FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              ____________________
(Mark One) [X] ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
               EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996

[  ]     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 of      (I.R.S. Employer Identification No.)
     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:

    Class C 9.00% Increasing Rate, Redeemable, Cumulative Preferred Stock
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 18, 1997 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, 1996 (the "1996  Annual Report to Shareholders") are  incorporated
 by reference into Parts I and II.
<PAGE>

                                     PART I


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, 1996, the Company had approximately $3.69 billion in
total assets,  $2.77  billion in total loans,  net of unearned  discount,  $3.24
billion in total deposits, and $251.4 million in total stockholders' equity.
     First Banks' subsidiary  financial  institutions and bank holding companies
         (the "Subsidiary Banks") are: 
        Financial institution subsidiaries:
            First Bank, headquartered in St. Louis County, Missouri ("First Bank
            Missouri");
            First Bank,  headquartered   in   O'Fallon,  Illinois  ("First  Bank
            Illinois");
            First Bank FSB,  headquartered in St. Louis County, Missouri ("First
            Bank FSB");
        Bank holding company subsidiaries:
            First Banks America, Inc.,  headquartered in Houston, Texas ("FBA");
            CCB Bancorp, Inc.,  headquartered in Santa  Ana, California ("CCB");
            and  First  Commercial  Bancorp,  Inc., headquartered in Sacramento,
            California ("FCB").

     First Bank  Missouri  and First Bank  Illinois  are  wholly  owned  banking
subsidiaries.  First Bank FSB is a wholly owned thrift subsidiary. CCB, a wholly
owned bank holding  company  subsidiary,  operates  through  First Bank & Trust,
headquartered in Santa Ana,  California  ("FB&T").  FBA, a  majority-owned  bank
holding company  subsidiary,  operates through BankTEXAS N.A.,  headquartered in
Houston,  Texas  ("BTX"),  and  Sunrise  Bank of  California,  headquartered  in
Roseville,  California  ("Sunrise").  FCB, a majority-owned bank holding company
subsidiary, operates through First Commercial Bank, headquartered in Sacramento,
California ("First Commercial"). First Banks' ownership interests in FBA and FCB
were 68.82% and 61.46%, respectively, at December 31, 1996.
     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,  agricultural,
municipal and industrial development,  real estate construction and development,
commercial and residential real estate and consumer and installment loans. Other
financial services include mortgage banking, discount brokerage,  credit-related
insurance,  automatic  teller  machines,  safe deposit boxes, and trust services
offered by certain Subsidiary Banks.
     First Banks'  management  philosophy  is to  centralize  overall  corporate
policies,  procedures and  administrative  functions and to provide  operational
support functions for the Subsidiary Banks. Primary  responsibility for managing
the  Subsidiary  Banks  rests  with  each of the  respective  Subsidiary  Bank's
officers and directors.
<TABLE>
<CAPTION>
     The following table lists the Subsidiary Banks at December 31, 1996:

                                                                       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 FSB.....................      40       $1,040,038          864,174          877,956
     First Bank Missouri................      31          838,799          628,428          745,465
     First Bank Illinois................      27          843,333          627,871          773,606
     CCB................................      13          474,174          310,930          400,342
     FBA ...............................       9          375,182          241,874          319,806
     FCB ...............................       6          153,033           94,497          136,136
</TABLE>

     In addition to the Subsidiary Banks, First Banks owns FirstServ, Inc. which
provides data processing  services and  operational  support for First Banks and
its  subsidiaries  through a management  services  agreement  with an affiliated
entity which is indirectly owned by First Banks' voting shareholders.
     The Company, Mr. Dierberg and  an  affiliate  of Mr. Dierberg own  18.12%, 
4.33% and 0.20%,  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
Class C Preferred Stock is publicly held and listed on The Nasdaq Stock Market's
National  Market.  The Class C Preferred  Stock has 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" of the 1996 Annual  Report to
Shareholders, which is incorporated herein by reference.

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  its
immediate  market area.  This led to the  acquisition of financial  institutions
which had offices in Dallas and Houston,  Texas in 1994 and Los Angeles,  Orange
County,  Santa Barbara,  San Francisco,  San Jose and Sacramento,  California in
1995.
     During 1996, 1995 and 1994,  First Banks completed  thirteen  acquisitions.
These  acquisitions  provided  total  assets  of $2.06  billion  and 46  banking
locations.  For a description  of the  acquisitions  completed  during the three
years ended  December  31, 1996,  see  "Management's  Discussion  and Analysis -
Acquisitions"  and Note 2 to the consolidated  financial  statements of the 1996
Annual Report to Shareholders, incorporated herein by reference.

Market Area
     As of December 31, 1996, the Subsidiary Banks' 126 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  markets are central and southern  Illinois and
southern and northern California,  respectively.  First Banks also has locations
in the Houston,  Dallas and McKinney,  Texas  metropolitan  areas, rural eastern
Missouri and the greater Chicago, Illinois metropolitan area.


<PAGE>
<TABLE>
<CAPTION>


     The following  table lists the market areas in which the  Subsidiary  Banks
operate by number of locations and deposits as of December 31, 1996:

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

<S>                                                          <C>                 <C>           <C>
St. Louis, Missouri Metropolitan Area (1).................   $   672.1           20.8%         27
Rural Eastern Missouri (2)................................       324.5           10.0          16
Central and Southern Illinois (3).........................       982.5           30.3          40
Northern Illinois (4).....................................       403.2           12.5          15
Texas (5).................................................       232.9            7.2           6
Southern and Central California (6).......................       369.2           11.4          11
Northern California (7)...................................       254.2            7.8          11
                    --                                         -------          -----         ---
Total Deposits............................................   $ 3,238.6          100.0%        126
                                                               =======          =====         ===
</TABLE>
----------------------
(1) First Bank Missouri  First  Bank Illinois and First  Bank FSB operate in the
    St. Louis metropolitan market area.
(2) First Bank FSB and First Bank Missouri operate in rural eastern Missouri.
(3) First Bank FSB  and First  Bank  Illinois  operate in central  and  southern
    Illinois  outside of the St. Louis metropolitan market area.
(4) First Bank FSB operates facilities in northern Illinois, including Chicago.
(5) BTX operates in the Houston, Dallas and McKinney metropolitan areas.
(6) 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. 
(7) FB&T,  First  Commercial  and  Sunrise  operate  in  northern   California, 
    including the greater San Francisco, San Jose  and  Sacramento  metropolitan
    market areas.

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,  1996 is  included  under
"Management's  Discussion  and  Analysis-Loans  and  Allowance for Possible Loan
Losses" of the 1996 Annual Report to Shareholders and is incorporated  herein by
reference.

Mortgage Banking Operations
     Through the First Bank Mortgage  division  ("First Bank Mortgage") of First
Bank FSB, 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 FSB 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.
     In conjunction with its de-emphasis of residential mortgage lending for its
loan  portfolio,  First Banks is  considering  subcontracting  its mortgage loan
servicing and transferring its origination  function to an entity which would be
indirectly owned by First Banks' voting shareholders. It is not anticipated that
any such subcontract and transfer, if consummated,  would have a material effect
on the financial  condition or results of operations of First Banks. First Banks
may also  consider  selling its  residential  mortgage  servicing,  either to an
unrelated  entity or an entity which would be  indirectly  owned by First Banks'

<PAGE>

voting shareholders. If such a transaction is initiated, its purpose would be to
redeploy the capital  allocated to its mortgage  servicing  activities to assets
which would provide a greater and more stable return on capital to First Banks.
     For a summary  of the  mortgage  banking  activities  of First  Banks,  see
"Management's  Discussion  and  Analysis - Mortgage  Banking  Activities" of the
1996 Annual Report to Shareholders which is 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 the
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 Company  does not engage in the practice of trading
securities  for the  purpose  of  generating  portfolio  gains.  The  investment
portfolio  composition  is  presented  in Note 3 to the  consolidated  financial
statements of the 1996 Annual Report to Shareholders and is 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, 1996  is included  under  "Management's  Discussion and Analysis - Deposits"
of the  1996  Annual  Report  to  Shareholders  and is  incorporated  herein  by
reference.

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.


<PAGE>


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  that 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 Missouri, First
Bank Illinois,  FB&T,  First  Commercial and Sunrise) 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 Missouri, as a member of the Federal Reserve System, is
the FRB, while the primary federal bank regulator for First Bank Illinois, FB&T,
First  Commercial  and  Sunrise,  which are not members of the  Federal  Reserve
System,  is the Federal Deposit Insurance  Corporation (the "FDIC").  First Bank
FSB, as a federally chartered savings institution, is subject to supervision and
regulation by the Office of Thrift  Supervision (the "OTS"), and BTX, a national
banking association,  is subject to the supervision and regulation of the Office
the Comptroller of the Currency (the "OCC").  Because the FDIC provides  deposit
insurance to the Company's depository  subsidiary 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

<PAGE>

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 that 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
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 that 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%.

<PAGE>

     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  that 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  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  17  to  the  accompanying  consolidated  financial
statements  of the 1996 Annual  Report to  Shareholders,  each of the  Company's
subsidiary  bank and thrift  depository  institutions  have,  as of December 31,
1996,   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 that 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

<PAGE>

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 provides 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 the third quarter of 1996 for the one-time  special deposit  insurance
assessment.  As a result of this special assessment,  however, First Banks' cost
of deposit insurance is expected to decrease by approximately $2 million for the
year ended  December 31, 1997,  compared to its deposit  insurance  cost for the
year ended  December 31, 1996,  excluding the effect of the special  assessment.
The  expected  decrease in the cost of deposit  insurance is based on an overall
assessment  rate for 1997 of 1.3 basis points and 6.4 basis points for each $100
of assessable deposits of BIF and SAIF deposits,  respectively, in comparison to
the current  assessment  rate,  applicable  only to SAIF  deposits,  of 23 basis
points.
     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
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

<PAGE>

each insured depositor. Certain of the Subsidiary Banks have deposits which were
added  through the merger of  acquired  thrifts.  Consequently,  First Bank FSB,
First Bank  Missouri,  First Bank  Illinois and FB&T are members of both the BIF
and the SAIF, BTX, First Commercial and Sunrise are members 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
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, and all of the assessments  paid by institutions in this 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, and the OTS has adopted similar guidelines for
thrifts.  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 that 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 that, in connection with examinations of financial  institutions

<PAGE>

within their  jurisdiction,  the federal  banking  regulators  must 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 BTX, First Commercial Bank
and Sunrise)  that do not involve the Company or  FirstServ,  Inc. 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 BTX, First Commercial
and  Sunrise.  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 FSB, First Bank Missouri,  First
Bank  Illinois,  FB&T and BTX 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 FSB and First Bank (Missouri),  as members of the FHLB of Des Moines, First
Bank  (Illinois),  as a member of the FHLB of  Chicago,  BTX, as a member of the
FHLB of Dallas, and FB&T, as a member 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.
     Qualified  Thrift Lender Status.  First Bank FSB must, and currently  does,
meet a  "Qualified  Thrift  Lender"  (the "QTL") test for,  among other  things,
future eligibility for FHLB advances. The QTL test requires savings associations
to maintain a specified percentage of assets in "qualifying" investments,  which
may include, for example, home mortgage loans,  mortgage-backed securities and a
percentage of consumer loans. Any savings association that fails to meet the QTL

<PAGE>

test must convert to a commercial  bank charter,  unless it requalifies as a QTL
on an average  basis in at least three out of every four quarters for two out of
three years and thereafter  remains a QTL. If an institution  that fails the QTL
test has not yet requalified and has not converted to a commercial bank, its new
investments and activities are limited to those permissible for a national bank.
Such an  association  is also  immediately  ineligible  to receive  any new FHLB
advances and is subject to national bank limits for payment of dividends and may
not  establish a branch  office at any location at which a national bank located
in the savings  association's  home state could not establish a branch.  If such
association  has not requalified or converted to a commercial bank charter three
years after its failure to meet the QTL test, it must divest all investments and
cease all activities not  permissible  for a national bank.  Such an association
must also repay promptly any outstanding  FHLB advances.  Certain  temporary and
limited exceptions from meeting the QTL test may be granted by the OTS.
     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 that 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  $45.6  million as of December 31, 1996,  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 banks deposits and assets of foreign branches,  and the imposition of and
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,  1996,  the  Company  and  its  subsidiaries  employed
approximately 1,424 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 and First Bank FSB,  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  12,013 is currently
leased to others.  Of the  Subsidiary  Banks'  other 125 main offices and branch
facilities,  83 are located in buildings  owned by the  Subsidiary  Banks and 42
currently 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

<PAGE>

believes that 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 Financial Data" included in the 1996 Annual Report to
Shareholders.

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 1996 Annual Report to
Shareholders.

Item 8.  Financial Statements and Supplementary Data
     The  following  consolidated  financial  statements,  included  in the 1996
Annual  Report to  Shareholders,  and  quarterly  consolidated  financial  data,
included in the 1996 Annual Report to Shareholders,  are incorporated  herein by
reference.
         Statement

         Consolidated Balance Sheets - December 31, 1996 and 1995
         Consolidated Statements of Income - Years Ended December 31, 1996, 1995
         and 1994 Consolidated  Statements of Changes in Stockholders'  Equity -
         Years Ended December 31, 1996, 1995,
             and 1994
         Consolidated Statements of Cash Flows - Years  Ended December 31, 1996,
             1995 and 1994
         Notes to Consolidated Financial Statements
         Independent Auditors' Report

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

                  Not applicable.



<PAGE>



         PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------
     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, 1996, are set forth below.
<TABLE>
<CAPTION>


<S>                               <C>      <C>   
         Name                     Age      Position with the Company and its Subsidiaries
         ----                     ---      ----------------------------------------------
James F. Dierberg...............  59       Chairman of the Board of Directors, President  and Chief 
                                           Executive Officer of the Company  and  FBA;  Directo  of
                                           CCB and Sundowner Corporation (a wholly owned subsidiary
                                           of FBA).

Allen H. Blake..................  54       Executive  Vice  President,  Chief  Financial  Officer,
                                           Secretary  and Director of the Company;  Secretary  and
                                           Director of First Bank Missouri; Vice President,  Chief
                                           Financial  Officer,  Secretary  and  Director  of  FBA;
                                           Director of First Bank Illinois,  FCB,  Sunrise,  First
                                           Commercial, Sundowner Corporation and FirstServ.
Donald Gunn, Jr.................  61       Director of the Company.

George J. Markos................  48       Director of the Company.

Thomas A. Bangert...............  53       Senior Vice President and Chief  Operations  Officer of
                                           the Company; Executive Vice President and  Director  of
                                           First Bank Missouri; and  Executive  Vice  President of
                                           First   Bank  FSB; President and Director of FirstServ.

Laurence J. Brost...............  40       Vice  President  and  Controller  of the Company;  Vice
                                           President,  Chief  Accounting  Officer,  Secretary  and
                                           Director of First Bank FSB;  Chief  Accounting  Officer
                                           of  First  Bank  Missouri;   Vice  President  of  First
                                           Commercial;  President  and  Director  of River  Valley
                                           Holdings, Inc.; Director of FirstServ.

John A. Schreiber...............  46       Executive Vice  President and Chief Lending  Officer of
                                           the Company; President  and  Chairman  of  the Board of
                                           Directors   of  First  Bank  Missouri;  Executive  Vice
                                           President of First Bank FSB.
Mark T. Turkcan ................  41       Executive Vice President,  Retail and Mortgage  Banking

                                           of the Company; President and Chairman of the Board of
                                           Directors of First  Bank  FSB;  Director of First Bank
                                           Missouri and FBA.

Donald W. Williams..............  49       Executive  Vice  President and Chief Credit  Officer of
                                           the  Company;  Senior Vice  President  and  Director of
                                           First Bank  Missouri;  Senior Vice  President  of First
                                           Bank  Illinois and First Bank FSB;  Director of FBA and
                                           BTX;  Chairman  and  Chief  Executive  Officer  of CCB,
                                           FB&T, FCB and First Commercial and Sunrise.
</TABLE>

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,  1996 or prior
years.

<PAGE>

     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.  In
addition,  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.
     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.
     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 Missouri and
Executive Vice  President of First Bank FSB,  positions he assumed on January 1,
1990. He is also the  President  and a Director of FirstServ,  a position he has
held since that company's incorporation in February 1992.
     Laurence  J. Brost is Vice  President  and  Controller  of the  Company,  a
position  he assumed in 1990,  and Vice  President,  Chief  Accounting  Officer,
Secretary  and  Director  of First Bank FSB where he had been  employed  as Vice
President and Chief  Accounting  Officer since 1987.  Mr. Brost also serves as a
Director of FirstServ.;  Chief Accounting  Officer of First Bank Missouri;  Vice
President  of First  Commercial  and  President  and  Director  of River  Valley
Holdings, Inc.
     John A. Schreiber is Executive Vice President and Chief Lending  Officer of
the Company and  President and a Director of First Bank  Missouri,  positions he
assumed in April 18, 1996 and  September  1992,  respectively.  In May 1994,  he
became Chairman of First Bank Missouri.  Mr.  Schreiber also serves as Executive
Vice  President of First Bank FSB. 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,  and  President  and Chairman of First Bank FSB,  where he has been
employed  in various  executive  capacities  since 1985.  Mr.  Turkcan is also a
Director of First Bank  Missouri  and a Director of 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 First Banks-Illinois, a Senior Vice President and Director of
First Bank  Missouri and Senior Vice  President of First Bank FSB,  positions he
assumed in March 1993.  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.


<PAGE>


Item 11.  Executive Compensation
------------------------------
<TABLE>
<CAPTION>
     The following  table sets forth the  compensation  for the named  executive
officers for the last three years.

                                    SUMMARY COMPENSATION TABLE

                                                                                          All Other
Name and Principal Positions             Year          Salary ($)        Bonus ($)     Compensation($)
----------------------------             ----          ----------        ---------     ---------------         

<S>                                      <C>          <C>                 <C>                 <C>    
James F. Dierberg,                       1996         $ 492,000$                 0         $ 4,750
Chairman of the Board of                 1995            492,000                 0           4,500
Directors, President,                    1994            492,000                 0           4,710
Chief Executive Officer

Donald W. Williams                       1996          $ 155,000          $ 30,000         $ 4,750
Executive Vice President                 1995            138,750            26,000           4,260
                                         1994            133,750            25,000           3,038

John A. Schreiber                        1996          $ 155,000          $ 20,000         $ 4,750
Executive Vice President                 1995            138,750            25,000           4,260
                                         1994            133,750            25,000           3,038

Allen H. Blake                           1996          $ 140,000          $ 30,000         $ 4,750
Executive Vice President and             1995            128,750            30,000           4,260
Chief Financial Officer                  1994            119,500                 0           2,813

Mark T. Turkcan                          1996          $ 130,000          $ 10,000         $ 4,088
Executive Vice President                 1995            113,750            25,000           4,163
                                         1994            105,450                 0           2,475
</TABLE>

Employment Agreements
     Messrs.  Schreiber and Williams are parties to employment  agreements  with
the Company and First Bank  Missouri.  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 in 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  Missouri 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 are 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
Missouri,  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.

<PAGE>

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 fee of $500 for each  Board  meeting  attended.  Effective  January 1,
1997,  such fees were  changed to provide a retainer of $1,000 per quarter and a
fee of $500 per meeting.  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 1996 the Company paid Mr. Markos,
directly and indirectly,  consulting fees in the amount of $125,500 exclusive of
reimbursement  for his travel  expenses.  It is anticipated that Mr. Markos will
continue to provide consulting services to the Company during the current fiscal
year.
     During 1996,  the Company paid $37,455 in legal fees to a law firm of which
Mr.  Donald  Gunn,  one of the  Company's  directors,  is a  shareholder.  It is
anticipated  that 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.
     All of the  executive  officers  of the  Company  (some  of whom  are  also
directors of the Company) serve as directors of certain of the Subsidiary Banks,
some of whose executive officers (and directors) serve on the Board of Directors
of the Company.  Similarly,  certain  directors of the Company (some of whom are
executive  officers of the Company) serve as executive  officers (and directors)
of certain of the  Subsidiary  Banks,  some of whose  directors  (and  executive
officers) are executive officers of the Company.
     The Company believes that 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  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.


