIRECTORS AND EXECUTIVE OFFICERS





                                                       First Banks, Inc.


<S>                                     <C>
         James F. Dierberg              Chairman of the Board, President and Chief Executive Officer

         Allen H. Blake                 Director, Executive Vice President and Chief Financial Officer

         George J. Markos               Director; President, Profit Management Systems, Richardson, Texas

         Donald J. Gunn                 Director; Attorney-At-Law, Gunn and Gunn, Creve Coeur, Missouri

         John A. Schreiber              Executive Vice President and Chief Lending Officer

         Mark T. Turkcan                Executive Vice President, Retail and Mortgage Banking

         Donald W. Williams             Executive Vice President and Chief Credit Officer

         Thomas J. Bangert              Senior Vice President and Chief Operations Officer

         Laurence J. Brost              Senior Vice President and Controller

                                                     First Banks America, Inc.

         James F. Dierberg              Chairman of the Board, President and Chief Executive Officer

         Allen H. Blake                 Director, Vice President, Chief Financial Officer and Secretary

         Charles A. Crocco, Jr.         Director; Partner in the law firm of Crocco & De Maio, P.C., New York, New York.

         Albert M. Lavezzo              Director;  Partner  in the law firm of  Favaro,  Lavezzo,  Gill,  Caretti &  Neppell,
                                        Vallejo, California.

         Edward T. Story, Jr.           Director;  President  and  Chief  Executive  Officer  of  SOCO  International,  Inc.,
                                        Comfort, Texas.

         Mark T. Turkcan                Director

         Donald W. Williams             Director

         David F. Weaver                Executive Vice President

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                            First Bank

<S>                                     <C>
         John A. Schreiber              Chairman of the Board, President and Chief Executive Officer
         
         Allen H. Blake                 Director, Secretary, Treasurer and Chief Financial Officer

         Thomas A. Bangert              Director and Executive Vice President

         Douglas R. Distler             Director, Senior Vice President and Regional President
        
         Donald W. Williams             Director and Executive Vice President

         Mark T. Turkcan                Director and Executive Vice President


                                                         First Bank & Trust

         Donald W. Williams             Chairman of the Board and Chief Executive Officer

         Fred D. Jensen                 Director and President

       
         Terrance M. McCarthy           Director, Senior Vice President and Chief Credit Officer
       
         Kathryn L. Perrine             Director, Vice President, Controller and Secretary
      
         Timothy Marme'                 Director and Regional President


                                                      First Bank of California

         Donald W. Williams             Chairman of the Board and Chief Executive Officer

        
         Jerry Brannigan                Director; Retired Title Company President, Sacaramento, California
      
         James E. Culleton              Director, President, Chief Operating Officer and Secretary
       
         Fred L. Harris                 Director; Attorney at Law, Rancho Cordova, California
       
         Albert M. Lavezzo              Director;  Partner  in the law  firm of  Favaro,  Lavezzo,  Gill,  Caretti  &  Neppell,
                                        Vallejo, California

         
         Terrance M. McCarthy           Director, Senior Vice President and Chief Credit Officer
        
         Arleen R. Scavone              Director and Vice President, Retail Banking
         
         Fred K. Sibley                 Director; Retired Bank President, Vallejo, California

                                                           BankTEXAS N.A.

         David F. Weaver                Chairman of the Board, President and Chief Executive Officer

         Donald W. Williams             Director

         Alan M. Meyer                  Director

         Joseph Milcoun, Jr.            Director and Vice President, Retail Banking

         Arved E. White                 Director, Senior Vice President and Chief Lending Officer
</TABLE>


<PAGE>



                              INVESTOR INFORMATION

                             Stock Quotation Symbol
                         NASDAQ National Market System:

                          First Preferred Capital Trust

                                              FBNKO


                                   Market price (1)        Dividend
   1997                          High            Low       declared
   ----                          ----            ---      ----------

   First Quarter            $   26-1/8         25        $    .38542
   Second Quarter               26-3/4         25-1/8         .57812
   Third Quarter                27             25-5/8         .57812
   Fourth Quarter               28-3/4         25-7/8         .57812
                               =======         =======              
                                                         $   2.11978
                                                         ===========

-------------------
(1) Per NASDAQ National Market System.

     Dividends are scheduled to be paid the last day of March,  June,  September
and December.




     A copy of the First Banks,  Inc.  Annual  Report on Form 10-K as filed with
the  Securities  and Exchange  Commission  may be obtained  without  charge upon
written request. Please direct your request to the following address.

   Allen H. Blake                         Transfer Agent
   Executive Vice President and           ChaseMellon Shareholder
     Chief Financial Officer                 Service L.L.C.
   First Banks, Inc.                      85 Challenger Road
   11901 Olive Boulevard                  Overpeck Centre
   Creve Coeur, Missouri  63141           Ridgefield Park, New Jersey 07660
   (314) 995-8700                         (888) 213-0965
                                           www.chasemellon.com



<PAGE>



                                  EXHIBIT 21.1

                                First Banks, Inc.

                            Significant Subsidiaries


       The  following  is a list  of all  subsidiaries  of the  Company  And the
jurisdiction of incorporation or organization.

                                                Jurisdiction of Incorporation 
         Name of Subsidiary                              or Organization
         ------------------                              ---------------

         First Bank                                        Missouri
         CCB Bancorp, Inc. (1)                             California
         First Banks America, Inc. (2)                     Delaware
         First Serve, Inc.                                 Missouri
---------------
(1)    CCB Bancorp, Inc.  is the   parent  company  of  First  Bank  &  Trust, a
       California state chartered bank.
(2)    First Banks America, Inc., a majority owned subsidiary of First Banks, is
       the  parent  company  of  Sundowner  Corporation,  a Nevada  corporation.
       Sundowner  Corporation  is the  parent  company  of  BankTEXAS,  N.A.,  a
       national  association,  and First Bank of California,  a state  chartered
       bank.