<PAGE>



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>
                          Title of Class                                 Number of       Percent      Percent of
                         and Name of Owner                                 Shares        of Class        Total
                         -----------------                                                -------           
                                                                            Owned                       Voting
                                                                            -----                              
                                                                                                         Power
Common Stock ($250 par value)                                                                            -----
<S>                                                                     <C>                <C>              
     Mary W. Dierberg and James F. Dierberg II,                         3,459,358(2)       14.6%           *
         Trustees  under living trust of James F. Dierberg II, dated
         July 24, 1989(1)........................................
     Mary W. Dierberg and Michael James Dierberg,                       3,459,358(2)       14.6%           *
         Trustees  under  living  trust of Michael  James  Dierberg,
         dated July 24, 1989(1)..................................
     Mary W. Dierberg and Ellen C. Dierberg, Trustees                   3,459,358(2)       14.6%           *
         under  living  trust of Ellen C.  Dierberg,  dated July 17,
         1992(1).................................................
     First Trust (Mary W. Dierberg and First Bank                       13,282,786(3)      56.1%           *
         Missouri,  Trustees  established  U/I  James  F.  Dierberg,
         dated December 30, 1992)................................
Class A Convertible Adjustable Rate Preferred Stock ($20 par value)
     James F. Dierberg, trustee of the James F. Dierberg                641,082(4)(5)       100%         77.7%
         living trust, dated October 8, 1985(1)..................
Class B Non-Convertible  Adjustable Rate Preferred Stock ($1.50 par
         value)
     James F. Dierberg, trustee of the James F. Dierberg                   160,505(5)       100%         19.5%
         living trust dated October 8 1985(1)....................
</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  Missouri,   Mr. D ierberg  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, 1996, is 1,835, 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, 1996, the shares of the
Company's  non-voting  Class C 9.00%  Increasing  Rate,  Redeemable,  Cumulative
Preferred  Stock  (the  "Class  C  Shares")  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
Class C Shares.
<TABLE>
<CAPTION>

              Beneficial Owners                        Number of Class C             Percent of Class
                                                   Shares Beneficially Owned
                                                   as of December 31, 1996(1)
                                                   --------------------------
<S>                                                            <C>                          
James F. Dierberg                                             -0-                          *
Allen H. Blake                                                800(2)                       *
Donald Gunn, Jr.                                              -0-                          *
George Markos                                                 -0-                          *
Donald D. Williams                                            -0-                          *
John A. Schreiber                                             -0-                          *
Mark T. Turkcan                                               -0-                          *
Directors and Executive                                       800                          *
  Officers as a Group (9 persons)
</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.
(2)      Shares were sold on January 28, 1997.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------
     Directors  and 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, 1996, 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 1996, 1995 and 1994, Tidal Insurance  Limited  ("Tidal"),  a British
Virgin  Islands  corporation  owned  indirectly by Mr. James F. Dierberg and his
children, received approximately $326,000, $192,000 and $233,000,  respectively,
in  commissions  or insurance  premiums for accident,  health and life insurance
policies  purchased by loan  customers of the  Subsidiary  Banks.  The insurance
policies  are  issued  by an  unaffiliated  company  and then  ceded  to  Tidal.
Commissions  received  by Tidal  were  paid by this  unaffiliated  company.  The
Company  believes  the  premiums  paid by the loan  customers of the Company are
comparable  to those that such loan  customers  would have paid if the  premiums
were subsequently being ceded to an unaffiliated third party insuror.
     For the years ended  December 31,  1996,  1995 and 1994,  First  Securities
America,   Inc.,  doing  business  as  First  Banc  Insurors  Agency,   received
approximately $285,000, $196,000, and $195,000,  respectively, in commissions or
insurance  premiums  for  mortgage,  forced  hazard  and  collateral  protection
insurance  purchased by certain customers of the Subsidiary  Banks.  Commissions
received  by First Banc  Insurors  Agency in  connection  with the sale of these
policies  were paid by  unaffiliated,  third-party  insurors to which First Banc
Insurors  Agency placed such policies.  In addition,  First Banc Insurors Agency
received  approximately  $958,000,  $999,000  and $635,000 for each of the three
years ended December 31, 1996,  1995 and 1994,  respectively,  in commissions in
connection  with the purchase and/or sale of annuities and securities by certain
customers of the Subsidiary Banks.  Commissions  received by First Banc Insurors
Agency  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.,  a  Missouri  corporation,  is owned by trusts  established  and
administered by and for the benefit of the Company's Chairman and members of his
immediate family. The insurance premiums on which the aforementioned commissions
were earned were  competitively  bid and the Company deems the commissions First
Banc  Insurors  Agency  earned to be  comparable  to those which would have been
earned by an unaffiliated third-party agent.
     First  Services,  a limited  partnership  which is indirectly  owned by the
Company's  Chairman and his  children,  provides  data  processing  services and
operational support for the Company and its subsidiaries.  FirstServ,  Inc. paid
$3.2  million,  $2.9  million  and $2.5  million  in fees to First  Services  as
provided under the Facilities  Management Agreement for the years ended December
31, 1996, 1995 and 1994, respectively.
     Pursuant to the terms of a lease agreement dated March 1, 1984, the Company
leases certain  unimproved and improved land from Investors of America,  Limited
Partnership  (formerly Dierberg Four, L.P). Total rental expense under the lease
was $180,410 for the year ended December 31, 1996.  Pursuant to the terms of the
lease  agreement,  the  Company has  provided  notice to  Investors  of America,
Limited  Partnership  to  terminate  this  agreement  effective  April 30, 1997.
Investors of America, Limited Partnership is a Delaware limited partnership, the
general partner of which is First Securities America,  Inc. The Company believes
that the terms of the lease,  including the rental payments, are consistent with
the  value  of the  property  and that the  terms of the  lease  are at least as
favorable as those which could have been obtained from an unaffiliated party.


<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 26
                           through 30, and the Notes to  Consolidated  Financial
                           Statements  are set forth at pages 37 through  50, of
                           the 1996 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 11.1     Statement  Regarding  Computation of
                                            Per Share Earnings.
                           Exhibit 13.1     1996 Annual Report to Shareholders. 
                                            The   1996   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, 1996:

                           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   Missouri
                                            and  John  A.  Schreiber,      dated
                                            September 21, 1992.
                           Exhibit 10.5     10.6  Employment  Agreement  by  and
                                            among  the   Company,   First   Bank
                                            Missouri  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
                                         Vice President and Controller
                                         (Principal Accounting Officer)

Date:  March 26, 1997

         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, 1997   
-------------------------------------
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, 1997   
------------------                                             
Allen H. Blake
Executive Vice President,
 Chief Financial Officer,
Secretary and Director



/s/ Donald Gunn, Jr.                                          March 26, 1997
--------------------                                              
Donald Gunn, Jr.
Director


/s/ George Markos                                             March 26, 1997
-----------------                                                 
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  Certificate  of  Preferred  Stock  Designation  to the  Company's  Restated
     Articles of Incorporation  (incorporated herein by reference to Exhibit 4.2
     to  Amendment  No. 2 to the  Company's  Registration  Statement on Form S-1
     (File No. 33-50576) dated September 15, 1992).

4.3  Form of  certificate  for the Class C 9.00%  Increasing  Rate,  Redeemable,
     Cumulative Preferred Stock (incorporated herein by reference to Exhibit 4.3
     to  Amendment  No. 1 to the  Company's  Registration  Statement on Form S-1
     (File No. 33-50576) dated September 3, 1992).

4.4  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.

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).

10.3 Facilities  Management  Agreement  dated  December  30,  1992 by and  among
     FirstServ,  Inc. and First Services, L.P. (incorporated herein by reference
     to Exhibit 10(i) to the  Company's  Annual Report on Form 10-K for the year
     ended December 31, 1992).


<PAGE>

10.4 Employment Agreement by and among the Company, First Bank Missouri 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  Missouri 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).

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).

11.1 Statement Regarding Computation of Per Share Earnings.

13.1 The Company's 1996 Annual Report to Shareholders.

21.1 Subsidiaries of the Company.

27.1 Financial Data Schedule (EDGAR only)


<PAGE>
                                                                Exhibit 11.1

                        CALCULATION OF EARNINGS PER SHARE
                        ---------------------------------
                                                            For the Year Ended
                                                               December 31,
                                                               ------------
EARNINGS PER SHARE:                                       1996           1995
-------------------                                       ----           ----
Average shares outstanding:
    Class C preferred stock                            2,194,192      2,200,000
    Class A preferred stock                              641,082        641,082
    Class B preferred stock                              160,505        160,505
    Common stock                                          23,661         23,661

Net Income                                        $   20,218,000     24,471,100
Preferred stock dividends:
    Class C preferred stock                           (4,940,720)    (4,950,000)
    Class A preferred stock                             (769,000)      (769,000)
    Class B preferred stock                              (16,853)       (16,853)
Income available to common 
    stockholders                                  $   14,491,427     18,735,147
PRIMARY EARNINGS PER SHARE                                612.46         791.82
FULLY DILUTED EARNINGS PER SHARE:
Dividends per share:
    Class C preferred stock                              $2.2500         2.2500
    Class A preferred stock                               1.1985         1.1984
    Class B preferred stock                               0.1050         0.1050
Class A preferred stock outstanding                      641,082        641,082
Book value/share of common stock,
    beginning of year                             $     7,038,74       6,307.84
    Dilution of common equity upon
        exercise  of options and  
        warrants  of  subsidiary bank                     (52.08)        (46.15)
Adjusted book value                               $     6,986.66       5,609.40
Common stock issuable upon conversion                      1,835          2,048
Shares of common stock outstanding                        23,661         23,661
    Fully diluted common stock                    $       25,496         25,947
Net income                                        $   20,218,000     24,471,000
Class C preferred dividends                           (4,940,720)    (4,950,000)
Class B preferred dividends                              (16,853)       (16,853)
    Fully-diluted net income                      $   15,260,427     19,504,147
    Fully diluted earnings per share              $       598.54         758.66


<PAGE>


                                                                 Exhibit 21.1

                       FIRST BANKS, INC. AND SUBSIDIARIES

Name and Place of Subsidiary         Nature of Organization       Ownership
----------------------------         ----------------------       ---------
First Bank FSB                       Federally  Chartered 
St. Louis Counnty, Missouri          Savings and  Loan                100% (1)
                                     Association
First Bank                           Missouri Chartered Bank          100%
St. Louis County, Missouri

First Bank                           Illinois Chartered bank          100%
O'Fallon, Illinois

First Banks America, Inc.            Delaware Corporation           68.82%
Houston, Texas
  First Banks America, Inc.   
   owns 100% of:

    Sundowner Corporation

     Sundowner Corporation
       owns 100% of:                                        
        Sunrise Bank of California   California Chartered Bank
         BankTEXAS, N.A.             National Banking Association

River Valley Holdings, Inc.          Delaware Corporation             100%
Peoria, Illinois

CCB Bancorp, Inc.                    Delaware Corporation             100%
Irvine, California
    CCB Bancorp, Inc. owns
        100% of:

        First Bank & Trust           California Chartered Bank
First Commercial Bancorp, Inc.       Delaware Corporation            61.46%
Sacramento, California
    First Commercial Bancorp,
      Inc.
        owns 100% of:

        First Commercial Bank        California Chartered Bank
FirstServ, Inc.                      Missouri Corporation             100%
St. Louis County, Missouri
---------------------
(1) 67.10 % of the outstanding capital stock of First Bank FSB is owned by First
Banks,  Inc., the remaining  32.90% is owned by River Valley  Holdings,  Inc., a
wholly-owned subsidiary of First Banks, Inc.



<PAGE>



                                                                  Exhibit 13.1











                                First Banks, Inc.

                               1996 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....................    25

Financial Statements:

Consolidated Balance Sheets.......................................    26

Consolidated Statements of Income.................................    28

Consolidated Statements of Changes in Stockholders' Equity........    29

Consolidated Statements of Cash Flows.............................    30

Notes to Consolidated Financial Statements........................    31

Independent Auditors' Report......................................    51

Board of Directors and Management.................................    52

Investor Information..............................................    52




<PAGE>






To our Valued Shareholders, Customers and Friends:

     First  Banks'  earnings for 1996 were $25.5  million,  without the one-time
Savings  Association  Insurance Fund special  assessment of $8.2 million or $5.3
million on an after  tax-basis.  This  compares to net earnings of $24.5 million
for  1995.  Return  on  average  assets  was .72% and .70% for the  years  ended
December  31,  1996 and  1995,  respectively.  This  compares  to  First  Banks'
historical  levels of return on average  assets of 1.00% and 1.16% for the years
ended December 31, 1994 and 1993, respectively.  With the assessment, net income
for 1996 was $20.2 million, representing a return on average assets of .57%. The
operating  results for 1996 and 1995 reflect several  influences  which have had
significant adverse effects on earnings, including the impact of 13 acquisitions
completed during the three years ended December 31, 1996.

     During 1995 and 1994, First Banks  experienced  substantial  growth through
the acquisition of twelve banks and thrifts,  providing  assets of $1.96 billion
and 43 banking  locations.  These  acquisitions,  and the acquisition of Sunrise
Bank of  California,  which was  completed on November 1, 1996,  provided  three
locations in Missouri,  13 locations in Illinois,  six locations in Texas and 24
locations in California.  The acquisitions have provided First Banks access into
several new major market areas and, accordingly,  an attractive  opportunity for
future  growth  and   profitability.   They  also  presented  several  immediate
challenges,  the most  immediate  being the asset  quality  problems  of certain
acquired entities, particularly those in California and Texas.

     For each acquisition,  management of First Banks has worked with management
of the  institution  to 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.

     Our progress toward  assimilating  the acquired  entities into First Banks'
systems  and  operating  culture is best  measured by the results for the fourth
quarter of 1996,  which reflected net income of $8.78 million,  in comparison to
$4.88 million for the same period in 1995.  The earnings for the fourth  quarter
of 1996 represents a return on average assets of .99%, in comparison to .56% for
the same period in 1995. With the restructuring process substantially  complete,
First Banks' focus will be broadened to include the further  development  of our
expanded banking franchise.

     As we begin 1997, we remain committed to the interests of our customers and
shareholders.  To this end, First Banks reiterates its  unconditional  guarantee
that the organization is "Not For Sale" and will continue as an independent bank
for the benefit of our customers, communities, shareholders and employees.


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, 1996. The  comparability of the selected
data  presented  is  affected by the  acquisitions  of ten banks and six 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,
                                                             1996        1995        1994        1993         1992
                                                             ----        ----        ----        ----         ----
                                                            (dollars expressed in thousands, except per share data)
Income Statement Data:
<S>                                                     <C>            <C>         <C>         <C>          <C>    
    Interest income...................................  $  266,021     261,621     162,435     140,012      161,303
    Interest expense..................................     141,670     144,945      70,670      58,058       79,529
    Net interest income...............................     124,351     116,676      91,765      81,954       81,774
    Provision for possible loan losses................      11,494      10,361       1,858       4,456       10,435
    Net interest income after provision
       for possible loan losses.......................     112,857     106,315      89,907      77,498       71,339
    Noninterest income................................      20,721      19,407      13,634       9,953       11,140
    Noninterest expense...............................     105,741      91,566      67,734      53,431       53,953
    Income before provision for income taxes,
       minority interest in (income) loss
         of subsidiaries and cumulative effect
          of change in accounting principle...........      27,837      34,156      35,807      34,020       28,526
    Provision for income taxes........................       6,960      11,038      12,012      11,592        9,510
    Income before minority interest in (income) 
     loss of subsidiaries and cumulative effect of
       change in accounting principle.................      20,877      23,118      23,795      22,428       19,016
    Minority interest in (income) loss of subsidiaries        (659)      1,353         237         --           --
    Income before cumulative effect of change in
       accounting principle...........................      20,218      24,471      24,032      22,428       19,016
    Cumulative effect of change in accounting
      principle.......................................         --          --          766         --
    Net income........................................  $   20,218      24,471      24,032      23,194       19,016
Dividends:
    Preferred stock...................................  $    5,728       5,736       5,735       5,766        1,951
    Common stock......................................         --          --          --          --           --
    Ratio of total dividends declared to net income...       28.33%      23.44%      23.86%      24.86%       10.26%
Per Share Data:
    Earnings per common share:
      Primary.........................................  $   612.46      791.82      773.31      741.69       719.51
      Fully diluted...................................      598.54      758.66      734.80      690.43       656.54
    Weighted average shares of common stock 
       outstanding....................................      23,661      23,661      23,661      23,498       23,144
Balance Sheet Data (at year-end):
    Investment securities.............................  $  552,801     508,323     587,878     531,148      518,525
    Loans, net of unearned discount...................   2,767,969   2,744,219   2,073,570   1,362,018    1,371,417
    Total assets......................................   3,689,154   3,622,962   2,879,570   2,031,909    2,047,022
    Total deposits....................................   3,238,567   3,183,691   2,333,144   1,779,389    1,768,225
    Notes payable.....................................      76,330      88,135      46,203         --        30,038
    Common stockholders' equity.......................     184,439     166,542     149,249     133,781      110,751
    Total stockholders' equity........................     251,389     234,605     217,312     201,844      180,814
Earnings Ratios:
    Return on average total assets....................         .57%        .70%       1.00%       1.16%        0.95%
    Return on average total stockholders' equity......        8.43       10.79       11.48       12.27        14.13
Asset Quality Ratios:
    Allowance for possible loan losses to loans.......        1.69        1.92        1.37        1.69         1.52
    Nonperforming loans to loans (1)..................        1.09        1.44        0.78        0.90         0.81
    Allowance for possible loan losses to 
       nonperforming loans (1)........................      154.55      133.70      175.37      188.50       188.43
    Nonperforming assets to loans and foreclosed
       assets (2).....................................        1.47        1.71        1.10        1.08         1.31
    Net loan charge-offs to average loans.............         .72        0.41        0.09        0.33         0.65
Capital Ratios:
    Average total stockholders' equity to average 
       total assets..................................         6.79        6.49        8.70        9.46         6.70
    Total risk-based capital ratio...................         9.23        9.34       12.68       16.90        14.71
    Leverage ratio...................................         5.99        5.32        7.54        9.30         7.66
----------------
</TABLE>

(1)  Nonperforming loans consist of nonaccrual loans and loans with restructured
     terms.
(2)  Nonperforming assets consist of nonperforming loans and foreclosed assets.



<PAGE>


     Company  Profile.  First  Banks  is  a  registered  bank  holding  company,
incorporated  in  Missouri  in  1978  and  headquartered  in St.  Louis  County,
Missouri.  At December 31, 1996,  First Banks had $3.69 billion in total assets,
$2.77 billion in total loans, net of unearned  discount,  $3.24 billion in total
deposits  and  $251.4  million  in  total  stockholders'  equity.  First  Banks'
subsidiary financial  institutions and bank holding companies (Subsidiary Banks)
are: 
         First Bank,  headquartered  in  St. Louis  County, Missouri (First Bank
         Missouri); First Bank, headquartered in O'Fallon, Illinois (First Bank
         Illinois);   First  Bank  FSB,   headquartered   in  St. Louis County,
         Missouri  (First Bank FSB);  First Banks America,  Inc., headquartered
         in Houston, Texas (FBA); CCB Bancorp, Inc., headquartered in Santa Ana,
         California  (CCB); and First Commercial  Bancorp,  Inc., headquartered
         in Sacramento, California (FCB).

     First Bank  Missouri  and First Bank  Illinois  are  wholly  owned  banking
subsidiaries.  First Bank FSB is a wholly owned thrift subsidiary. CCB, a wholly
owned bank holding  company  subsidiary,  operates  through  First Bank & Trust,
headquartered  in Santa  Ana,  California  (FB&T).  FBA, a  majority-owned  bank
holding company  subsidiary,  operates through BankTEXAS N.A.,  headquartered in
Houston, Texas (BTX) and Sunrise Bank of California, headquartered in Roseville,
California  (Sunrise).  FCB, a majority-owned  bank holding company  subsidiary,
operates through First Commercial Bank, headquartered in Sacramento,  California
(First Commercial).  First Banks' ownership interests in FBA and FCB were 68.82%
and 61.46%, respectively, at December 31, 1996.
     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,  agricultural, real
estate construction and development,  commercial and residential real estate and
consumer and  installment  loans.  Other  financial  services  include  mortgage
banking,  discount  brokerage,   credit-related   insurance,   automatic  teller
machines,  safe deposit boxes, and trust services offered by certain  Subsidiary
Banks.
     First Banks'  management  philosophy  is to  centralize  overall  corporate
policies,  procedures and  administrative  functions and to provide  operational
support functions for the Subsidiary Banks. Primary  responsibility for managing
the  Subsidiary  Banks  rests  with  each of the  respective  Subsidiary  Bank's
officers and directors.
<TABLE>
<CAPTION>
    The following table lists the Subsidiary Banks at December 31, 1996:

                                                                                  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 FSB................................     40       $1,040,038          864,174          877,956
     First Bank Missouri...........................     31          838,799          628,428          745,465
     First Bank Illinois...........................     27          843,333          627,871          773,606
     CCB...........................................     13          474,174          310,930          400,342
     FBA ..........................................      9          375,182          241,874          319,806
     FCB ..........................................      6          153,033           94,497          136,136
</TABLE>

     In addition to the Subsidiary Banks, First Banks owns FirstServ, Inc. which
provides data processing  services and  operational  support for First Banks and
its Subsidiary Banks through a management  services agreement with an affiliated
entity which is indirectly owned by First Banks' voting shareholders.
     The voting stock of First Banks, Inc. 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,  Inc. and the election of its directors.
The Class C  Preferred  Stock is  publicly  held and listed on The Nasdaq  Stock
Market's  National  Market.  The Class C  Preferred  Stock has no voting  rights
except in certain limited circumstances.

     General. First Banks expanded rapidly through acquisitions during the years
ended December 31, 1994 and 1995.  Total assets  increased from $2.03 billion on
January 1, 1994 to $3.62  billion on December  31,  1995,  an increase of 78.3%.
First Banks' net income for these periods was,  however,  adversely  affected by
expenses  resulting from the amalgamation of those acquisitions into its systems
and  operating  culture,   as  well  as  certain  other   non-recurring   items.
Consequently,  net income of First  Banks was $20.2  million  for the year ended
December 31, 1996,  compared  with $24.5 million and $24.0 million for the years
ended December 31, 1995 and 1994, respectively.
     First Banks has, in the development of its banking franchise, traditionally
placed primary  emphasis upon acquiring other financial  institutions as a means
of achieving its growth objectives.  These 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.  Its  acquisitions  are  then  supplemented  by
marketing  and  business  development  efforts to broaden  the  customer  bases,
strengthen  particular  segments  of the  business  or fill voids in the overall
market coverage.  However,  because First Banks has exclusively 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  generally  a  result  of  the  market
attractiveness  of financial  institutions'  stock,  the  advantages of tax-free
exchanges and the financial reporting  flexibility inherent in structuring stock
transactions. Consequently, First Banks' acquisition activities are sporadic, in
which multiple transactions are consummated in a particular period,  followed by
a relatively  inactive  period.  Furthermore,  the resulting  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 due
both to the  constraints  imposed by the amount of funds required for the larger
transaction,  as well as the  opportunity  to  minimize  the  aggregate  premium
required  through  smaller  individual  transactions.  Secondly,  it may acquire
institutions  which have some problems which could reduce the  attractiveness to
other  potential  acquirers,  and  therefore  reduce the  amount of  acquisition
premiums  required.  Finally,  First Banks  realizes  that  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.  This  pattern  has  been  evident  in  First  Banks'
acquisitions in the two years ended December 31, 1995.
     During 1995 and 1994, First Banks  experienced  substantial  growth through
the acquisition of seven banks and five thrifts. These included two acquisitions
in Missouri,  three in  Illinois,  one in Texas and six in  California.  As more
fully discussed below, these acquisitions provided access into several new major
market areas and, accordingly,  an attractive  opportunity for future growth and
profitability.  While providing this long-term  opportunity,  these acquisitions
presented  several  immediate  challenges.  Many of the  acquired  institutions,
particularly those in California, continue to experience asset quality problems.
While these  problems had been  identified  and  considered  in the  acquisition
pricing,  this led to the  increase in the level of First  Banks'  nonperforming
assets to $40.9  million at December 31, 1996 and $47.1  million at December 31,
1995,  from $22.9  million  and $14.8  million at  December  31,  1994 and 1993,
respectively.  In addition to the loss of income on these assets,  they required
substantial dedication of management and other resources to control.
     The  combination  of five  diverse  institutions  into a  single  financial
institution, FB&T, and the conversion of that entity to First Banks' systems and
policies  required a further  commitment  of time and  effort.  A  reengineering
process  of  the  operating  structures  and  cultures  of  these  entities  was
necessitated by their relatively high operating costs. This process included the
redeployment and repricing of assets,  the realignment of deposit products,  the
reorganization  of personnel and the  centralization  of various bank functions.
The  combination  of the costs of  managing  and  servicing  the  portfolios  of
nonperforming  assets,  the excessive  operating cost structures of the acquired
entities and the additional costs associated with the reengineering  process has
inhibited  the  acquired   institutions   from  generating  income  since  their
acquisition dates commensurate with their acquisition costs.
     Operating  results  have  also  been  adversely  affected  by the lower net
interest  margin  earned by the thrifts  acquired by First Banks  compared  with
those generally earned by commercial banks. The lower net interest margin earned
by the acquired  thrifts,  primarily River Valley Holdings,  Inc. (River Valley)
and  First  Federal  Savings  Bank  of  Proviso  Township  (First  Federal),  is
attributable  to their primary source of interest  income and the composition of
their deposit bases.  Their primary source of interest income is their portfolio
of residential mortgage loans and residential mortgage-backed securities,  which
typically yield lower interest rates than other types of loans. In addition, the
cost of deposits is generally  higher due to the  composition,  which includes a
smaller  portion of  noninterest-bearing  accounts and a greater portion of time
deposits.  Furthermore,  thrifts generally pay slightly higher rates to maintain
the time deposits within the competitive markets.

<PAGE>

     Recognizing  that  the  acquisition  program  involved  the  assumption  of
additional credit risk and lower than normal net interest margins for the thrift
acquisitions,  First Banks pursued a strategy of maintaining higher than average
asset quality for its Missouri and Illinois  operations through strict adherence
to its lending policies and practices.  To accomplish this, First Banks expanded
its credit administration and loan review functions. In addition, in response to
the interest rate risk inherent within the balance sheets of its thrifts,  First
Banks  commenced  a program  designed to reduce its  exposure  to interest  rate
fluctuations.
     The effort to increase  control  over the interest  rate  exposure of First
Banks  led to  substantially  more  sophisticated  measurement  systems  and the
implementation  of a hedging  program.  Once the  interest  rate risk profile of
First Banks was adequately analyzed,  the hedging program was implemented during
early 1994. However,  at that time, interest rates had already increased.  While
the hedging program prevented further  deterioration in the net interest margin,
it eliminated  the  opportunity  to recover from the increase in interest  rates
which had already occurred. As more fully discussed under "-- Interest Rate Risk
Management,"  as interest rates began to decline in 1995, the underlying  hedges
were  adjusted to reflect the increase in  prepayments  which were  subsequently
received  and  the  corresponding  shortening  of  the  effective  lives  of the
residential  real  estate  asset  portfolios.  These  factors  and  the  cost of
implementing  the hedging  program  have had an adverse  effect on net  interest
income and the net interest margin in 1995 and 1996.
     Finally,  in September 1996, a one-time special  assessment to recapitalize
the Savings  Association  Insurance Fund (SAIF) of the Federal Deposit Insurance
Corporation  (FDIC)  was  enacted.  The  assessment  was  applied  to all thrift
deposits as of March 31, 1995.  Because  First Bank had been active in acquiring
thrifts,  a  substantial  portion of its deposit base was subject to the special
assessment.  This special assessment  resulted in an $8.2 million charge,  which
was recorded as an expense  during the year ended December 31, 1996. As a result
of  this  special  assessment,  First  Banks'  cost  of  deposit  insurance  for
SAIF-insured  deposits is expected to decrease by approximately $2.0 million for
the year ended  December 31, 1997 in comparison to December 31, 1996,  excluding
the effect of the special one-time assessment.

     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 there 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  its
immediate  market area.  This led to the  acquisition of financial  institutions
which had offices in Dallas and Houston,  Texas in 1994 and Los Angeles,  Orange
County,  Santa Barbara,  San Francisco,  San Jose and Sacramento,  California in
1995.


<PAGE>

<TABLE>
<CAPTION>


     During 1996, 1995 and 1994,  First Banks completed  thirteen  acquisitions.
These  acquisitions,  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)
             1996
Sunrise  Bancorp, Inc.
<S>                            <C>              <C>                <C>          <C>          <C>             <C>
Roseville, California          November 1, 1996     $110,800       61,100       18,100       92,000          3

             1995
QCB Bancorp
Long Beach, California (1)     November 30, 1995    $ 56,200       35,100       10,700       50,200          3

La Cumbre Savings Bank F.S.B.
Santa Barbara, California (1)  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 (1)              May 31, 1995      83,300       68,700        7,500       61,600          2

HNB Financial Group
Huntington  Beach, 
 California (1)                   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 (2)            January 4, 1995     412,000      225,000      125,000      286,000         10
                  --                               ---------      -------      -------      -------         --
                                                 $ 1,145,900      721,700      216,500      918,100         31
                                                   =========      =======      =======      =======         ==
             1994

St. Charles Federal Savings
   and Loan Association
St. Charles, Missouri (2)      November 30, 1994 $    90,000       54,400       29,600       68,900          1

First Banks America, Inc.
(formerly BancTEXAS Group Inc.)
Houston, Texas                   August 31, 1994     367,000      177,000      167,000      243,600          6

Farmers Bancshares, Inc.
Breese, Illinois (3)                June 3, 1994      60,700       27,100       28,300       54,500          2

Heritage National Bank
St. Louis County, Missouri (4)    March 31, 1994      63,800       32,200       21,200       57,100          2

First Federal Savings Bank
   of Proviso Township
Chicago, Illinois (2)            January 3, 1994     230,000       57,900      153,800      168,500          1
                  --                                 -------       ------      -------      -------          -
                                                 $   811,500      348,600      399,900      592,600         12
                                                     =======      =======      =======      =======         ==
</TABLE>
------------------
(1)  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 wholly owned banking subsidiary, FB&T.
(2)  River Valley Holdings, Inc., First Federal Savings Bank of Proviso Township
     and St. Charles Federal Savings and Loan  Association (St. Charles Federal)
     were merged into First Bank FSB.
(3)  Farmers  Bancshares,  Inc.  and its banking  subsidiaries  were merged into
     First Banks and First Bank Illinois, respectively.
(4)  Heritage National Bank was merged into First Bank Missouri.

      The aforementioned  acquisitions were funded by First Banks from available
cash  reserves,  proceeds  from the sales and  maturities  of available for sale
investment securities, borrowings under promissory notes to former shareholders,
and  borrowings  under the  Credit  Agreement.  See "Note 2 to the  Consolidated
Financial Statements."


<PAGE>



     Financial Condition and Average Balances. First Banks' total average assets
were $3.53 billion for the year ended  December 31, 1996, in comparison to $3.50
billion  and $2.41  billion  for the years  ended  December  31,  1995 and 1994,
respectively. Total assets increased by $70 million to $3.69 billion at December
31, 1996 from $3.62  billion at December  31,  1995.  The  increase is primarily
attributable  to the  acquisition  of Sunrise which  provided  $110.8 million in
total assets. Offsetting this increase was the settlement in January 1996 of the
sale of $41.3  million  of  investment  securities  carried as a  receivable  at
December 31, 1995.
     Loans, net of unearned discount,  increased by $30 million to $2.77 billion
from $2.74 billion at December 31, 1996 and 1995, respectively.  The increase is
primarily attributable to the loans provided by acquisition of $61.1 million and
the increase of $135.8 million in loans within corporate banking,  substantially
offset by decreases in residential real estate and indirect  automobile loans of
$127.9  million and $77.4  million,  respectively.  These changes are consistent
with the  restructuring  plan of the loan portfolio which was initiated in early
1995. In accordance with that plan,  First Banks has sold  substantially  all of
its conforming  residential mortgage production in the secondary mortgage market
and has significantly  reduced its origination of indirect  consumer  automobile
loans.  Tables  summarizing  the composition of the loan portfolio are presented
under "-- Lending and Credit Management."
     Deposits  increased by $60 million to $3.24  billion from $3.18  billion at
December 31, 1996 and 1995, respectively. The increase is primarily attributable
to the deposits provided by the acquisition of $92 million,  partially offset by
the $32 million  decrease in time  deposits of $100,000 or more to $169  million
from $201 million at December 31, 1996 and 1995, respectively. See "-- Deposits"
for the composition of the deposit portfolio.
     For the year ended  December 31, 1995,  total average  assets  increased by
$1.09 billion  primarily as a result of the assets  provided by  acquisitions of
$1.15 billion and internal loan growth of $66 million. This was partially offset
by sales of investment securities and residential mortgage loans of $399 million
and $147 million, respectively,  most of which were used to fund loan growth and
to reduce borrowings.  The internal loan growth is primarily attributable to the
corporate  banking  activities.  Each regional  lending area within First Banks'
marketplace   experienced  growth  during  1995.  The  continued  growth  within
corporate  banking  is  reflective  of First  Banks'  commitment  to expand  its
presence in its markets.  The sales of  investment  securities  were executed in
connection with the restructuring of acquired entities'  investment  portfolios,
to provide funds for internal loan growth and to reduce borrowings.
     First Banks'  acquisition  program  during 1994 and 1995,  coupled with its
internal  growth in residential  mortgage loans resulted in a consolidated  loan
portfolio which had a disproportionate amount of such loans. Although the credit
risk associated with residential  mortgage loans is generally  relatively small,
the performance of these loans in periods of changing interest rates makes their
interest  rate risk more  difficult  to manage  than most other  types of loans.
Consequently, First Banks concluded that its residential mortgage loan portfolio
as a percentage of the total loans should be reduced. Accordingly,  during 1995,
First Banks sold $147 million of residential  mortgage loans which resulted in a
loss of $284,000.
     The average  balance of notes  payable  increased by $67.6 million to $83.1
million for 1995, in comparison to $15.5 million for 1994. The increase was used
to provide funds for acquisitions completed during 1995 and 1994.
     Average  stockholders'  equity has continued to increase over these periods
from $209.4  million at December 31, 1994 to $239.9 million at December 31, 1996
or by $30.5 million.  The increase is  attributable  to First Banks' practice of
retaining most of its net income to further support future growth.



<PAGE>
<TABLE>
<CAPTION>


     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.

                                                                         For the years ended December 31,
                                                           1996                       1995                          1994
                                                         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............................  $ 2,714,387  236,527    8.71% $2,585,763  220,931   8.54%  $1,602,661 128,708   8.03%
       Tax-exempt (3).....................       11,910    1,311   11.01      13,173    1,543  11.71      13,973    1,346   9.63
    Investment securities:
       Taxable (4)........................      469,832   22,650    4.82     585,868   34,379   5.87     593,460   29,385   4.95
       Tax-exempt (3) (4).................       22,648    1,889    8.34      26,751    2,138   7.99      27,492    2,259   8.22
    Federal funds sold....................       63,802    3,352    5.25      52,208    2,905   5.56      37,587    1,533   4.08
    Other.................................       25,634    1,410    5.50      14,602    1,013   6.94       9,605      466   4.85

         Total interest-earning assets....    3,308,213  267,139    8.08   3,278,365  262,909   8.02   2,284,778  163,697   7.16
Nonearning assets.........................      224,175                      219,445                     122,922
                                              ---------                    ---------                   ---------
         Total assets.....................  $ 3,532,388                    3,497,810                  $2,407,700
                                              =========                    =========                   =========

LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
    Interest-bearing demand deposits......  $   304,247    4,845    1.59% $  279,681    5,760   2.06%  $ 234,839    4,421   1.88%
    Savings deposits......................      683,009   21,769    3.19     663,870   22,737   3.42     537,462   15,198   2.83
    Time deposits of $100 or more (4).....      164,453    9,665    5.88     166,232    9,931   5.97      72,976    3,300   4.52
    Other time deposits (4)...............    1,592,657   95,813    6.02   1,443,026   83,595   5.79     969,840   41,170   4.25
         Total interest-bearing deposits..    2,744,366  132,092    4.81   2,552,809  122,023   4.78   1,815,117   64,089   3.53
Federal funds purchased, repurchase 
     agreements and Federal Home Loan 
     Bank advances (4)....................       64,021    3,964    6.19     256,333   16,850   6.57     107,185    5,498   5.13
Notes payable and other...................       76,892    5,614    7.30      83,068    6,072   7.31      15,500    1,083   6.99
         Total interest-bearing liabilities   2,885,279  141,670    4.91   2,892,210  144,945   5.01   1,937,802   70,670   3.65
                                                         -------                      -------                      ------       
Noninterest-bearing liabilities:
    Demand deposits.......................      368,786                      345,397                     243,829
    Other liabilities.....................       38,413                       33,345                      16,692
                                              ---------                    ---------                   ---------
         Total liabilities................    3,292,478                    3,270,952                   2,198,323
Stockholders' equity......................      239,910                      226,858                     209,377
                                              ---------                    ---------                   ---------
         Total liabilities and
           stockholders' equity...........  $ 3,532,388                   $3,497,810                  $2,407,700
                                              =========                    =========                   =========
         Net interest income..............               125,469                      117,964                      93,027
                                                         =======                      =======                      ======
         Net interest margin..............                          3.79%                       3.60%                       4.07%
                                                                    ====                        ====                        ==== 


</TABLE>

(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 $1.1 million,
      $1.3 million and $1.3 million for the years ended December 31, 1996, 1995
      and 1994, respectively.
(4)   Includes the effects of interest rate exchange agreements.


<PAGE>
<TABLE>
<CAPTION>


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

                                                        Increase (decrease)attributable to change in:
                                                        ---------------------------------------------     
                                                  December 31, 1996 compared         December 31, 1995 compared
                                                     to December 31, 1995               to December 31, 1994
                                                     --------------------               --------------------
                                                                          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...........................    $ 11,139       4,457      15,596     83,570       8,653      92,223
       Tax-exempt t(3)...................        (143)        (89)       (232)       (71)        268         197
    Investment securities:
       Taxable (4).......................      (6,163)     (5,566)    (11,729)      (368)      5,362       4,994
       Tax-exempt (3) (4)................        (349)        100        (249)       (59)        (62)       (121)
    Federal funds sold...................         597        (150)        447        710         662       1,372
    Other................................         547        (150)        397        299         248         547
                                               ------      ------      ------     ------      ------      ------
           Total interest income.........       5,628      (1,398)      4,230     84,081      15,131      99,212
                                               ------      ------      ------     ------      ------      ------
Interest paid on:
    Interest-bearing demand deposits.....         573      (1,488)       (915)       892         447       1,339
    Savings deposits.....................         678      (1,646)       (968)     3,965       3,574       7,539
    Time deposits of $100 or more........        (110)       (156)       (266)     5,300       1,331       6,631
    Other time deposits (4)..............       8,834       3,384      12,218     24,345      18,080      42,425
    Federal funds purchased, repur-
       chase agreements and Federal
       Home Loan Bank advances (4).......     (11,964)       (922)    (12,886)     9,446       1,906      11,352
    Notes payable and other..............        (450)         (8)       (458)     4,937          52       4,989
                                              -------        ----      ------     ------      ------      ------
           Total interest expense........      (2,439)       (836)     (3,275)    48,885      25,390      74,275
                                              -------        ----      ------     ------      ------      ------
           Net interest income...........    $  8,067        (562)      7,505     35,196     (10,259)     24,937
                                              =======        ====      ======     ======     =======      ======
</TABLE>
---------------

(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.

     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 $125.5
million for the year ended  December  31,  1996,  from $118.0  million and $93.0
million for the years ended December 31, 1995 and 1994, respectively.
     While net interest income  continued to increase during these periods,  the
net interest margin, which is net interest income (expressed on a tax-equivalent
basis)  expressed  as  a  percentage  of  earning  assets,  decreased.  This  is
indicative of the fact that net interest income  increased at a slower rate than
the increase of earning assets, as follows: 
<TABLE>
<CAPTION>

                                          Increase in average                Increase in
                               Average      earning assets                   net interest     Net
                                earning    from preceding  Net interest      income from    interest
                               assets        period          income       preceding period   margin
                                ------        ------          ------      ---------------   --------  
                                            (dollars expressed in thousands)
  Year ended December 31:
<S>    <C>                  <C>              <C>           <C>                  <C>           <C>  
       1996                 $3,308,213         .91%        $ 125,469             6.36%        3.79%
       1995                  3,278,365       43.49           117,964            26.81         3.60
       1994                  2,284,778       19.69            93,027            12.16         4.07
</TABLE>

     This is not an unusual  phenomenon  during  periods of rapid growth by cash
acquisition  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.  However,  as indicated by the severity of the decline in net interest
margin, other factors were involved.
     Since 1990,  First Banks has acquired ten thrifts in various  transactions.
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
earning assets,  and  certificates of deposit as a source of funds. For example,
First Bank FSB,  First  Banks'  thrift  subsidiary,  had loans,  net of unearned
discount of $864.2  million at December 31, 1996,  of which $570.7  million,  or
66.0%, were residential  mortgage loans, and deposits of $878 million,  of which
$596.5 million, or 67.9%, were certificates of deposit.  This compares to loans,
net of unearned discount of $855.8 million at December 31, 1995, of which $619.2
million,  or 72.4%,  were  residential  mortgage  loans,  and deposits of $911.6
million,  of which  $626.5  million,  or 68.7%,  were  certificates  of deposit.
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 other segments of its loan portfolio and interest-bearing  deposits,
respectively, were as follows:
<TABLE>
<CAPTION>
                                                                                   Interest
                                                    Average        Percent of      income/       Yield/
                                                    balances          total        expense       rate
                                                    --------          -----        -------       ----
                                                                (dollars expressed in thousands)

Year ended December 31, 1996:
<S>                                              <C>                  <C>       <C>              <C>  
     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
                                                   =========         ======        =======       ====

Year ended December 31, 1995:
     Residential mortgage loans                  $ 1,253,474          48.23%     $  99,656       7.95%
     Other loans                                   1,345,462          51.77        122,818       9.13
                                                   ---------         ------        -------       ----
          Total loans                            $ 2,598,936         100.00%     $ 222,474       8.56
                                                   =========         ======        =======       ====

     Certificates of deposit                       1,609,258          63.04%        93,526       5.81%
     Other interest-bearing deposits                 943,551          36.96         28,497       3.02
                                                   ---------         ------        -------       ----
          Total interest-bearing deposits        $ 2,552,809         100.00%     $ 122,023       4.78
                                                   =========         ======        =======       ====
</TABLE>

     In  addition  to the  narrow  interest  rate  spread  between  the yield on
residential  mortgage  loans  and the rates  paid on  certificates  of  deposit,
mortgage loans introduce  various  prepayment  alternatives  for borrowers which
exacerbate the inherent  interest rate risk associated with their typically long
maturities.
     For these two reasons,  in 1994, First Banks initiated a plan to reduce its
reliance on residential  mortgage loans within its portfolio.  The change in the
portfolio composition required the concurrent internal generation of other types
of loans,  particularly commercial and industrial,  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
began  selling  essentially  all of its  production  of  conforming  residential
mortgage loans in the secondary  market.  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."

<PAGE>

     While this process was  occurring,  First Banks  expanded its interest rate
risk management to improve its risk  measurement  techniques and reporting,  and
increase  its risk  control  abilities.  This  included  initiating a program of
substantial  use of derivative  financial  instruments  to reduce  interest rate
exposure.  Beginning in early 1994,  First Banks used a combination  of interest
rate futures, options on futures, swaps, caps and floors to reduce its exposure,
primarily   arising  from   residential   mortgage  loans  and   mortgage-backed
securities. The expense of these derivative financial instruments is a component
of net interest income as summarized below.
<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>               <C>  
          1996                      $ 3,875                7,623        11,498            (.35)
          1995                        2,210                6,911         9,121            (.28)
          1994                          --                   490           490            (.02)
</TABLE>
 ----------------
     (1) Effect on net interest margin is expressed as reduction of net interest
income divided by average earning assets.
<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.  Furthermore,  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.  This  causes  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  monitoring  mechanism 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 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. To
measure the effect of interest rate changes,  First Banks  recalculates  its net
income over two one-year  horizons on a pro forma basis assuming  instantaneous,
permanent  parallel  and  non-parallel  shifts in the yield  curve,  in  varying
amounts both upward and downward.
     As  discussed  previously,  during  1994,  First Banks  expanded its use of
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.  See "-- Notes 1 and
10 to the consolidated financial  statements."  Derivative financial instruments
held by First Banks for purposes of managing  interest rate risk are  summarized
as follows:
<TABLE>
<S>                                                                     <C>
                                                               December 31,
                                                               ------------
                                                       1996                    1995
                                                       ----                    ----
                                               Notional     Credit    Notional     Credit
                                                 amount    exposure     amount    exposure
                                               --------    --------   --------    --------
                                                       (dollars expressed in thousands)
<S>                                          <C>                       <C>              
        Interest rate swap agreements        $  70,000        --       145,000        --
        Interest rate floor agreements         105,000        141      105,000        608
        Interest rate cap agreements            10,000        335       30,000        292
        Forward commitments to sell
          mortgage-backed securities            35,000        308       42,000        --
</TABLE>

     The notional amounts of derivative  financial  instruments do not represent
amounts  exchanged  by the parties  and,  therefore,  are not a measure of First
Banks' credit exposure through its use of derivative financial instruments.  The
amounts  exchanged are  determined by reference to the notional  amounts and the
other terms of the derivatives.
     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.  Interest rate futures  contracts are
commitments to either  purchase or sell  designated  financial  instruments at a
future date for a specified price and may be settled in cash or through delivery
of such financial instruments. Options on interest rate futures contracts confer
the right to purchase or sell financial  futures  contracts at a specified price
and are settled in cash.
     With  the  emphasis  on  limiting  First  Banks'  reliance  on  residential
mortgage-based  assets and the overall  expansion of the loan  portfolio  during
1994 and 1995,  the relative  magnitude and primary  function of the  investment
portfolio  changed.  During the year ended December 31, 1994, average investment
securities  represented 27.2% of average earning assets. This decreased to 18.7%
and 14.9% for the years ended  December  31, 1995 and 1996,  respectively.  This
reduction in the investment security portfolio and corresponding increase in the
magnitude  of the loan  portfolio  increased  the  importance  of liquidity as a
securities  selection criteria.  Generally this resulted in reducing the average
maturity of the investment security portfolio and directing available funds into
more readily  marketable  securities,  primarily U.S.  Treasury and generic U.S.
government agencies obligations. Consequently, mortgage-backed securities in the
portfolio  decreased from $351.8 million,  or 59.8% of the portfolio at December
31, 1994 to $235.5  million,  or 46.3% of the portfolio at December 31, 1995 and
$204.2  million,  or 36.9% of the portfolio at December 31, 1996.  These changes
had a  substantial  effect  on the  interest  rate risk  characteristics  of the
portfolio,  and  consequently the magnitude of hedging required and methods used
to limit interest rate risk.

<PAGE>

      As a result, beginning in the second quarter of 1995, First Banks began to
reduce its hedge  position to coincide  with the  current  expected  life of the
available-for-sale  securities portfolio by decreasing the number of outstanding
interest  rate  futures  contracts.  First Banks  continued  to reduce its hedge
position  through  additional  reductions in the number of outstanding  interest
rate  futures  contracts  during  the  third  quarter  as a  result  of  certain
investment  security sales and further  declines in interest rates. In addition,
during the fourth  quarter of 1995,  the  remaining  outstanding  interest  rate
futures contracts were closed.  The closure of the remaining  contracts reflects
First Banks'  decision to manage the interest  rate risk of the overall  balance
sheet, rather than specific components.
     The net increase in the unamortized  balance of net deferred losses to $4.6
million at  December  31,  1995,  from a net  deferred  gain of $6.5  million at
December 31, 1994 is attributable  to the significant  decline in interest rates
which  occurred  during 1995.  The losses  incurred on the interest rate futures
contracts were partially  offset by gains in the  available-for-sale  securities
portfolio.  The loss in  market  value,  net of  related  tax  benefit,  for the
available-for-sale  securities  portfolio totaled $1.3 million during the period
from December 31, 1994 to December 31, 1995.  The loss in market value  resulted
from an  increase in the  projected  prepayments  of  principal  underlying  the
available-for-sale  securities portfolio. These increased prepayment projections
disproportionately  shortened  the  expected  lives  of  the  available-for-sale
securities  portfolio in comparison to the effective  maturity  created with the
hedge position.
     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.  There were no  unamortized  net  deferred  losses on  interest  rate
futures  contracts  remaining at December 31, 1996. Of the remaining  balance of
$4.6 million at December 31, 1995,  $3.9 million was amortized as a component of
interest  income and  $701,000  was  realized  in  connection  with the sales of
investment securities during the year ended December 31, 1996.
     As  more  fully  described  in  Note  10 to the  accompanying  consolidated
financial statements, interest rate swap agreements with notional amounts of $70
million  and $145  million  were  outstanding  at  December  31,  1996 and 1995,
respectively. Interest rate swap agreements are 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
$7.4 million,  $6.6 million and $490,000 for the years ended  December 31, 1996,
1995 and 1994, respectively.
     In  connection  with the sale of a pool of  approximately  $147  million of
residential  mortgage loans and repayment of the related short-term  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 decrease was the result of the decision by First Banks
to reduce its portfolio of residential mortgage loans by selling essentially all
of its new loan  originations  in the secondary  market as well as a significant
decline  in  interest  rates  during  1995,  which  caused  an  increase  in the
projections  of principal  prepayments  of  residential  mortgage  loans.  These
factors  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 and  November  1996,  First  Banks
shortened the effective maturity of its interest-bearing liabilities through the
termination of $225 million and $75 million, respectively, of interest rate swap
agreements resulting in losses of $13.5 million and $5.3 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 will be charged to operations.
     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, 1996 and 1995, the  unamortized  costs of these  agreements were
$433,000 and $685,000,  respectively,  and were included in other assets.  There
are no amounts receivable under these agreements.
     As more fully 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,  a more
traditional  interest  rate  sensitivity  position 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,  1996,  adjusted to
account for 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>      
    Loans (1)........................  $ 776,384   418,266    520,002    942,188      111,129  2,767,969
    Investment securities............    110,407    76,960     85,147    246,014       34,273    552,801
    Federal funds sold...............     74,100      --          --         --           --      74,100
    Interest-bearing deposits with 
      other financial institutions...      6,050      --          --         --           --       6,050
                                         -------   -------    -------  ---------      -------  ---------
        Total interest-earning assets. $ 966,941   495,226    605,149  1,188,202      145,402  3,400,920
                                         =======   =======    =======  =========      =======  =========
Interest-bearing liabilities:
    Interest-bearing demand accounts.. $ 124,919    77,651     50,643     37,138       47,267    337,618
    Savings accounts..................    50,153    41,304     35,402     50,153      118,008    295,020
    Money market demand accounts......   376,266       --         --         --           --     376,266
    Time deposits.....................   446,633   354,861    516,119    492,280        1,577  1,811,470
    Other borrowed funds..............   130,989     2,447     10,810      1,522          544    146,312
                                       ---------   -------    -------    -------      -------  ---------
        Total interest-bearing
          liabilitie.................. 1,128,960   476,263    612,974    581,093      167,396  2,966,686
Effect of interest rate exchange
    agreements on rate-sensitive 
     liabilities......................   (70,000)       --    35,000     35,000          --         --
                                        --------   -------    ------     ------      -------  ---------              
        Total rate-sensitive liabili-
           ties adjusted for impact
           of interest rate exchange
           agreements..............  $ 1,058,960    476,263   647,974    616,093      167,396  2,966,686
                                       =========    =======   =======    =======      =======  =========
Interest sensitivity gap:
    Periodic.......................  $   (92,019)    18,963   (42,825)   572,109      (21,994)   434,234
                                                                                                 =======
    Cumulative.....................      (92,019)   (73,056) (115,881)   456,228      434,234
                                      ==========    =======  ========    =======      =======
Ratio of interest-sensitive 
     assets to interest-sensitive liabilities:
      Periodic......................        0.91       1.04      0.93       1.93         0.87       1.15
                                                                                                    ====
      Cumulative....................        0.91       0.95      0.95       1.16         1.15
                                            ====       ====      ====       ====         ====
</TABLE>

<PAGE>

------------------
(1)  Loans presented net of unearned discount.

     Management  makes certain  assumptions in preparing the table above.  These
assumptions   include:   loans  will  repay  at   historic   repayment   speeds;
mortgage-backed  securities,  included in investment  securities,  will repay at
projected  repayment  speeds;   interest-bearing  demand  accounts  and  savings
accounts are interest sensitive at a rate of 37% and 17%,  respectively,  of the
remaining  balance for each period  presented;  and fixed maturity deposits will
not be withdrawn prior to maturity.
     At December  31, 1996 and 1995,  First Banks was  liability  sensitive on a
cumulative  basis through the  twelve-month  time horizon by $115.9 million,  or
3.14% of total assets, and $41.6 million, or 1.1% of total assets, respectively.
The  increased  liability-sensitive  position  for 1996 is  attributable  to the
planned  offering of $86.2 million of  Cumulative  Trust  Preferred  Securities,
completed in February 1997, which would provide a long-term source of fixed-rate
funding. See Note 21 to the accompanying consolidated financial statements.
     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>

     In conjunction with its de-emphasis of residential mortgage lending for its
loan  portfolio,  First Banks is  considering  subcontracting  its mortgage loan
servicing and transferring its origination  function to an entity which would be
indirectly owned by First Banks' voting shareholders. It is not anticipated that
any such subcontract and transfer, if consummated,  would have a material effect
on the financial  condition or results of operations of First Banks. First Banks
may also  consider  selling its  residential  mortgage  servicing,  either to an
unrelated  entity or an entity which would be  indirectly  owned by First Banks'
voting shareholders. If such a transaction is initiated, its purpose would be to
redeploy the capital  allocated to its mortgage  servicing  activities to assets
which would provide a greater and more stable return on capital to First Banks.
     For the three years ended  December  31, 1996,  1995 and 1994,  First Banks
originated and purchased loans for resale totaling $136 million, $67 million and
$81 million and sold loans totaling $113 million, $207 million and $168 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  totaled $847 million,  $857 million and
$699  million at December  31, 1996,  1995 and 1994,  respectively.  The primary
change was an increase in mortgage  loans serviced for investors of $189 million
for the year ended  December 31, 1995 reflects both the  acquisitions  completed
during 1995 and the  expansion  of the  residential  mortgage  loan  origination
function into certain of the markets of the acquired entities. This increase was
substantially  offset by First  Banks'  sale of $427  million of  mortgage  loan
servicing  rights in July 1995. First Banks elected to sell the servicing rights
due to the prospective  profitability of its mortgage servicing  portfolio,  the
favorable sales prices available in the market, and the substantial increases to
the portfolio resulting from various acquisitions.  This sale resulted in a gain
of $3.8 million for the year ended December 31, 1995.
     The interest  income earned on loans held for sale was $3.2  million,  $3.2
million and $4.7 million for the three years ended  December 31, 1996,  1995 and
1994,  respectively.  The  fluctuations  in interest income during these periods
relate  primarily  to changes in the average  balance of loans held for sale and
the related loan volumes,  and the prevailing interest rates when the loans were
made.  The  average  balance  of loans  held for sale was $36.3  million,  $36.8
million and $59.2 million for the years ended December 31, 1996,  1995 and 1994,
respectively.  On an annualized  basis, the yield on the portfolio of loans held
for sale was 8.68%,  8.70% and 7.96% of the average  balance for the years ended
December 31, 1996, 1995 and 1994, respectively.  This compares with First Banks'
cost of funds,  as a  percentage  of average  interest-bearing  liabilities,  of
4.91%,  5.01% and 3.65% for the years ended  December 31,  1996,  1995 and 1994,
respectively.
     The  mortgage  loan  servicing  fees are  reported  net of  mortgage-backed
security guarantee fee expense, interest shortfall and amortization of purchased
mortgage  servicing  rights.  Loan servicing  fees, net were $1.8 million,  $2.9
million and $1.6 million for the years ended  December 31, 1996,  1995 and 1994,
respectively.
     Associated with the activity of originating and purchasing loans to be sold
into 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 $40,000 and $126,000 for the years ended  December 31, 1996 and 1994,
respectively,  in comparison  to a loss of $608,000 for the year ended  December
31, 1995.
     As more fully  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 the loan.  To reduce
this exposure,  First Banks  utilizes  forward  commitments  to sell  fixed-rate
mortgage-backed  securities at a specified  date in the future.  At December 31,
1996 and 1995, First Banks had $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  $35.0  million  and $42.0  million,
respectively, were hedged through the use of such forward commitments.

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 .72% and .70% for the years ended
December  31,  1996 and  1995,  respectively.  This  compares  to  First  Banks'
historical  levels of return on average  assets of 1.00% and 1.16% for the years
ended  December  31, 1994 and 1993,  respectively.  Including  the effect of the
assessment,  net income  for 1996 was $20.2  million,  representing  a return on
average assets of .57%.

<PAGE>

     The  decline  in  operating  results  in 1996  and  1995  reflects  several
influences which have 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 has been  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 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.
     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:
<TABLE>
<CAPTION>


                                                          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%
</TABLE>
-----------------------
(1)  Excludes the effect of the one-time FDIC special assessment, net of related
     tax benefit.
     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,
$9.1 million and $490,000 for the years ended December 31, 1996,  1995 and 1994,
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  will be used to  recapitalize  the
SAIF of the FDIC in order to bring it into parity with the Bank  Insurance  Fund
(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.


<PAGE>


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

                                            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 Missouri 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
reflects 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>

<PAGE>

                                                                              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
    Losses and expenses on foreclosed real estate, net of gains......      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 will be used to  recapitalize  the SAIF of the FDIC and bring it into
parity with the BIF of the FDIC. As a result of this special  assessment,  First
Banks'  cost of deposit  insurance  for  SAIF-insured  deposits  is  expected to
decrease by  approximately  $2.0 million for the year ended December 31, 1997 in
comparison to December 31, 1996, excluding the effect of the special assessment.
First Banks has approximately $1.1 billion of SAIF-insured  deposits at December
31, 1996.

Comparison of Results of Operations for Years ended 1995 and 1994
     Net  Income.  Net  income for the year ended  December  31,  1995 was $24.5
million,  compared with $24.0 million earned in 1994.  Although income increased
in 1995, the substantial  increase in total assets  resulting from  acquisitions
caused  the  return on  average  assets to  decrease  to .70% for the year ended
December  31,  1995,  compared  to  1.00% in 1994.  This was  indicative  of the
marginal  operating  results  of  certain of the  acquired  entities  during the
periods subsequent to their respective acquisition dates, as well as the cost of
the  funds  used  in  their  acquisitions  and  the  expenses   associated  with
amalgamating them into First Banks' systems and culture.
     As discussed previously, net interest income (expressed on a tax-equivalent
basis) was $118.0  million,  or 3.60%,  of average  interest-earning  assets for
1995, compared to $93.0 million, or 4.07%, for 1994.
     Provision for Possible Loan Losses.  The provision for possible loan losses
was $10.4  million and $1.9  million for the years ended  December  31, 1995 and
1994, respectively, which was partially attributable to the increase in net loan
charge-offs  to $10.8  million in 1995 from $1.5  million in 1994.  First  Banks
substantially  increased  its  provision  for  possible  loan  losses in 1995 in
recognition  of the  internal  growth  in the  loan  portfolio  as  well  as its
assessment of the risk inherent in the various  portfolios of acquired entities.
The  unusually  high  level  of  recoveries  of  previously   charged-off  loans
experienced in prior years decreased, contributing to the increase in the amount
of net loan  charge-offs  for the year.  At the same time,  an  increase  in the
amount of loans past due over 30 days,  particularly  in  portfolios of recently
acquired  entities,  and the desire to deal  aggressively  with loan problems as
they arise, led to First Banks' decision to continue to strengthen its allowance
for possible loan losses.
     The increased level of net loan charge-offs and loans past due over 30 days
primarily related to the portfolios of CCB and FBA, which were acquired by First
Banks on March 15, 1995 and August 31, 1994, respectively.  Net loan charge-offs
for both CCB and FBA were  approximately $9.2 million and $514,000 for the years
ended December 31, 1995 and 1994, respectively.

<PAGE>

     CCB's charge-offs  resulted  primarily from the application of First Banks'
more  aggressive  approach to resolving  loan problems  within its  consolidated
portfolio.  This  approach  resulted  in a  reduction  in the level of  acquired
problem  loans to $23.7 million at December 31, 1995 from $38.5 million at March
15, 1995, the acquisition date.
     FBA  experienced  an  increase  in  its  automobile  loan  charge-offs  and
automobile loans past due 30 days or more which resulted in a special  provision
of $3.7 million  during the  three-month  period ended  September 30, 1995.  The
increase in  charge-offs  for FBA is partly due to changes in the  practice  and
timing of recording such charge-offs.  Previously, FBA charged-off the remaining
balance of a loan  after  reducing  that  amount by the  estimated  value of the
collateral even if the collateral was not yet in its  possession.  Commencing in
the second quarter of 1995, FBA,  consistent with First Banks'  practice,  began
charging  off a loan when it became  120 days or more  past due,  regardless  of
whether  the  collateral  was  in  its  possession.   When  the  collateral  was
subsequently  received, the charged-off amount was adjusted for the value of the
collateral.  In addition,  in an effort to further  reduce the overall  level of
loan  charge-offs and loans past due 30 days or more within this portfolio,  FBA
increased  its  collection   efforts  and  implemented  more  stringent  lending
practices,  including  regular  reviews  of  new  loans  originated  and  strict
adherence to approved policies and practices.
     A contributing  factor to the increase in net loan  charge-offs for 1995 in
comparison  to 1994 was  reductions  in the level of  recoveries  of  previously
charged-off  loans.  Recoveries of  previously  charged-off  loans  decreased by
$300,000 to $4.9 million from $5.2 million for the years ended December 31, 1995
and 1994,  respectively.  The  decrease  reflects  the  reduced  levels of loans
charged-off  from $12.2  million for the year ended  December 31, 1992,  to $9.5
million  and $6.7  million  for the  years  ended  December  31,  1993 and 1994,
respectively,  and the  corresponding  reduction in the  opportunities to obtain
recoveries.
     Noninterest Income and Expense. The following table summarizes  noninterest
income and  noninterest  expense for the years ended December 31, 1995 and 1994,
respectively.
<TABLE>
<CAPTION>
                                                                              December 31,      Increase (decrease)
                                                                              ------------      -------------------
                                                                           1995        1994      Amount        %
                                                                           ----        ----      ------        -
                                                                            (dollars expressed in thousands)
Noninterest income:
<S>                                                                     <C>            <C>        <C>        <C>  
    Service charges on deposit accounts and customer service fees....   $ 10,661       8,300      2,361      28.4%
    Credit card fees.................................................      2,179       1,746        433      24.8
    Loan servicing fees, net.........................................      2,932       1,645      1,287      78.2
    Gain (loss) on mortgage loans sold and held for sale:
      Originated for sale............................................       (324)        126       (450)   (357.1)
      Other loan sales...............................................       (284)        --        (284)      --
    Trust and brokerage fees.........................................        699         744        (45)     (6.0)
    Net loss on sales of securities..................................       (866)       (290)      (576)   (198.6)
    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............................................................      3,909       1,363      2,546     186.8
                                                                          ------      ------      -----          
            Total noninterest income.................................   $ 19,407      13,634      5,773      42.3
                                                                          ======      ======      =====      ====
Noninterest expense:
    Salaries and employee benefits...................................   $ 37,941      28,337      9,604      33.9%
    Occupancy, net of rental income..................................      8,709       5,260      3,449      65.6
    Furniture and equipment..........................................      6,852       5,209      1,643      31.5
    Federal Deposit Insurance Corporation premiums...................      4,911       4,484        427       9.5
    Postage, printing and supplies...................................      4,678       3,304      1,374      41.6
    Data processing fees.............................................      4,838       3,733      1,105      29.6
    Legal, examination and professional fees.........................      5,412       3,562      1,850      51.9
    Credit card expenses.............................................      2,490       2,455         35       1.4
    Communications...................................................      2,476       1,816        660      36.3
    Advertising......................................................      2,182       1,767        415      23.5
    Losses and expenses on foreclosed real estate, net of gains......      1,302         792        510      64.4
    Other............................................................      9,775       7,015      2,760      39.3
                                                                          ------      ------     ------          
           Total noninterest expense.................................   $ 91,566      67,734     23,832      35.2
                                                                          ======      ======     ======      ====
</TABLE>


<PAGE>



     Noninterest  income  increased by $5.8 million to $19.4  million from $13.6
million for the year ended December 31, 1995 in comparison to December 31, 1994.
The increase was attributable to mortgage banking activities, additional service
charges  and  customer  fee  income,  partially  offset  by sales of  investment
securities  and  residential  mortgage  loans.  A more thorough  discussion  and
analysis of the increases  attributable to mortgage banking  operations has been
presented under "-- Mortgage Banking Activities."
     Increases  of $4.1  million  for the  year  ended  December  31,  1995,  in
comparison  to the same period in 1994,  in service  charges,  customer  service
fees,  credit  card  fees  and  loan  servicing  fees  relate  primarily  to the
aforementioned acquisitions.
     Offsetting  the increase in  noninterest  income was a net loss on sales of
securities  of $866,000 and  $290,000 for the years ended  December 31, 1995 and
1994,  respectively.  The sales were executed to restructure  acquired entities'
investment  portfolios  to provide  funds for internal loan growth and to reduce
borrowings.
     As  previously  discussed,  First  Banks sold $147  million of  residential
mortgage  loans  resulting in a net loss of $284,000 for the year ended December
31, 1995.  The proceeds  from the sale of these loans were used to repay certain
interest-bearing  liabilities,  which resulted in the termination of an interest
rate  swap  agreement.  The  loss on  cancellation  of the  interest  rate  swap
agreement was $3.3 million.
     Other income for the year ended December 31, 1995 increased by $2.5 million
to $3.9  million  from  $1.4  million  for 1994.  In  addition  to the  increase
associated  with the overall  growth of First  Banks,  other income for the year
ended  December 31, 1995 included a $294,000 gain upon sale of bank building and
related  deposits,  $179,000 of income from the termination of FBA's  Directors'
Retirement Plan and $802,000 of funds returned to FBA which were maintained in a
trust.  During  1990,  FBA  established  a trust in lieu of officer and director
liability  insurance.  Since such coverage is now available and in place through
First Banks, the trust was terminated and the funds were returned to FBA.
     Noninterest expense was $91.6 million and $67.7 million for the years ended
December  31,  1995 and 1994,  respectively,  representing  an increase of $23.8
million. As a percentage of average assets,  noninterest expenses were 2.62% and
2.81% for the years  ended  December  31, 1995 and 1994,  respectively.  To some
extent,  the  year-to-year  noninterest  expense was not comparable,  due to the
incremental  operating  expenses of acquired  entities,  which are accounted for
under the purchase  method of accounting,  merger-related  expenses and expenses
associated  with  amalgamating  acquired  entities into First Banks' systems and
culture.
     Salaries  and  employee   benefits   represent  the  largest   category  of
noninterest  expense,  which  totaled  $37.9  million,  or 41.4% of  noninterest
expense,  for the year ended  December 31, 1995.  This  compares to salaries and
employee  benefits of $28.3 million,  or 41.8% of noninterest  expense,  for the
year  ended  December  31,  1994.   The  $9.6  million   increase  is  primarily
attributable to the  acquisitions  completed  during 1995,  partially  offset by
staff reductions,  occurring primarily in the third and fourth quarters of 1995,
due  to  the  effects  of  both  acquisition-related  synergies  and  increasing
economies of scale.
     Occupancy and furniture and equipment expenses increased by $5.1 million to
$15.6 million from $10.5 million for the years ended December 31, 1995 and 1994,
respectively.  The  increase is a result of First  Banks'  market  expansion  in
central and northern  Illinois,  Dallas and Houston,  Texas, and California.  In
addition,  the increase in these  expenses  reflects the upgrading of systems to
enhance both the quality of service to First Banks' expanding  customer base and
improving staff productivity.
     On August 8, 1995, the FDIC voted to reduce the deposit insurance  premiums
paid by most members of the BIF and to keep existing assessment rates intact for
members of the SAIF. The reduction in the BIF rates were effective June 1, 1995,
resulting in a reduction in First Banks' FDIC premiums  expense by approximately
$1.6 million for the year ended December 31, 1995.

     Loans and Allowance for Possible Loan Losses.  Interest  earned on the loan
portfolio is the primary source of income for the Subsidiary  Banks.  Loans, net
of unearned  discount,  represent 75.0% of total assets as of December 31, 1996,
as compared to 75.7% as of December 31,  1995.  For 1996,  loan  growth,  net of
unearned discount and excluding loans held for sale, was $41.3 million, compared
to $646.0 million for 1995.
      Internally  generated  loans  decreased  by $37.4  million  for  1996,  in
comparison  to an  increase  of $65.9  million  for 1995.  The  decrease in 1996
included an increase in corporate  banking's loan  portfolio of $135.8  million,
offset by decreases in residential real estate and indirect  automobile loans of
$127.9  million  and $77.4  million,  respectively.  For 1995,  the  increase is
attributable to corporate banking,  partially offset by the sale of $147 million
of  residential  mortgage  loans.  As previously  discussed  under "-- Financial
Condition and Average  Balances," the growth which  occurred in the  residential
mortgage loan portfolio, relative to other types of loans, and the effects which
these loans have on the  interest  rate risk  management  process have led First
Banks to the  conclusion  that its  residential  mortgage loan  portfolio,  as a
percentage  of the total loans,  should be reduced.  In  addition,  during 1995,

<PAGE>

First Banks elected to reduce the level of originations  of indirect  automobile
loans due to increasing  past due loans and  charge-offs  within that portfolio.
The indirect  automobile  loan portfolio  which increased from $305.3 million at
December 31, 1994 to $319.8 million at June 30, 1995, has subsequently decreased
to  $206.4   million  and  $283.8   million  at  December  31,  1996  and  1995,
respectively.
     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.  The 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 on the strength of the
borrowers'  general credit standing 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  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-rate residential loans pending sale in the secondary loan market
in the form of a GNMA or FNMA mortgage-backed security and the excess production
of ARMs sold directly to private third-party investors.
     The following  table shows the  composition  of the loan portfolio by major
category  and the  percent  of  each  to the  total  portfolio  as of the  dates
presented:
<TABLE>
<CAPTION>

                                                                                   December 31,
                                                                                   ------------
                                                   1996              1995              1994           1993             1992
                                                   ----              ----              ----           ----             ----
                                              Amount      %     Amount     %     Amount      %     Amount    %      Amount     %
                                              ------      -     ------     -     ------      -     ------    -      ------     -
                                                                         (dollars expressed in thousands)

<S>                                         <C>           <C>    <C>      <C>    <C>       <C>    <C>       <C>    <C>        <C>  
Commercial, financial and agricultural     $ 457,186     16.7%$  364,018  13.5% $ 208,649  10.2%  $160,211  12.8%   $154,322   12.2%
Real estate construction and development     289,378     10.5     209,80   7.8    122,912   6.0     76,049  6.17       7,208    6.2
Real estate mortgage:
    One- to four-family residential loan   1,059,770     38.7  1,199,491  44.4    967,129   47.1   584,868  46.6     606,847   48.1
    Other real estate loans...........       600,810     21.9    512,264  19.0    332,075   16.1   243,382  19.4     189,267   15.0
Consumer and installment, net of
    unearned discount.................       333,340     12.2    413,609  15.3    422,461   20.6   189,851  15.1     234,552   18.5
                                           ---------     ----    -------  ----  ---------   ----   -------  ----     -------   ----
         Total loans, excluding
            loans held for sale.......     2,740,484   100.0% 2,699,184  100.0% 2,053,226  100.0% 1,254,361 100.0% 1,262,196  100.0%
Loans held for sale...................        27,485             45,035            20,344           107,657          109,221
                                           ---------          ---------         ---------         ---------        ---------
         Total loans..................    $2,767,969         $2,744,219        $2,073,570        $1,362,018       $1,371,417
                                           =========           ========          ========         =========        =========
</TABLE>

<TABLE>
<CAPTION>

     Loans at December 31, 1996 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>    
Commercial, financial and agricultural                 $   353,791    84,688     15,950     2,757     --    457,186
Real estate construction and development                   279,261     9,049        884       184     --    289,378
Real estate mortgage                                       818,113   301,076    361,608   178,669   1,114 1,660,580
Consumer and installment, net of unearned discount          65,242   251,838        346    15,914     --    333,340
Loans held for sale                                         27,485     --            --        --     --     27,485
                                                         ---------   -------    -------   -------   ----- ---------
         Total loans                                   $ 1,543,892   646,651    378,788   197,524   1,114 2,767,969
                                                         =========   =======    =======   =======   ===== =========


</TABLE>

<PAGE>
<TABLE>
<CAPTION>


       Following is a summary of loan loss  experience  for the five years ended
December 31, 1996:

                                                                                  December 31,
                                                                                  ------------
                                                              1996       1995        1994         1993        1992
                                                              ----       ----        ----         ----        ----
                                                                        (dollars expressed in thousands)

<S>                                                         <C>         <C>         <C>        <C>           <C>            
Allowance for possible loan losses,
   beginning of period................................  $   52,665      28,410      23,053       20,897        19,238
Acquired allowances for possible loan losses..........       2,338      24,655       5,026        2,079           399
                                                         ---------   ---------   ---------   ----------    ----------
                                                            55,003      53,065      28,079       22,976        19,637
                                                         ---------   ---------   ---------   ----------    ----------
Loans charged-off:
    Commercial, financial and agricultural............      (8,918)     (2,337)       (813)      (2,023)       (3,885)
    Real estate construction and development..........      (1,241)       (275)       (119)         (19)         (424)
    Real estate mortgage..............................     (10,308)     (5,948)     (1,282)      (2,212)       (2,697)
    Consumer and installment..........................      (8,549)     (7,060)     (4,482)      (5,277)       (5,197)
                                                         ---------   ---------   ---------    ---------    ---------- 
            Total.....................................     (29,016)    (15,620)     (6,696)      (9,531)      (12,203)
                                                         ---------   ---------   ---------    ---------    ---------- 
Recoveries of loans previously charged-off:
    Commercial, financial and agricultural............       2,642       1,714         831        1,191         1,083
    Real estate construction and development..........         495         666         401          241            34
    Real estate mortgage..............................       3,255         290         840        1,396           503
    Consumer and installment..........................       2,908       2,189       3,097        2,324         1,408
                                                         ---------   ---------   ---------    ---------    ---- -----
            Total.....................................       9,300       4,859       5,169        5,152         3,028
                                                         ---------   ---------   ---------    ---------    ----------
            Net loans charged-off.....................     (19,716)    (10,761)     (1,527)      (4,379)       (9,175)
Provision for possible loan losses....................      11,494      10,361       1,858        4,456        10,435
                                                         ---------   ---------   ---------    ---------    ----------
Allowance for possible loan losses, end of period.....  $   46,781      52,665      28,410       23,053        20,897
                                                         =========   =========   =========    =========    ==========
Loans outstanding:
    Average...........................................  $2,726,297   2,598,936   1,616,634    1,340,641     1,416,597
    End of period.....................................   2,767,969   2,744,219   2,073,570    1,362,018     1,371,417
    End of period, excluding loans held for sale......   2,740,484   2,699,184   2,053,226    1,254,361     1,262,196
                                                         =========   =========   =========    =========     =========
    Ratio of allowance for possible loan losses to 
       loans outstanding:
         Average......................................        1.72%       2.03%       1.76%        1.72%         1.48%
         End of period................................        1.69        1.92        1.37         1.69          1.52
         End of period, excluding loans held for sale.        1.71        1.95        1.38         1.84          1.66
    Ratio of net charge-offs to average loans 
       outstanding....................................        0.72        0.41        0.09         0.33          0.65
                                                              ====        ====        ====         ====          ====
Allocation of allowance for possible loan losses
       at end of period:
    Commercial, financial and agricultural............  $   13,579      12,501       4,160        3,531         2,912
    Real estate construction and development..........       4,584       4,665       2,440        2,867         2,895
    Real estate mortgage..............................      14,081      19,849       8,051        6,712         4,186
    Consumer and installment..........................      10,296      10,016       6,225        2,925         2,428
    Unallocated.......................................       4,241       5,634       7,534        7,018        8 ,476
                                                         ---------   ---------   ---------    ---------     ---------
            Total.....................................  $   46,781      52,665      28,410       23,053        20,897
                                                         =========   =========   =========    =========     =========
Percent of categories to loans, net of unearned
  discount:
    Commercial, financial and agricultural............       16.52%      13.27%      10.06%       11.76%        11.25%
    Real estate construction and development..........       10.45        7.65        5.93         5.58          5.63
    Real estate mortgage..............................       60.00       62.49       62.66        60.81         58.05
    Consumer and installment..........................       12.04       14.95       20.37        13.94         17.10
    Loans held for sale...............................         .99        1.64        0.98         7.91          7.97
                                                         ---------   ---------   ---------    ---------     ---------
            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,
                                                                            ------------
                                                     1996         1995         1994         1993          1992
                                                     ----         ----         ----         ----          ----
                                                                 (dollars expressed in thousands)
Commercial, financial and agricultural:
<S>                                               <C>            <C>          <C>          <C>         <C>  
    Nonaccrual..............................    $   4,113        9,930        2,540        4,278         2,707
    Restructured terms......................          130          --            60           60           122
Real estate construction and development:
    Nonaccrual..............................          817        2,002        1,448           70            89
Real estate mortgage:
    Nonaccrual..............................       24,486       27,159       11,637        7,546         7,292
    Restructured terms......................          278          --           222          227           568
Consumer and installment:
    Nonaccrual..............................          440          300          293           49           312
    Restructured terms......................            5          --           --           --            --
                                                ---------    ---------    ---------    ---------    ----------
          Total nonperforming loans.........       30,269       39,391       16,200       12,230        11,090
Other real estate...........................       10,607        7,753        6,740        2,529         6,938
                                                ---------    ---------    ---------    ---------    ----------
          Total nonperforming  assets.......   $   40,876       47,144       22,940       14,759        18,028
                                                =========    =========    =========    =========    ==========

Loans, net of unearned discount.............   $2,767,969    2,744,219    2,073,570    1,362,018     1,371,417
                                                =========    =========    =========    =========     =========
Loans past due 90 days or more and
   still accruing...........................   $    3,779        8,474        1,885        1,199         3,074
                                                =========    =========    =========    =========     =========

Allowance for possible loan losses to loans.         1.69%        1.92%        1.37%        1.69%         1.52%
Nonperforming loans to loans................         1.09         1.44         0.78         0.90          0.81
Allowance for possible loan losses to 
   nonperforming loan.......................       154.55       133.70       175.37       188.50        188.43
Nonperforming assets to loans and
   foreclosed assets........................         1.47         1.71         1.10         1.08          1.31
                                                     ====         ====         ====         ====          ====
</TABLE>

     As of  December  31,  1996 and  1995,  $31.5  million  and  $47.9  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 focuses on identifying
and managing credit exposure.  First Banks utilizes a lender-initiated system of
rating credits,  which is  subsequently  tested by internal loan review and bank
regulators.  Adversely  rated  credits are  included  on a watch  list,  and are
reviewed at the bank level and  centrally at least every four months.  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 as soon as any problem 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.
     In addition to the rating system,  credit  administration  coordinates  the
periodic credit reviews and provides management with information on risk levels,
trends, delinquencies and portfolio concentrations.
     The  allowance  for  possible  loan  losses  is  based  on past  loan  loss
experience,  on First Banks management's  evaluation of the quality of the loans
in the portfolio and on the  anticipated  effect of national and local  economic
conditions relative to the ability of loan customers to repay. Each quarter, the
allowance  for possible  loan losses is reviewed  relative to the watch list and
other data to determine its adequacy.  The provision for possible loan losses is
management's  estimate of the amount  necessary to maintain  the  allowance at a
level  consistent  with this  evaluation.  As  adjustments  to the allowance for
possible  loan  losses  are  considered  necessary,  they are  reflected  in the
consolidated statements of income.
     First  Banks does not lend funds for  foreign  loans.  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.

     Investment   Securities.   As  more  fully  described  in  Note  3  to  the
accompanying consolidated financial statements, in October 1995, the FASB issued
a Special Report, A Guide to  Implementation  of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities (Special Report).  The Special
Report was issued in  response to various  questions  that have been raised as a
result of initially  applying SFAS 115,  including the regulatory  treatment for
purposes of calculating capital compliance.  The Special Report also provided an
enterprise   the   opportunity   to   reassess   the   appropriateness   of  the
classifications of all investment  securities without bringing into question the
intent of an enterprise to hold other debt  securities to maturity.  In light of
the  Special  Report  and  management's  review  of  the  investment  securities
portfolios,  debt  securities  with an  amortized  cost of $174.1  million  were
reclassified from held to maturity to available for sale at December 31, 1995.
     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,
                                                                      ------------
                                              1996                        1995                       1994
                                              ----                        ----                       ----
                                             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..................  $418,193    12.91%  --    $389,658      12.24%  --   $  290,039    12.43%     --
Interest-bearing demand deposits.   337,618    10.42   1.73   307,584      9.66    1.89    268,212    11.50      2.04
Savings deposits.................   671,286    20.73   3.07   690,902      21.70   3.16    538,027    23.06      3.03
Time deposits of $100,000 or more   169,057     5.22   5.64   201,025       6.31   5.69    113,381     4.86      4.87
Other time deposits.............. 1,642,413    50.72   5.69 1,594,522      50.09   5.72  1,123,485    48.15      4.84
                                  ---------    -----   ---- ---------     ------   ----  ---------   ------      ====
         Total deposits..........$3,238,567   100.00%      $3,183,691     100.00%       $2,333,144   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 in 1996 and
1995.  The  dividends  paid on the Class C Shares were $4.94 million in 1996 and
$4.95 million in 1995 and 1994.  First Banks has never paid,  and has no present
intention to pay, dividends on its common stock. See Note 17 to the consolidated
financial statements.

     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 $315.4  million and $359.2  million at December 31, 1996
and 1995, respectively.
     At December 31, 1996, First Banks' more volatile sources of funds mature as
follows:

                                                (dollars expressed in thousands)

    Three months or less...........................      $  120,634
    Over three months through six months...........          31,446
    Over six months through twelve months..........          75,516
    Over twelve months.............................          87,773
                                                            -------
                      Total........................      $  315,369
                                                            =======

     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 Class C
9%  preferred  stock  and the  Cummulative  Trust  Preferred  Securities  issued
subsequent to December 31, 1996.  See Note 21 to the  accompanying  consolidated
financial statements.


<PAGE>

     Effect of New Accounting  Standards.  First Banks adopted the provisions of
Statement of Financial  Accounting Standards (SFAS) 114, Accounting by Creditors
for Impairment of a Loan,  and SFAS 118,  Accounting by Creditors for Impairment
of a Loan - Income  Recognition  and  Disclosures,  which  amends  SFAS 114,  on
January 1, 1995. SFAS 114 defines the recognition  criterion for loan impairment
and the  measurement  methods for certain  impaired  loans and loans whose terms
have been modified in troubled-debt restructurings.  SFAS 118 amends SFAS 114 to
allow a creditor to use existing  methods for recognizing  interest income on an
impaired loan. The  implementation  of these  statements did not have a material
effect  on  First  Banks'  financial  position  and  resulted  in no  additional
provision for possible loan losses.
     First  Banks  adopted  the  provisions  of  SFAS  121,  Accounting  for the
Impairment of Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. SFAS 121 established accounting standards for the impairment of
long-lived  assets,  certain  identifiable  intangibles and goodwill  related to
those  assets  to be  held  and  used  and for  long-lived  assets  and  certain
identifiable intangibles to be disposed of.

<PAGE>

     SFAS  121  requires  that  long-lived   assets  and  certain   identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In performing the review for recoverability,  the entity
should  estimate  the future  cash flows  expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future cash flows
(undiscounted  and without interest charges) is less than the carrying amount of
the asset,  an impairment loss is recognized.  Otherwise,  an impairment loss is
not  recognized.  Measurement of an impairment  loss for  long-lived  assets and
identifiable  intangibles that an entity expects to hold and use should be based
on the fair value of the asset.
     First Banks  adopted the  provisions of SFAS 122,  Accounting  for Mortgage
Servicing  Rights,  on January 1, 1996. SFAS 122 amends SFAS 65,  Accounting for
Certain Mortgage Banking  Activities.  SFAS 122 requires that a mortgage banking
enterprise  recognize as separate  assets rights to service  mortgage  loans for
others, regardless of how those servicing rights are acquired.
     A mortgage  banking  enterprise  that acquires  mortgage  servicing  rights
through  either the  purchase  or  origination  of  mortgage  loans and sells or
securitizes those loans with servicing rights retained should allocate the total
cost of the mortgage  loans to the servicing  rights and the loans  (without the
mortgage  servicing  rights),  based  on their  relative  fair  values  if it is
practicable to estimate those fair values.  If it is not practicable to estimate
the fair values of the mortgage servicing rights and the mortgage loans (without
the mortgage servicing rights), the entire cost of purchasing or originating the
loans should be allocated to the mortgage loans (without the mortgage  servicing
rights) and no cost should be allocated to the mortgage servicing rights.
     SFAS 122 requires that a mortgage banking enterprise assess its capitalized
mortgage  servicing  rights  for  impairment  based on the  fair  value of those
rights.  The entity  should  stratify  its  mortgage  servicing  rights that are
capitalized  after the  adoption of this  statement  based on one or more of the
predominate risk  characteristics of the underlying loans.  Impairment should be
recognized through a valuation allowance for each impaired stratum.
     The  implementation of SFAS 121 and SFAS 122 did not have a material effect
on First Banks' consolidated financial statements.
     In June 1995,  the FASB  issued  SFAS 125,  Accounting  for  Transfers  and
Servicing  of  Financial  Assets and  Extinguishment  of  Liabilities.  SFAS 125
established  accounting  and reporting  standards for transfers and servicing of
financial assets and extinguishment of liabilities.
     The standards established by SFAS 125 are based on consistent  applications
of a financial-components approach that focuses on control. Under that approach,
after a transfer of financial  assets,  an entity  recognizes  the financial and
servicing  assets it controls and the liabilities it has incurred,  derecognizes
financial assets when control has been surrendered and derecognizes  liabilities
when  extinguished.  SFAS 125 provides  consistent  standards for distinguishing
transfers of  financial  assets that are sales from  transfers  that are secured
borrowings.
     SFAS 125 is effective for  transfers and servicing of financial  assets and
extinguishments  of liabilities  occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
     First  Banks does not believe  the  implementation  of SFAS 125 will have a
material effect on its consolidated financial position or results of operation.

     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 interest rate risk management
program.



<PAGE>
<TABLE>
<CAPTION>


                 Quarterly Condensed Financial Data (unaudited)

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

<S>                                                                  <C>           <C>        <C>         <C>   
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) loss
                  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:.............................................
    Primary.....................................................     $ 126.93      173.34       4.12      308.07
    Fully diluted...............................................       125.52      165.91      11.37      295.74
                                                                       ======      ======      =====      ======


                                                                                   1995 Quarter Ended
                                                                                   ------------------
                                                                                              Septem-     Decem-
                                                                       March 31    June 30    ber 30      ber 31
                                                                       --------    -------    ------      ------
                                                                           (dollars expressed in thousands)

Interest income.................................................     $ 60,582      65,426     66,043      69,570
Interest expense................................................       33,257      36,061     37,032      38,595
                                                                       ------      ------     ------      ------
                Net interest income.............................       27,325      29,365     29,011      30,975
Provision for possible loan losses..............................        1,366       1,644      5,439       1,912
                                                                       ------      ------     ------      ------
                Net interest income after provision
                  for possible loan losses......................       25,959      27,721     23,572      29,063
Noninterest income..............................................        7,060       5,214      5,368       1,765
Noninterest expense.............................................       21,218      24,041     21,442      24,865
                                                                       ------      ------     ------      ------
                Income before provision for income taxes
                  and minority interest in (income) loss
                  of subsidiaries...............................       11,801       8,894      7,498       5,963
Provision for income taxes......................................        4,089       2,802      2,523       1,624
                                                                       ------      ------     ------      ------
                Income before minority interest in
                  (income) loss of subsidiaries.................        7,712       6,092      4,975       4,339
Minority interest in (income) loss of subsidiaries..............         (139)        (17)       972         537
                                                                       ------      ------     ------      ------
                Net income......................................     $  7,573       6,075      5,947       4,876
                                                                       ======      ======     ======      ======
Earnings per share:
    Primary.....................................................     $ 259.47      198.89     190.72      142.74
    Fully diluted...............................................       246.28      188.04     183.03      141.31
                                                                       ======      ======     ======      ======
</TABLE>



<PAGE>
<TABLE>
<CAPTION>


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


                                                                                                December 31,
                                                                                                ------------
                                                                                            1996           1995
                                                                                            ----           ----
                                             ASSETS

Cash and cash equivalents:
<S>                                                                                   <C>                  <C>    
    Cash and due from banks........................................................   $    147,804         128,553
    Interest-bearing deposits with other financial institutions -
      with maturities of three months or less......................................          6,050          16,860
    Federal funds sold.............................................................         74,100          53,800
                                                                                         ---------       ---------
               Total cash and cash equivalents.....................................        227,954         199,213
                                                                                         ---------       ---------

Investment securities:
    Available for sale, at fair value..............................................        532,605         471,791
    Held to maturity, at amortized cost (estimated fair value
      of $20,611 and $37,021 at December 31, 1996 and 1995,
      respectively)................................................................         20,196          36,532
                                                                                         ---------       ---------
               Total investment securities.........................................        552,801         508,323
                                                                                         ---------       ---------

Loans:
    Commercial, financial and agricultural.........................................        457,186         364,018
    Real estate construction and development.......................................        289,378         209,802
    Real estate mortgage...........................................................      1,660,580       1,715,052
    Consumer and installment.......................................................        341,154         419,894
    Loans held for sale............................................................         27,485          45,035
                                                                                         ---------       ---------
               Total loans.........................................................      2,775,783       2,753,801
Unearned discount..................................................................         (7,814)         (9,582)
Allowance for possible loan losses.................................................        (46,781)        (52,665)
                                                                                         ---------       --------- 
               Net loans...........................................................      2,721,188       2,691,554
                                                                                         ---------       ---------

Bank premises and equipment, net of accumulated
    depreciation and amortization..................................................         48,078          50,278
Intangibles associated with the purchase of subsidiaries...........................         23,303          23,841
Purchased mortgage servicing rights, net of amortization...........................         10,230          12,122
Accrued interest receivable........................................................         23,250          22,027
Receivable from sales of investment securities.....................................            --           41,265
Other real estate..................................................................         10,607           7,753
Deferred income taxes..............................................................         43,406          41,576
Other assets.......................................................................          8,337          25,010
                                                                                         ---------       ---------
               Total assets........................................................   $  3,689,154       3,622,962
                                                                                        ==========       =========
</TABLE>


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


<PAGE>

<TABLE>
<CAPTION>




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


                                                                                                 December 31,
                                                                                                 ------------
                                                                                               1996        1995
                                                                                               ----        ----
                                           LIABILITIES
Deposits:
    Demand:
<S>                                                                                      <C>               <C>    
      Non-interest-bearing............................................................   $    418,193      389,658
      Interest-bearing................................................................        337,618      307,584
    Savings...........................................................................        671,286      690,902
    Time:
      Time deposits of $100 or more...................................................        169,057      201,025
      Other time deposits.............................................................      1,642,413    1,594,522
                                                                                            ---------    ---------
          Total deposits..............................................................      3,238,567    3,183,691
Federal Home Loan Bank advances.......................................................         39,277       49,883
Other borrowings......................................................................         30,705       21,658
Notes payable.........................................................................         76,330       88,135
Accrued interest payable..............................................................         10,288       10,726
Deferred income taxes.................................................................          6,194        6,517
Accrued and other liabilities.........................................................         23,521       15,310
Minority interest in subsidiaries.....................................................         12,883       12,437
                                                                                            ---------    ---------
          Total liabilities...........................................................      3,437,765    3,388,357



                                      STOCKHOLDERS' EQUITY

Preferred stock:
    Class C 9.00%  increasing  rate,  redeemable,  cumulative,  $1.00 par value,
      $25.00 stated value;  5,000,000  shares  authorized,  2,155,480 shares and
      2,200,000 shares issued and outstanding at December 31, 1996
      and 1995, respectively..........................................................         53,887       55,000
    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.......................................................................          3,289        4,307
Retained earnings.....................................................................        171,182      156,692
Net fair value adjustment for securities available for sale...........................          4,053         (372)
                                                                                            ---------    --------- 
          Total stockholders' equity..................................................        251,389      234,605
                                                                                            ---------    ---------
          Total liabilities and stockholders' equity..................................  $   3,689,154    3,622,962
                                                                                            =========    =========

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                        Consolidated Statements of Income

             (dollars expressed in thousands, except per share data)

                                                                                      Years ended December 31,
                                                                                      ------------------------
                                                                                   1996          1995       1994
                                                                                   ----          ----       ----
Interest income:
<S>                                                                           <C>             <C>          <C>    
    Interest and fees on loans............................................... $  237,379      221,934      129,583
    Investment securities:
       Taxable...............................................................     22,639       34,379       29,385
       Nontaxable............................................................      1,240        1,390        1,468
    Federal funds sold and other.............................................      4,763        3,918        1,999
                                                                                 -------      -------      -------
         Total interest income...............................................    266,021      261,621      162,435
                                                                                 -------      -------      -------
Interest expense:
    Deposits:
       Interest-bearing demand...............................................      4,845        5,760        4,421
       Savings...............................................................     22,687       22,737       15,198
       Time deposits of $100 or more.........................................      8,977        9,315        3,300
       Other time deposits...................................................     88,228       78,250       41,170
    Federal Home Loan Bank advances..........................................      2,591       12,548        3,443
    Interest rate exchange agreements, net...................................      7,623        6,911          490
    Notes payable and other borrowings.......................................      6,719        9,424        2,648
                                                                                 -------      -------      -------
         Total interest expense..............................................    141,670      144,945       70,670
                                                                                 -------      -------       ------
         Net interest income.................................................    124,351      116,676       91,765
Provision for possible loan losses...........................................     11,494       10,361        1,858
                                                                                 -------      -------       ------
         Net interest income after provision for possible loan losses........    112,857      106,315       89,907
                                                                                 -------      -------       ------
Noninterest income:
    Service charges on deposit accounts and customer service fees............     12,521       10,661        8,300
    Credit card fees.........................................................      2,475        2,179        1,746
    Loan servicing fees, net.................................................      1,837        2,932        1,645
    Gain (loss) on mortgage loans sold and held for sale.....................         40         (608)         126
    Net loss on sales of securities..........................................       (311)        (866)        (290)
    Gain on sale of mortgage loan servicing rights...........................        --         3,843          --
    Loss on cancellation of interest rate swap agreement.....................        --        (3,342)         --
    Other income.............................................................      4,159        4,608        2,107
                                                                                  ------       ------       ------
         Total noninterest income............................................     20,721       19,407       13,634
                                                                                  ------       ------       ------
Noninterest expense:
    Salaries and employee benefits...........................................     39,995       37,941       28,337
    Occupancy, net of rental income..........................................      9,758        8,709        5,260
    Furniture and equipment..................................................      7,218        6,852        5,209
    Federal Deposit Insurance Corporation premiums...........................     11,715        4,911        4,484
    Postage, printing and supplies...........................................      4,687        4,678        3,304
    Data processing fees.....................................................      4,477        4,838        3,733
    Legal, examination and professional fees.................................      4,901        5,412        3,562
    Credit card expenses.....................................................      2,913        2,490        2,455
    Communications...........................................................      2,635        2,476        1,816
    Advertising..............................................................      2,224        2,182        1,767
    Losses and expenses on foreclosed real estate, net of gains..............      1,927        1,302          792
    Other expenses...........................................................     13,291        9,775        7,015
                                                                                 -------       ------       ------
         Total noninterest expense...........................................    105,741       91,566       67,734
                                                                                 -------       ------       ------
         Income before provision for income taxes and minority interest
               in  (income) loss of subsidiaries.............................     27,837       34,156       35,807
Provision for income taxes...................................................      6,960       11,038       12,012
                                                                                 -------       ------       ------
         Income before minority interest in  (income) loss of subsidiaries...     20,877       23,118       23,795
Minority interest in  (income) loss of subsidiaries..........................       (659)       1,353          237
                                                                                 -------       ------       ------
         Net income..........................................................     20,218       24,471       24,032
Preferred stock dividends....................................................      5,728        5,736        5,735
                                                                                 -------       ------       ------
         Net income available to common stockholders.........................   $ 14,490       18,735       18,297
                                                                                 -------       ------       ------
Earnings per common share:
    Primary..................................................................   $ 612.46       791.82       773.31
    Fully diluted............................................................     598.54       758.66       734.80
                                                                                  ======       ======       ======

Weighted average shares of common stock outstanding..........................     23,661       23,661       23,661
                                                                                  ======       ======       ======
</TABLE>
The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.
<PAGE>



<TABLE>
<CAPTION>

                                         Consolidated Statements of Changes in Stockholder's Equity
                                             (dollars expressed in thousands, except per share data)

                                                 Three years ended December 31, 1996


                                                   Class C                                                    Net fair
                                                  preferred     Adjustable rate                             value adjust-
                                                   stock,       preferred stock                               ment  for   total
                                                 increasing   Class                                           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>      <C>    
Consolidated balances, January 1, 1994........... $ 55,000   12,822       241     5,915     4,604    119,660    3,602    201,844

Year ended December 31, 1994:
    Consolidated net income......................       --       --        --        --        --     24,032       --     24,032
    Class C preferred stock dividends, 
     $2.25 per share.............................       --       --        --        --        --     (4,950)      --     (4,950)
    Class A preferred stock dividends,
      $1.20 per share............................       --       --        --        --        --       (768)      --       (768)
    Class B preferred stock dividends,
      $.11 per share.............................       --       --        --        --        --        (17)      --        (17)
    Effect of capital stock transactions of
       majority-owned subsidiary.................       --       --        --        --       (125)       --       --       (125)
    Net fair value adjustment for securities
       available for sale........................       --       --        --        --         --        --     (2,704)  (2,704)
                                                    ------   ------       ---     -----     ------   -------     ------   ------ 
Consolidated balances, December 31, 1994.........   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,
      $1.20per 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
                                                   =======    ======      ===     =====      =====    =======      ===== =======
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


<PAGE>


<TABLE>
<CAPTION>



                       Consolidated Statement of Cash Flow
                        (dollars expressed in thousands)


                                                                                        Years ended December 31,
                                                                                        ------------------------
                                                                                      1996       1995        1994
                                                                                      ----       ----        ----
Cash flows from operating activities:
<S>                                                                               <C>            <C>        <C>   
    Net income..................................................................  $   20,218     24,471     24,032
    Adjustments to reconcile net income to net cash provided by operating
     activities:
       Depreciation and amortization of bank premises and equipment.............       5,784      5,534      4,164
       Amortization, net of accretion...........................................      12,481      4,520      5,364
       Originations and purchases of loans held for sale........................    (135,792)  (67,005)    (80,630)
       Proceeds from the sale of loans held for sale............................     113,074    207,077    167,942
       Provision for possible loan losses.......................................      11,494     10,361      1,858
       Provision for income taxes...............................................       6,960     11,039     12,012
       Payments of income taxes.................................................      (7,655)    (1,105)   (12,125)
       (Increase) decrease in accrued interest receivable.......................        (623)     1,320       (469)
       Interest accrued on liabilities..........................................     141,670    144,946     70,670
       Payments of interest on liabilities......................................    (142,210)  (145,066)   (69,370)
       Other operating activities, net..........................................      (6,637)    (5,190)      (883)
       Minority interest in  income (loss) of subsidiaries......................         659     (1,353)      (237)
                                                                                     -------    -------    ------- 
          Net cash provided by operating activities.............................      19,423    189,549    122,328
                                                                                     -------    -------    -------

Cash flows from investing activities:
    Cash paid for acquired entities, net of cash and cash equivalents received..     10,715      54,458    (24,171)
    Sales of investment securities of acquired entity...........................        --       88,334    133,990
    Sales of investment securities available for sale...........................     91,147     279,537    145,757
    Maturities of investment securities available for sale......................     440,314    147,395    262,953
    Maturities of investment securities held to maturity........................      14,643     36,469     94,359
    Purchases of investment securities available for sale.......................    (527,091)  (282,599)  (235,093)
    Purchases of investment securities held to maturity.........................        (916)    (2,397)   (81,096)
    Net (increase) decrease in loans............................................      20,350    (71,211)  (458,172)
    Recoveries of loans previously charged-off..................................       9,300      4,859      5,169
    Purchases of bank premises and equipment....................................      (3,299)    (5,337)    (4,190)
    Interest rate futures contracts, net........................................        --      (22,167)     7,469
    Other investing activities..................................................      10,657      3,946     (3,285)
                                                                                     -------    -------    ------- 
          Net cash provided by (used in) investing activities...................      65,820    231,287   (156,310)
                                                                                     -------    -------   -------- 

Cash flows from financing activities:
       Decrease in demand and savings deposits..................................     (20,466)   (123,260)  (77,075)
       Increase (decrease) intime deposits......................................     (15,804)    55,885     38,151
    Increase (decrease) in federal funds purchased..............................      (3,000)   (67,300)    18,000
    Increase (decrease) in Federal Home Loan Bank advances......................     (10,606)   (170,644)   11,464
    Increase (decrease) in securities sold under agreements to repurchase.......      13,525    (55,615)    40,762
    Increase (decrease) in notes payable........................................     (13,284)    13,751     47,493
    Purchase and retirement of Class C preferred shares.........................      (1,139)      --         --
    Payment of preferred stock dividends........................................      (5,728)    (5,736)    (5,735)
                                                                                     -------    -------    ------- 
          Net cash provided by (used in) financing activities...................     (56,502)  (352,919)    73,060
                                                                                     -------   --------     ------
          Net increase in cash and cash equivalents.............................      28,741     67,917     39,078
Cash and cash equivalents, beginning of year....................................     199,213    131,296     92,218
                                                                                     -------    -------     ------
Cash and cash equivalents, end of year..........................................  $  227,954    199,213    131,296
                                                                                     =======    =======    =======

Noncash investing and financing activities:
    Loans transferred to foreclosed real estate.................................  $  10,451        5,395     5,030
    Loans to facilitate sale of foreclosed real estate..........................        --           587     1,724
    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      --
                                                                                    =======      =======     =====

</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


<PAGE>




(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 1995 and 1994 amounts have been reclassified to conform with
the classifications and format used for 1996.
     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  primarily through two wholly owned bank subsidiaries,
one wholly  owned  thrift  subsidiary,  one wholly  owned bank  holding  company
subsidiary  and two  majority-owned  bank holding  company  subsidiaries.  First
Banks' subsidiary financial institutions (Subsidiary Banks) are:

         First Bank,  headquartered  in St. Louis County,  Missouri  (First Bank
           Missouri);
         First Bank, headquartered in O'Fallon,  Illinois (First Bank Illinois);
         First Bank FSB, headquartered in St. Louis County, Missouri (First Bank
           FSB); 
         First Banks America, Inc.,  headquartered in Houston, Texas (FBA);
         CCB Bancorp, Inc.,  headquartered in Santa Ana, California (CCB); and
         First Commercial Bancorp, Inc., headquartered in Sacramento, California
           (FCB).

     CCB Bancorp, Inc., a wholly owned bank holding company subsidiary, operates
through First Bank & Trust,  headquartered in Santa Ana, California (FB&T). FBA,
a majority-owned  bank holding company  subsidiary,  operates through  BankTEXAS
N.A.,  headquartered  in Houston,  Texas (BTX) and Sunrise  Bank of  California,
headquartered  in Roseville,  California  (Sunrise Bank).  FCB, a majority-owned
bank  holding  company  subsidiary,  operates  through  First  Commercial  Bank,
headquartered in Sacramento,  California (First Commercial).  In addition to the
Subsidiary  Banks,  First  Banks  owns  FirstServ,  Inc.  Through  a  facilities
management agreement with First Services,  L.P.,  FirstServ,  Inc. provides data
processing services and operational support for First Banks.
      Cash and Cash Equivalents.  Cash, due from banks,  federal funds sold, and
interest-bearing  deposits with original  maturities of three months or less are
considered  to be cash and cash  equivalents  for  purposes of the  consolidated
statements of cash flows.  The Subsidiary Banks are required to maintain certain
daily reserve balances on hand in accordance with regulatory  requirements.  The
reserve balances maintained in accordance with such requirements at December 31,
1996 and 1995 were $41.4 million and $38.2 million, respectively.
      Investment  Securities.  The  classification  of investment  securities as
available  for sale or held to maturity is  determined  at the date of purchase.
First Banks does not engage in the trading of investment securities.  Investment
securities  designated as available for sale,  which include any security  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.
      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.
      As  more  fully  described  in  Note  3 to the  accompanying  consolidated
financial    statements,    First   Banks   reclassified   $174.1   million   of
held-to-maturity   investment   securities  to   available-for-sale   investment
securities on December 31, 1995.
      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.

<PAGE>

      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.
      First Banks adopted the  provisions  of Statement of Financial  Accounting
Standards (SFAS) 114,  Accounting by Creditors for Impairment of a Loan and SFAS
No. 118,  Accounting by Creditors for Impairment of a Loan - Income  Recognition
and  Disclosures,  which  amends  SFAS 114,  on  January 1,  1995.  The  initial
application  of SFAS 114 and SFAS 118 did not have a  material  effect  on First
Banks' financial  position and resulted in no additional  provision for possible
loan losses. First Banks has elected to continue to use its existing methods for
recognizing interest 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 purchased
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
50 years and equipment over two to seven 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.
     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
Missouri and First Bank FSB are 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.  Earnings  per common share data is  calculated
using the weighted average number of shares of common stock  outstanding  during
each  period.  The Class A, Class B, and Class C preferred  stock are not common
stock  equivalents.  The Class A  preferred  stock has been  reflected  in fully
diluted  earnings  per  share  because  of its  conversion  feature,  using  the
if-converted method.
     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.

<PAGE>

     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  include
interest rate swap,  floor and cap agreements;  interest rate futures  contracts
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 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 3, 1994,  First Banks completed its acquisition of First Federal
Savings Bank of Proviso Township,  Chicago, Illinois (First Federal) in exchange
for $23.1  million in cash.  First  Federal's  total  assets were $230  million,
consisting  primarily  of  residential  loans  of  $54  million  and  investment
securities  and federal funds sold of $165  million.  First  Federal,  which was
subsequently  merged  with First Bank FSB,  conducts  business  from one banking
location  centrally  located in the Hillside  community  of the greater  Chicago
metropolitan  area.  The  excess of the cost over the fair  value of net  assets
acquired was approximately $450,000 and is being amortized over 10 years.
     On March 31,  1994,  First  Banks  completed  its  acquisition  of Heritage
National  Bank, St. Louis,  Missouri  (Heritage) in exchange for $6.5 million in
cash. Heritage's total assets were $63.8 million,  consisting primarily of loans
of $32.2  million and  investment  securities  and  federal  funds sold of $27.2
million.  Heritage was merged into First Bank  Missouri.  The excess of the cost
over the fair value of the net assets  acquired was  approximately  $2.8 million
and is being amortized over 10 years.
     On  June  3,  1994,  First  Banks  completed  its  acquisition  of  Farmers
Bancshares,  Inc., Breese and Valmeyer,  Illinois (Farmers) in exchange for $8.1
million in cash. Farmers' total assets were $60.7 million,  consisting primarily
of loans of $27.1 million and  investment  securities  and federal funds sold of
$31.0 million.  Farmers was merged into First Bank  Illinois.  The excess of the
cost over the fair  value of the net  assets  acquired  was  approximately  $1.9
million and is being amortized over 10 years.
     On August 31, 1994,  First Banks completed its acquisition of approximately
65.05% of the voting  stock of FBA in exchange  for $30 million in cash.  At the
time  of  the  transaction,  FBA  operated  through  its  wholly  owned  banking
subsidiary,  BTX. Total assets were $367 million,  consisting primarily of loans
of $177 million and investment securities of $167 million. BTX conducts business

<PAGE>

primarily from six banking  locations in Dallas and Houston,  Texas. The outside
investors' interest in FBA is reflected as minority interest in the accompanying
consolidated financial statements. The excess of the cost over the fair value of
the net assets  acquired was  approximately  $4.0 million and is being amortized
over 10 years.
     On November 30, 1994,  First Banks acquired 96.3% of St. Charles Federal in
exchange for $19.3 million in cash. The purchase,  combined with the 3.7% of the
stock of St. Charles Federal previously acquired by First Banks, increased First
Banks'  ownership of St. Charles  Federal to 100%. St. Charles Federal had total
assets of  approximately  $90.0  million.  The  excess of the cost over the fair
value of the net assets  acquired  was  approximately  $3.9 million and is being
amortized over 12 years.
     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 FSB.  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.  HNB and Huntington  National Bank
were merged into CCB and FB&T, formerly Commercial Center Bank, respectively, on
August 18, 1995.
     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.  Irvine and Irvine
City Bank, f.s.b. were merged into CCB and FB&T, respectively, in August 1995.
     During 1995,  First Banks  completed its investment in QCB Bancorp (QCB), a
California  corporation  and sole  shareholder of Queen City Bank,  N.A.  (Queen
City), 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. QCB was merged into CCB in March 1996. Queen City was merged into FB&T in
April 1996.
     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
FCB and $6.5 million of convertible  debentures maturing in October and December
2000. The debentures bear interest at 12% annually.  Interest thereon is payable
in cash only if permitted by the appropriate  regulatory  authorities of FCB and
First  Commercial and their Boards of Directors.  The debentures and any accrued
but unpaid interest thereon must be converted at maturity,  but may be converted
at any time prior thereto at the option of First Banks, at $.10 per share.
     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 $5 million of newly issued
common stock at $.10 per share.  A maximum of $1.0 million of this  offering not
otherwise  subscribed to was offered to individuals who were not stockholders of
FCB. In  addition,  $969,000 of common stock was offered in exchange for certain
outstanding  dividend  obligations  and  accrued  interest  thereon of FCB.  FCB

<PAGE>

completed the offering during 1996 and issued approximately 36 million 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
61.46% at December 31,  1996,  prior to the  conversion  of the  debentures,  or
77.24% if the debentures had been converted as of December 31, 1996.
     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. La Cumbre operated
as a wholly  owned  thrift  subsidiary  of CCB until it was merged  into FB&T in
January 1996.
     The  aforementioned  acquisitions  were  accounted  for using the  purchase
method of accounting.  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.
     The following unaudited summary information  presents the pro forma results
of operations of First Banks  combined with the  acquisitions  completed  during
1995 as if First Banks had completed the  transactions  on January 1, 1994.  The
pro forma  results of operations  also include FBA,  which was acquired by First
Banks on August 31, 1994, for the periods prior to the acquisition date.
<TABLE>
<CAPTION>

                                                                                              December 31,
                                                                                              ------------
                                                                                          1995          1994
                                                                                          ----          ----
                                                                                   (dollars expressed in thousands,
                                                                                        except per share data)

<S>                                                                                     <C>            <C>    
         Net interest income......................................................      $127,602       136,221
         Provision for possible loan losses.......................................        24,770        16,141
         Net income (loss)........................................................         4,018        (4,599)
         Preferred stock dividends................................................         5,736         5,736
         Net loss available to common stockholders................................        (1,718)      (10,335)
                                                                                        --------       ------- 

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

         Net loss per common share:
             Primary .............................................................      $ (72.60)      (436.76)
             Fully diluted........................................................        (36.91)      (368.67)
                                                                                          ======       ======= 
</TABLE>

     The  unaudited  pro  forma  condensed  statements  of  income  reflect  the
application of the purchase method of accounting and certain other  assumptions.
The purchase accounting  adjustments reflect the assets acquired and liabilities
assumed at fair value.  Purchase  accounting  adjustments  have been  applied to
investment securities,  loans, bank premises and equipment,  deferred tax assets
and  liabilities  and excess cost  required to reflect the assets  acquired  and
liabilities  assumed at fair value.  The  resulting  premiums and  discounts are
amortized or accreted to income consistent with the accounting policies of First
Banks.  The  application  of the purchase  method of accounting  will not have a
material impact on the future operating results of First Banks.
     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 under
First Banks'  credit  agreement.  The  transaction  was  accounted for under 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
excess  of the fair  value  of the net  assets  acquired  over the cost was $3.2
million and is being amortized to expense over 15 years.
     Sunrise was merged into a wholly  owned  subsidiary  of FBA.  Sunrise  Bank
operates as a wholly owned indirect  subsidiary of FBA and conducts its business
through two banking  locations in Roseville and Citrus  Heights,  California and
one loan production office in San Francisco, California.


<PAGE>



(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, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>

                                                                                      Total
                                                          Maturity         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, 1996:
    Carrying value:
<S>                                     <C>           <C>        <C>       <C>      <C>           <C>       <C>    <C>       <C>
       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%
                                             ====       ====      ====       ==== 

 December 31, 1995:
    Carrying value:
       U.S. Treasury..................  $  20,080     23,823        --         --      43,903     134       (25)    44,012   5.54%
       U.S. government agencies and
         corporations:
          Mortgage-backed.............      2,863     56,178    29,268     48,897      237,206   1,436    (3,146)  235,496    6.32
          Other.......................     92,343     67,926        --         --      160,269     766      (738)  160,297    5.82
       Other..........................      2,383        804       100          9        3,296       7        --     3,303    5.11
       Equity investments in other
         financial institutions.......      5,256         --        --         --        5,256   5,254        --    10,510    3.97
       Federal Home Loan Bank and
         Federal Reserve Bank stock...     18,173         --        --         --       18,173      --        --    18,173    7.02
       Net deferred loss on interest
         rate futures contracts.......      2,059      2,517        --         --        4,576      --    (4,576)       --      --
                                          -------     ------    ------    -------      -------   -----    ------    ------   -----
                Total.................  $ 143,157    151,248    29,368    148,906      472,679   7,597    (8,485)  471,791    6.07
                                          =======    =======    ======    =======      =======   =====    ======   =======    ====
    Market value:
       Debt securities................    117,693    147,690    29,315    148,410
       Equity securities..............     28,683         --        --         --
                                          -------    -------    ------    -------
                Total.................  $ 146,376    147,690    29,315    148,410
                                          =======    =======    ======    =======

 Weighted average yield...............       5.88%      5.49%     6.45%      6.44%
                                             ====       ====      ====       ==== 

</TABLE>

<PAGE>


     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, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>

                                                                             Total
                                                     Maturity       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, 1996:
    Carrying value :
       State and political
<S>                                   <C>        <C>       <C>       <C>       <C>          <C>      <C>    <C>       <C>  
         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%
                                          ====    ====       ====     ==== 

 December 31, 1995:
    Carrying value:
       U.S. Treasury............      $  7,018      --         --       --       7,018        63      --     7,081     6.51%
       U.S. government agencies
         and corporations :
          Other.................         2,004   1,936         --        --      3,940        --     (16)    3,924      4.83
       State and political
         subdivisions...........         2,787   3,545     13,781    5,461      25,574       509     (67)   26,016      5.55
                                        ------   -----     ------    -----      ------       ---     ---    ------          
          Total.................      $ 11,809   5,481     13,781    5,461      36,532       572     (83)   37,021      5.93
                                        ======   =====     ======    =====      ======       ===     ===    ======      ====
    Market value :
       Debt securities..........      $ 11,906   5,572     14,035    5,508
                                        ======   =====     ======    =====

 Weighted average yield.........          6.01%   5.78%      5.18%    5.25%
                                          ====    ====       ====     ==== 
</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. The stated maturity of the net
deferred losses on interest rate futures contracts represents the period the net
deferred losses are expected to be amortized into interest income.
     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.  Gains and losses
were computed using the specific identification basis for each security sold.
     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.  Gains and losses  were  computed  using the  specific
identification basis for each security sold.
     During  1995,  proceeds  from the sales of debt  securities  classified  as
available for sale totaling $1.3 million were  previously  classified as held to
maturity.  Gross gains realized from the sales of these securities were $36,000.
These securities were transferred from held to maturity to available for sale in
accordance  with the  provisions of a special report issued by the FASB, A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities (Special Report).

<PAGE>

     The Special Report provided an enterprise the opportunity to reclassify any
of its investment  securities  through  December 31, 1995 without  bringing into
question the intent of an enterprise to hold other debt  securities to maturity.
Under the Special Report,  First Banks reclassified $174.1 million of securities
from held to maturity to  available  for sale,  of which $1.3 million were sold.
Accordingly,  at December 31, 1995, debt securities of $172.8 million previously
classified as held to maturity were classified as available for sale. The market
valuation  account,  for the  securities  reclassified  to  available  for  sale
remaining in the  portfolio at December 31, 1995,  was adjusted by $2.7 million,
representing a decrease in the recorded  balance of such  securities at December
31, 1995 to their fair value on that date;  the  deferred  tax asset of $950,000
was  recorded  to  reflect  the  tax  effect  of the  market  valuation  account
adjustment; and the net decrease resulting from the reclassification at December
31,  1995  of  $1.8  million  was  reflected  within  a  separate  component  of
stockholders' equity.
     Proceeds from the sales of debt securities classified as available for sale
during 1994 were $261.1 million. Gross gains of $1.7 million and gross losses of
$3.5 million were  realized on those  sales.  Proceeds  from the sales of equity
securities classified as available for sale during 1994 were $8.4 million. Gross
gains of $2.1 million and gross losses of $96,000 were realized on those sales.
     Proceeds from the sales of debt  securities  classified as held to maturity
during 1994 were $10.3 million.  Gross losses of $488,000 were realized on those
sales.  There were no gains realized on those sales.  These sales were allowable
under SFAS 115 as they related to investment  securities  acquired in connection
with the  acquisition  of First  Federal and the sale was  necessary in order to
maintain First Banks' existing interest rate risk position.
     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 FSB, First Bank Missouri, First Bank Illinois, FB&T and BTX 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 Missouri and BTX are members of the FRB system.
     Investment securities with a carrying value of approximately $212.1 million
and $230.2 million were pledged in connection  with deposits of public and trust
funds and for other  purposes as required by law at December  31, 1996 and 1995,
respectively.
<PAGE>

(4)  Loans
      Changes in the  allowance  for  possible  loan  losses for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>

                                                                       1996      1995       1994
                                                                       ----      ----       ----
                                                                   (dollars expressed in thousands)

<S>                             <C>                                <C>          <C>        <C>   
       Balance, January 1.....................................     $ 52,665     28,410     23,053
       Acquired allowances for possible loan losses...........        2,338     24,655      5,026
                                                                     ------     ------     ------
                                                                     55,003     53,065     28,079
                                                                     ------     ------     ------
       Loans charged-off......................................      (29,016)   (15,620)    (6,696)
       Recoveries of loans previously charged-off.............        9,300      4,859      5,169
                                                                    -------     ------     ------
       Net loans charged-off..................................      (19,716)   (10,761)    (1,527)
       Provision charged to operations........................       11,494     10,361      1,858
                                                                     ------     ------     ------
       Balance, December 31...................................     $ 46,781     52,665     28,410
                                                                     ======     ======     ======
</TABLE>

     At  December  31, 1996 and 1995,  First  Banks had $30.3  million and $39.4
million,  respectively,  of loans on a nonaccrual status. Interest on nonaccrual
loans, which would have been recorded under the original terms of the loans, was
$4.2 million for the years ended December 31, 1996 and 1995 and  $1.7million for
the period December 31, 1994. Of these amounts,  $2.7 million,  $1.9 million and
$982,000  were  actually  recorded  as  interest  income on such  loans in 1996,
1995and  1994,  respectively.  At December  31,  1996 and 1995,  First Banks had
impaired loans in the amount of $30.3 million and $39.4  million,  respectively,
consisting of loans on  nonaccrual  status.  The impaired  loans had no specific
reserves at December  31, 1996 and 1995.  The  average  recorded  investment  in
impaired  loans was $36.2 million and $34.3 million for the years ended December
31, 1996 and 1995, respectively.  The amount of interest income recognized using
a cash basis method of accounting  during the time these loans were impaired was
$2.7 million and $1.9 million in 1996 and 1995, respectively.
     First Banks' primary market areas are the states of Missouri,  Illinois and
California.  At  December  31,  1996 and  1995,  88% and 93% of the  total  loan
portfolio and 92% and 96% 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  67% and 73% of the
consolidated  loan  portfolio  at December 31, 1996 and 1995,  respectively,  of
which 51% and 58% 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, 1996 and
1995,  97%  of the  loan  portfolio  was  secured.  Collateral  is  required  in
accordance   with  the  normal   credit   evaluation   process  based  upon  the
creditworthiness  of the  customer  and the  credit  risk  associated  with  the
particular transaction.
<PAGE>

(5)  Mortgage Banking Activities
      At December  31,  1996 and 1995,  First  Banks  serviced  loans for others
amounting  to $847 million and $857  million,  respectively.  Borrowers'  escrow
balances held by First Banks on such loans were $4.2 million and $4.5 million at
December 31, 1996 and 1995, respectively.
     Changes in the mortgage  servicing  rights for the years ended  December 31
were as follows:
<TABLE>
<CAPTION>

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

<S>                  <C>                                        <C>            <C>  
    Balance, January 1...................................       $ 12,122       5,755
    Acquired purchased  mortgage servicing rights........            --       10,601
    Purchases of mortgage servicing rights...............             65         685
    Sales of mortgage servicing rights ..................            --       (2,771)
    Amortization.........................................         (1,957)     (2,148)
                                                                  ------      ------ 
    Balance, December 31.................................       $ 10,230      12,122

                                                                  ======      ======

</TABLE>
(6)  Bank Premises and Equipment
      Bank  premises and equipment  were  comprised of the following at December
31:
<TABLE>
<CAPTION>

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

<S>                                                                        <C>           <C>   
         Land........................................................      $ 13,431      12,393
         Buildings and improvements..................................        39,256      40,405
         Furniture, fixtures and equipment...........................        36,329      37,211
         Leasehold improvements......................................         6,916       6,582
         Construction in progress....................................         2,149         985
                                                                             ------      ------
                                                                             98,081      97,576
         Less accumulated depreciation and amortization..............        50,003      47,298
                                                                             ------      ------
                          Bank premises and equipment, net...........      $ 48,078      50,278
                                                                             ======      ======
</TABLE>

     Total rent expense was $4.2 million,  $3.2 million and $1.1 million for the
years ended December 31, 1996, 1995 and 1994, respectively.

(7)  Federal Home Loan Bank Advances
<TABLE>
<CAPTION>
     Advances from the FHLB of Des Moines,  Dallas and San Francisco at December
31 are summarized as follows:
                                                                                            1996        1995
                                                                                            ----        ----
                                                                                   (dollars expressed in thousands)
                                                            
       Advances under a $25 million revolving variable rate line of                    
<S>                                                                                     <C>              
             credit maturing July 1997..........................................        $ 23,532       --
       Adjustable-rate advances, maturing from December 1996 through
             December 1997......................................................          10,000      44,220
       Fixed-rate advances, maturing May 1998 ..................................           5,745       5,663
                                                                                          ------      ------
                          Total.................................................        $ 39,277      49,883
                                                                                          ======      ======
</TABLE>
<PAGE>

     All stock in the FHLB and first  mortgage  loans  with  principal  balances
aggregating 150% of outstanding and available advances are pledged as collateral
to secure outstanding  advances.  In addition,  investment  securities have been
pledged to collateralize  $5.7 million and $5.7 million of advances which had an
aggregate market value of $7.6 million and $8.1 million at December 31, 1996 and
1995,  respectively.  The average rates paid on advances  outstanding during the
years  ended  December  31,  1996,  1995  and 1994  were  6.2%,  6.3% and  5.6%,
respectively.

(8)  Notes Payable
      Notes payable include a Revolving Line and Term Credit  Agreement  (Credit
Agreement), promissory notes payable to former shareholders of acquired entities
and convertible subordinated debentures.
     First Banks' Credit Agreement,  dated July 18, 1996, replaced the revolving
credit agreement  outstanding dated July 14, 1995. 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
London Interbank  Offered Rate plus 1.50% and 1.25%,  respectively,  and is paid
monthly.  Loans may be made under the revolving loan  commitment  until July 11,
1997 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
July 12, 2000, 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. Borrowings outstanding under
the Credit  Agreement  were $75.0 million and $66.3 million at December 31, 1996
and 1995, respectively.  See Note 21 to the accompanying  consolidated financial
statements regarding the subsequent repayments of balances outstanding under the
Credit Agreement.

<PAGE>

     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, 1996 and 1995,  First
Banks and the  Subsidiary  Banks were in compliance  with all  restrictions  and
requirements in the Credit Agreement.
     The promissory notes and convertible  subordinated  debentures totaled $1.3
million and $21.8 million at December 31, 1996 and 1995, respectively.  Interest
under the  promissory  notes  are  payable  under  similar  terms as the  Credit
Agreement. The convertible subordinated debentures were repaid in May 1996.
     The  average  balance and maximum  month-end  balance of the notes  payable
outstanding for the years ended December 31 were as follows:
                                            1996         1995
                                            ----         ----
                                    (dollars expressed in thousands)

         Average balance               $   76,739       80,647
         Maximum month-end balance         86,899       89,811
                                           ======       ======

     The average rates paid on notes payable  outstanding during the years ended
December 31, 1996, 1995 and 1994 were 7.15%, 7.22% and 7.17%, respectively.

(9)  Income Taxes
     Income  tax  expense  (benefit)  attributable  to  income  from  continuing
operations for the years ended December 31 consists of :
<TABLE>
<CAPTION>
                                                                                 Years ended December 31,
                                                                                 ------------------------
                                                                                 1996       1995     1994
                                                                                 ----       ----     ----
                                                                             (dollars expressed in thousands)
         Current income taxes:
<S>                                                                          <C>           <C>      <C>   
             Federal.....................................................    $  6,106      2,638    11,978
             State.......................................................       1,068        870       906                         
                                                                                -----      -----    ------ 
                                                                                7,174      3,508    12,884
                                                                                -----      -----    ------
Deferred income tax expense (benefit):
             Federal.....................................................       1,837      8,584      (872)
             State.......................................................       3,192        (94)      --
                                                                                -----        ---         
                                                                                5,029      8,490      (872)
                                                                                -----      -----    ------ 
         Reduction in valuation allowance................................      (5,243)      (960)     --
                                                                               ------     ------    ------
                     Total...............................................    $  6,960     11,038    12,012
                                                                               ======     ======    ======

</TABLE>

<PAGE>



     The federal income tax rates and amounts are reconciled  with the effective
income tax rates and amounts as follows: 

 <TABLE>
<CAPTION>
                                                                             Years ended December 31, 
                                                                               ------------------------ 
                                                                  1996                  1995                1994
                                                                  ----                  ----                ----
                                                                        % 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)
<S>                                                         <C>                <C>                      <C>    
           loss  of  subsidiaries..................         $27,837            $34,156                  $35,807
                                                            =======            =======                  =======

         Taxes on income calculated at statutory rates        9,743      35.0%  11,955       35.0%       12,532     35.0%
         Effects of differences in tax reporting:
            Tax-exempt interest income.............            (730)     (2.6)    (817)      (2.4)         (795)    (2.2)
            Tax preference adjustment of
               interest income.....................              82        .3       99         .3            78       .2
            Amortization of excess cost............             729       2.6      645        1.8           152       .4
            State income taxes.....................             715       2.6      504        1.5           589      1.6
            Change in deferred valuation allowance.          (5,243)    (18.8)    (960)      (2.8)           --       --
            Other, net.............................           1,664       5.9     (388)      (1.1)         (544)    (1.5)
                                                              -----      ----     ----       ----          ----     ---- 
                    Provision for income taxes.....         $ 6,960      25.0% $11,038       32.3%      $12,012     33.5%
                                                              =====      ====  =======       ====       =======     ==== 
</TABLE>

     The tax  effects of  temporary  differences  that give rise to  significant
portions of the deferred tax assets and  deferred  tax  liabilities  for periods
after the adoption of SFAS 109 are below.  The net  deferred tax assets  reflect
amounts attributable to entities acquired in purchase transactions.
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                              1996        1995
                                                                                     (dollars expressed in thousands)
         Deferred tax assets:
<S>                                                                                       <C>           <C>   
            Allowance for possible loan losses....................................        $  19,421     21,642
            Other real estate.....................................................            2,179      2,736
            Alternative minimum tax credits.......................................            2,102      1,754
            Book losses on investment securities currently not allowable
               for tax purposes...................................................            1,134        --
            Net fair value adjustment for securities available for sale...........              --         329
            Net operating loss carryforwards......................................           33,821     36,145
            Other.................................................................            4,276      3,081
                                                                                            -------    -------
                          Total gross deferred tax assets.........................           62,933     65,687
            Less valuation allowance..............................................          (19,527)   (24,111)
                                                                                            -------    ------- 
                          Gross deferred tax assets, net of valuation allowance...           43,406     41,576
                                                                                            -------    -------
         Deferred tax liabilities:
            Depreciation on bank premises and equipment...........................            2,231      2,467
            FHLB stock dividends..................................................            1,063        997
            State taxes...........................................................              354      1,660
            Net fair value adjustment for securities available for sale...........            2,207        --
            Book losses on investment securities currently not
               allowable for tax purposes.........................................              --         266
            Other.................................................................              339      1,393
                          Total gross deferred tax liabilities....................            6,194      6,517
                          Net deferred tax assets.................................        $  37,212     35,059
                                                                                             ======     ======
</TABLE>

     At December  31, 1996 and 1995,  First Banks has separate  limitation  year
(SRLY) net  operating  loss (NOL)  carryforwards  of $60.1  million.  These SRLY
carryforwards  were acquired with the  acquisitions  occurring from 1992 through
1995 and their  utilization is subject to annual  limitations.  Also acquired in
the  acquisitions  are  alternative  minimum tax credits of $1.8 million.  These
credits are also subject to annual limitations.

<PAGE>

     At December 31, 1996 and 1995,  for federal  income taxes  purposes,  First
Banks had NOL  carryforwards of  approximately  $60.1 million and $70.6 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:
      2001..............................................       $    315
      2002..............................................          5,582
      2003..............................................          7,470
      2004..............................................          7,619
      2005 - 2009.......................................         39,117
                                                                 ------
                                                               $ 60,103
                                                                 ====== 

     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, 1996 and 1995,  for federal  income tax purposes,  FBA had
NOL   carryforwards   of   approximately   $35.4  million  and  $32.7   million,
respectively. The NOL carryforwards at December 31, 1996 expire as follows:

                                                    (dollars expressed
                                                       in thousands)
     Year ending December 31:
         1998......................................    $  4,140
         1999......................................       2,641
         2000......................................         103
         2001 - 2010...............................      28,527
                                                         ------
                                                       $ 35,411
                                                         ======

     The remaining net deferred tax assets of FBA were  reevaluated to determine
whether  it is more  likely  than not  that  the  deferred  tax  assets  will be
recognized  in the  future.  Taking all  positive  and  negative  criteria  into
consideration,  it was determined that the valuation  allowance  established for
FBA should remain at $2.7 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,  1996,  for  federal  income  tax  purposes,  FCB had NOL
carryforwards of approximately  $1.1 million.  The NOL  carryforwards  expire as
follows:
                                              (dollars expressed in thousands)
            Year ending December 31:
                2008......................................  $   363
                2009......................................      747
                                                              -----
                                                            $ 1,110
                                                              =====

     The  realization  of First  Banks' net  deferred tax assets is based on the
availability of carrybacks to prior taxable periods,  the anticipation of future
taxable  income  in  certain   periods  and  the  utilization  of  tax  planning
strategies.  Management has determined  that it is more likely than not that the
net  deferred  tax  assets  relating  to  entities  owned  prior  to 1995 can be
supported by  carrybacks to federal  taxable  income in the  three-year  federal
carryback period and by expected future taxable income which will exceed amounts
necessary to fully  realize  remaining  deferred tax assets  resulting  from NOL
carryforwards and the scheduling of temporary differences.  However, it has been
determined that the net deferred tax assets of certain entities acquired in 1995
and 1996 should not be fully valued  until they can provide an earnings  history
sufficient  to support  their  respective  net deferred  tax asset.  A valuation
reserve  was  determined  using the same  criteria  as used for other First Bank
entities.  This  valuation  reserve  is shown as an  addition  to the  valuation
allowance in the following schedule.


<PAGE>

<TABLE>
<CAPTION>

     Changes to the deferred tax assets valuation allowance are as follows:
                                                                                   Years ended December 31,
                                                                                   ------------------------
                                                                                       1996        1995
                                                                                       ----        ----
                                                                               (dollars expressed in thousands)

<S>                                                                                  <C>           <C>  
       Balance, beginning of year............................................        $ 24,111      2,731
       Current year deferred provision, change in deferred 
          tax valuation allowance............................................          (5,243)      (960)
       Purchase acquisitions.................................................             659     22,340
                                                                                       ------     ------
       Balance, end of year..................................................        $ 19,527     24,111
                                                                                       ======     ======
</TABLE>

     The  valuation  allowance  for deferred tax assets at December 31, 1996 and
1995,  includes  $5.9  million  and  $2.7  million,  respectively,   which  when
recognized,  will be credited to  intangibles  associated  with the  purchase of
subsidiaries.  This  accounting  treatment  is  required  under the terms of the
quasi-reorganizations  implemented  for FBA and FCB as of December  31, 1994 and
1996, respectively.

(10)  Interest Rate Risk Management and Derivative  Financial  Instruments With 
      Off-Balance Sheet  Risk
      During 1994, First Banks expanded its use of  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,
                                                                             ------------
                                                                   1996                      1995
                                                                   ----                      ----
                                                         Notional       Credit       Notional     Credit
                                                          amount       exposure       amount     exposure
                                                          ------       --------       ------     --------
                                                                        (dollars expressed in thousands)
<S>                                                      <C>              <C>      <C>              
         Interest rate swap agreements.................  $ 70,000         --       145,000           --
         Interest rate floor agreements ...............   105,000        141       105,000          608
         Interest rate cap agreements .................    10,000        335        30,000          292
         Forward commitments to sell
              mortgage-backed securities ..............    35,000        308        42,000           --
</TABLE>

     The notional amounts of derivative  financial  instruments do not represent
amounts  exchanged  by the parties  and,  therefore,  are not a measure of First
Banks' credit exposure through its use of 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,
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 the sales of investment  securities  during the year
ended December 31, 1996.
     Interest  rate  swap  agreements  are  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
$7.4 million,  $6.6 million and $490,000 for the years ended  December 31, 1996,
1995 and 1994,  respectively.  The maturity dates,  notional  amounts,  interest

<PAGE>

rates  paid and  received,  and fair  values of  interest  rate swap  agreements
outstanding as of the dates indicated are summarized as follows:
<TABLE>
<CAPTION>
                                                                                       Fair value
                                              Notional   Interest rate Interest rate      gain
                                               amount        paid        received        (loss)
                                               ------        ----        --------        ------
                                                        (dollars expressed in thousands)
         December 31, 1996:
<S>                                          <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)
                                               ======        ====           ====          ====== 
         December 31, 1995:
             September 30, 1997              $ 35,000        7.04%        5.69%$            (932)
             December 8, 1997                  15,000        7.90           5.81            (711)
             September 30, 1999                35,000        7.32           5.69          (2,073)
             September 30, 2001                35,000        7.65           5.69          (3,207)
             January 30, 2005                  25,000        8.13           5.94          (3,703)
                                              -------        ----           ----         ------- 
                                            $ 145,000        7.53           5.74        $(10,626)
                                              =======        ====           ====         ======= 
</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 and  November  1996,  First  Banks
shortened  the  maturity  of  its   interest-bearing   liabilities  through  the
termination  of $225  million and $75 million of interest  rate swap  agreements
resulting  in losses of $13.5  million  and $5.3  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 $13.4 million and $11.6 million at December 31, 1996
and 1995, respectively, and are 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, 1996 and 1995, the unamortized  costs for these  agreements were
$433,000 and $685,000,  respectively,  and were included in other assets.  There
are no amounts receivable under these agreements.
      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
$36.7  million and $42.4  million at December  31, 1996 and 1995,  respectively.
These net loan  commitments  and loans  held for sale are  hedged  with  forward
contracts to sell  mortgage-backed  securities of $35 million and $42 million at
December  31,  1996 and  1995,  respectively.  Gains  and  losses  from  forward
contracts are deferred and included in the cost basis of loans held for sale. At
December  31,  1996 and 1995,  the net  unamortized  losses  were  $452,000  and
$737,000,  respectively,  which were applied to the carrying  value of the loans
held for sale as part of the lower of cost or market valuation.

(11)  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.
     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  10  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 that
the amounts are fully advanced and that, in accordance with the  requirements of
SFAS 105, collateral or other security is of no value. First Banks uses the same

<PAGE>

credit policies in granting  commitments and conditional  obligations as it does
for on-balance-sheet loans.
<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                           ------------
                                                                                       1996         1995
                                                                                       ----         ----
                                                                               (dollars expressed in thousands)

<S>                                                                               <C>              <C>    
         Commitments to extend credit........................................     $   716,967      578,750
         Commercial and standby letters of credit............................          25,256       29,468
                                                                                      -------      -------
                                                                                  $   742,223      608,218
                                                                                      =======      =======
</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
by First Banks 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 holds real property as collateral  supporting those  commitments for
which collateral is deemed necessary.

 (12)  Fair Values 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.
     The estimated fair value of First Banks' financial  instruments at December
31 were as follows:
<TABLE>
<CAPTION>

                                                                      1996                        1995
                                                                      ----                        ----
                                                            Carrying     Estimated      Carrying       Estimated
                                                              value     fair value        value       fair value
                                                              -----     ----------        -----       ----------
        Financial assets:
<S>                                                       <C>            <C>             <C>            <C>    
           Cash and cash equivalents..................    $ 227,954      227,954         199,213        199,213
           Investment securities:
               Available for sale.....................      532,605      532,605         471,791        471,791
               Held to maturity.......................       20,196       20,611          36,532         37,021
           Net loans..................................    2,721,188    2,744,737       2,691,554      2,749,133
           Accrued interest receivable................       23,250       23,250          22,027         22,027
                                                          =========    =========       =========      =========
        Financial liabilities:
           Deposits:
               Demand:
                  Non-interest-bearing................    $ 418,193      418,193         389,658        389,658
                  Interest-bearing....................      337,618      337,618         307,584        307,584
                  Savings and money market............      671,286      671,286         690,902        690,902
               Time deposits..........................    1,811,470    1,815,779       1,795,547      1,804,347
           Borrowings.................................      146,312      146,312         159,676        159,676
           Accrued interest payable...................       10,288       10,288          10,726         10,726
                                                          =========    =========       =========      =========
        Off-balance-sheet:
           Interest rate swap, cap and floor 
               agreements.............................    $  14,702       (1,101)         14,509         (9,726)
           Forward contracts to sell mortgage-
               backed securities......................          308          308            (234)          (234)
           Credit commitments.........................           --           --              --             --
                                                           ========    =========       =========      =========
</TABLE>


<PAGE>

     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 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  investment 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 on 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.
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.

(13)  Employee Benefits
     First Banks' new  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 1996. Total employer contributions under
the plan were $576,000,  $448,000 and $477,000, for the years ended December 31,
1996, 1995 and 1994, respectively.
     Postretirement benefits other than pensions and postemployment benefits are
generally not provided for First Banks' employees.
<PAGE>

(14)  Preferred Stock
      First Banks has three classes of preferred stock outstanding.
      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  are 9%  through
November 30, 1997. On December 1, 1997,  the annual  dividend rate  increases to
9.75%.
     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.  Class C preferred  stock may
not be  converted,  but may be redeemed at stated value after  December 1, 1997.
Redemption of any issue of preferred  stock  requires the prior  approval of the
Federal Reserve Board.

     The annual dividend rates were as follows:
                                                 1996    1995     1994
                                                 ----    ----     ----

            Class C preferred stock               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

(15)  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 1996, 1995 and 1994, Tidal Insurance Limited (Tidal),  a corporation
owned   indirectly  by  First  Banks'   Chairman  and  his  children,   received
approximately  $326,000,  $192,000  and  $233,000,  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, 1996, 1995
and 1994, First Securities America, Inc., doing business as First Banc Insurors,
received  approximately  $285,000,  $196,000  and  $195,000,   respectively,  in
commissions  or insurance  premiums for mortgage,  forced hazard and  collateral
protection   insurance  paid  by  customers  of  the  Subsidiary  Banks  to  the
unaffiliated,  third-party  insurors  to which First Banc  Insurors  placed such
policies.  In addition,  First Banc Insurors  received  approximately  $958,000,
$999,000  and $635,000  for the years ended  December  31, 1996,  1995 and 1994,
respectively,  in  commissions  in connection  with the purchase  and/or sale of
annuities  and  securities  by  certain   customers  of  the  Subsidiary  Banks.
Commissions  received by First Banc  Insurors 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.  is  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  through a  facilities  management  agreement  with
FirstServ,  Inc., a wholly owned subsidiary of First Banks.  Fees paid under the
agreement  to First  Services  L.P.  were $3.2  million,  $2.9  million and $2.5
million for the years ended December 31, 1996, 1995 and 1994, respectively.
<PAGE>

(16)  Capital Stock of Subsidiaries
First Banks America, Inc.
      First  Banks  owns  all of the  Class B common  stock of FBA  representing
68.82% and 65.41% of all classes of  outstanding  voting  stock at December  31,
1996 and 1995,  respectively.  FBA common stock, which is publicly traded on the
New York Stock Exchange, is the only other class of voting stock.
     In connection with a previous corporate restructuring,  FBA issued warrants
to the FDIC for the purchase of 131,336  shares of Class A common at an exercise
price of $.75 per  share.  On October 1, 1996,  FBA  purchased  the  outstanding
warrants  from the FDIC for an  aggregate  amount  of $1.28  million  which  was
applied as a reduction to FBA's stockholders' equity. First Banks' proportionate
share of  $862,000  was  applied  against  capital  surplus  for the year  ended
December 31, 1996.
<PAGE>

First Commercial Bancorp, Inc.
     First Banks owns 61.46% and 93.29% of all  outstanding  voting stock of FCB
at December 31, 1996 and 1995,  respectively.  FCB common stock is traded on the
NASDAQ Small Cap Market System.
     First Banks owns $6.5 million of debentures (FCB Debentures) secured by all
of the outstanding stock of First  Commercial.  The FCB Debentures bear interest
at 12% per year and  mature  five  years  after  issuance.  The FCB  Debentures,
including any accrued but unpaid interest thereon, will be converted at maturity
into FCB common  stock at $12.50 per share.  However,  at the  election of First
Banks,  the FCB  Debentures  may be converted  into FCB common stock at the same
rate at any time after issuance.
     As  more  fully  described  in  Note  2 to  the  accompanying  consolidated
financial statements,  during 1996, FCB offered to its stockholders,  other than
First  Banks,  rights to acquire an  aggregate  of $6.0  million of newly issued
common stock at $12.50 per share.  Upon  completion of the offering,  FCB issued
approximately  288,720 shares of FCB common stock which resulted in First Banks'
ownership being reduced to 61.46% at December 31, 1996,  prior to the conversion
of the FCB Debentures,  or 77.24% if the FCB Debentures had been converted as of
December 31, 1996.

(17)   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 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 regulations 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.  As of August 31, 1995, the date of the most recent  notification from
First  Banks'  primary   regulator,   the  subsidiary  banks  and  thrifts  were
categorized  as well  capitalized  under  the  regulatory  framework  for  promt
corrective   action,   except  for  BTX  which  was  categorized  as  adequately
capitalized.  There have been no  conditions  or events since that  notification
that  management  believes  have  changed  theses  subsidiary  banks' and thrift
category,  except for BTX which  management  believes  is now well  capitalized.
Management believes, as of December 31, 1996, the subsidiary banks' and thrifts'
are well capitalized as defined by the FDIC Act.

<PAGE>

     At  December  31, 1996 and 1995,  First  Banks' and the  Subsidiary  Banks'
capital ratios were as follows:
<TABLE>
<CAPTION>

                                                               Risk-based capital ratios
                                                               -------------------------
                                                              Total                Tier 1           Leverage ratio
                                                              -----                ------           --------------
                                                         1996       1995      1996      1995        1996     1995
                                                         ----       ----      ----      ----        ----     ----

<S>                                                      <C>         <C>        <C>      <C>        <C>      <C>  
     First Banks....................................     9.23%       9.34%     7.92%     7.77%      5.99%    5.32%
     First Bank Missouri............................    10.47       10.03      9.21      8.78       7.25     7.01
     First Bank Illinois............................    11.06       12.91      9.88     11.66       7.17     7.22
     First Bank FSB.................................    11.00       11.90      9.75     10.80       6.45     6.74
     CCB ...........................................    16.67       15.25     15.40     13.96      11.64     9.58
     FBA............................................     7.64       11.69      6.38     10.43       5.31     8.38
     FCB............................................     6.95        4.99      5.66      3.68       4.25     2.14
     St. Charles Federal (1)........................      --        18.95        --     18.46         --     8.73
</TABLE>
-------------------------------
     (1)  St. Charles merged with First Bank FSB in December 1996

(18)  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
8, in the amount of dividends  which are  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   $45.6  million,   unless  prior  permission  of  the  regulatory
authorities or the lending banks is obtained.

<PAGE>
(19)  Parent Company Only Financial Information
      Following are  condensed  balance  sheets of First Banks  (parent  company
only) as of December 31, 1996 and 1995,  and condensed  statements of income and
cash flows for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
                            CONDENSED BALANCE SHEETS
                                                                                               December 31,
                                                                                               ------------
                                       Assets                                                1996        1995
                                       ------                                                ----        ----
                                                                                     (dollars expressed in thousands)

<S>                                                                                      <C>              <C>  
Cash deposited in subsidiary banks....................................................   $    3,887       1,331
Investment in subsidiaries, at equity.................................................      290,305     289,211
Investment securities.................................................................       18,564      17,544
Other assets..........................................................................       19,933      19,943
                                                                                            -------     -------
           Total assets...............................................................   $  332,689     328,029
                                                                                            =======     =======

                        Liabilities and Stockholders' Equity

Notes payable.........................................................................       76,330      88,135
Accrued expenses and other liabilities................................................        4,970       5,289
                                                                                            -------     -------
           Total liabilities..........................................................       81,300      93,424
Stockholders' equity..................................................................      251,389     234,605
                                                                                            -------     -------
           Total liabilities and stockholders' equity.................................    $ 332,689     328,029
                                                                                            =======     =======

</TABLE>

<TABLE>
<CAPTION>
                         CONDENSED STATEMENTS OF INCOME
                         ------------------------------

                                                                                    Years ended December 31,
                                                                                    ------------------------
                                                                                  1996        1995        1994
                                                                                  ----        ----        ----
                                                                               (dollars expressed in thousands)
Income:
<S>                                                                           <C>            <C>         <C>   
    Dividends from subsidiaries...........................................    $  20,714      57,901      42,500
    Management fees from subsidiaries.....................................        7,393       5,108       4,304
    Other income..........................................................        1,684       2,015       2,410
                                                                                 ------      ------      ------
       Total income.......................................................       29,791      65,024      49,214
                                                                                 ------      ------      ------
Expenses:
    Interest expense......................................................        5,461       5,861       1,034
    Salaries and employee benefits........................................        5,538       4,597       4,723
    Legal and professional fees...........................................        1,978       2,426       1,892
    Other expenses........................................................        3,415       3,035       2,391
                                                                                 ------      ------     - -----
       Total expenses.....................................................       16,392      15,919      10,040
                                                                                 ------      ------      ------
       Income before income tax benefit and equity in undistributed
         earnings (loss) of subsidiaries..................................       13,399      49,105      39,174
Income tax benefit........................................................       (1,880)     (2,007)     (1,162)
                                                                                 ------      ------      ------ 
       Income before equity in undistributed earnings (loss)
         of subsidiaries..................................................       15,279      51,112      40,336
Equity in undistributed earnings (loss) of subsidiaries, net 
         of dividends paid................................................        4,939     (26,641)    (16,304)
                                                                                 ------     -------     ------- 
       Net income.........................................................    $  20,218      24,471      24,032
                                                                                 ======      ======      ======

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                       CONDENSED STATEMENTS OF CASH FLOWS
                       ----------------------------------

                                                                                   Years ended December 31,
                                                                                   ------------------------
                                                                              1996          1995           1994
                                                                              ----          ----           ----
                                                                               (dollars expressed in thousands)

Cash flows from operating activities:
<S>                                                                       <C>              <C>            <C>   
    Net income.........................................................   $  20,218        24,471         24,032
    Adjustments to reconcile net income to net cash provided by
       operating activities:
         Net income of subsidiaries....................................     (25,610)      (30,973)       (24,931)
         Dividends from subsidiaries...................................      20,714        57,901         42,500
         Other, net....................................................        (998)           58           (511)
                                                                             ------        ------         ------ 
           Net cash provided by operating activities...................      14,324        51,457         41,090
                                                                             ------        ------         ------
Cash flows from investing activities:
    (Increase) decrease in investment securities.......................         --          2,420         (2,017)
    Acquisitions of subsidiaries.......................................         --        (49,996)       (72,624)
    Capital contributions to subsidiaries..............................        (200)      (44,329)       (14,656)
    Return of subsidiary capital.......................................       7,786        12,149           --
    Decrease in advances to subsidiaries...............................        (950)      (13,529)          --
    Other, net.........................................................         268        (1,011)          (125)
                                                                             ------       -------        ------- 
           Net cash provided by (used in) investing activities.........       6,904       (94,296)       (89,422)
                                                                             ------       -------        ------- 
Cash flows from financing activities:
    Increase (decrease) in notes payable...............................     (11,805)       41,932         46,203
    Payment of preferred stock dividends...............................      (5,728)       (5,736)        (5,735)
    Purchase and retirement of Class C preferred shares................      (1,139)         --               --
                                                                             ------       -------        -------
           Net cash provided by (used in) financing activities.........     (18,672)       36,196         40,468
                                                                            -------        ------         ------
           Net increase (decrease) in cash and cash equivalents........       2,556        (6,643)        (7,864)
Cash and cash equivalents, beginning of year...........................       1,331         7,974         15,838
                                                                            -------        ------         ------
Cash and cash equivalents, end of year.................................   $   3,887         1,331          7,974
                                                                            =======        ======         ======
</TABLE>

(20)  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 that the ultimate resolution of these proceedings will have no
material effect on the consolidated  financial position or results of operations
of First Banks.

(21)  Subsequent Event
         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 at $25 per share
in  an  underwritten  public  offering  and  issued  106,702  shares  of  Common
Securities to First Banks at $25 per share.  The gross  proceeds of the offering
were  used by First  Capital  to  purchase  a  $88,917,550,  9.25%  Subordinated
Debenture  from First Banks.  First  Banks'  proceeds  from  the issuance of the
Subordinated  Debentures to First Capital, net of underwriting fees and offering
expenses,  were $83.1 million.  First Banks will record distributions payable on
the Preferred Securities as an expense in the consolidated  statements of income
for financial reporting.
         The  proceeds  from  the  offering  were  used  for  general  corporate
purposes, including to reduce the borrowings under the Credit Agreement to $10.0
million and to provide funds toward the  repurchase of Class C preferred  stock.
The  portion  of the  proceeds  not used to reduce  borrowings  under the Credit
Agreement or repurchase Class C preferred stock has  been  temporarily  invested
pending its use for the purposes described above.




<PAGE>



                                         
                          Independent Auditors' Report


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, 1996 and 1995,  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,
1996. 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,  1996 and 1995,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.





                                                  /s/KPMG Peat Marwick LLP
                                                  ------------------------
St. Louis, Missouri
March 7, 1997


<PAGE>



                               Board of Directors


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

     Allen H. Blake       Executive Vice President and Chief Financial Officer,
                           First Banks, Inc.

     George Markos        President,  Profit  Management  Systems,  Richardson,
                           Texas

     Donald Gunn          Attorney-At-Law, Gunn and Gunn, Creve Coeur, Missouri


                              Investor Information

                             Stock Quotation Symbol
                         NASDAQ National Market System:
                                      FBNKP

                             Class C Preferred Stock
                                Stock Information


                                   Market price(1)       Dividend
       1996                     High            Low      declared

       First Quarter       $   27-3/4         25-1/2     $    .5625
       Second Quarter          26-1/2         25-1/5          .5625
       Third Quarter           26             24-3/4          .5625
       Fourth Quarter          26             25              .5625
                               ======         ======         ------  
                                                         $   2.2500
                                                             ======
       1995

       First Quarter       $   26             24-1/2     $    .5625
       Second Quarter          26             24-3/4          .5625
       Third Quarter           26-1/4         25-1/4          .5625
       Fourth Quarter          26-1/2         25-1/4          .5625
                               ======         ======         ------
                                                         $   2.2500
                                                             ======
-----------------------
       (1) Per NASDAQ National Market System

     Dividends are scheduled to be paid the first 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                  Boatmen's Trust Company
           Chief Financial Officer                   510 Locust Street
       First Banks, Inc.                             St. Louis, Missouri 63101
       11901 Olive Boulevard                         (314) 466-1357
       Creve Coeur, Missouri  63141
       (314) 995-8700