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

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

                   For the fiscal year ended December 31, 1999

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

                           Commission File No. 0-20632


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

          MISSOURI                                     43-1175538
(State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

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

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

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

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

                                                 Name of each exchange
         Title of each class                      on which registered
         -------------------                      -------------------

                None                                       N/A

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

                   9.25% Cumulative Trust Preferred Securities
             (issued by First Preferred Capital Trust and guaranteed
                       by its parent, First Banks, Inc.)
                                (Title 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  and Chief  Executive  Officer,  and members of his immediate
family.

         At March 20, 2000, 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 year  ended
December 31, 1999 are  incorporated by reference into Parts I, II and IV of this
report.


<PAGE>


                                     PART I


         The following portions of the 1999 Annual Report to Stockholders ("1999
Annual  Report") of First  Banks,  Inc.  ("First  Banks" or the  "Company")  are
incorporated by reference in this report:
<TABLE>
<CAPTION>

                                                                                          Page(s) in 1999
                             Section                                                       Annual Report
                             -------                                                       -------------

              Management's Discussion and Analysis of
<S>                                                                                           <C> <C>
                 Financial Condition and Results of Operations                                3 - 31
              Selected Consolidated and Other Financial Data                                     2
              Consolidated Financial Statements                                               34 - 62
              Supplementary Financial Data                                                      32
              Range of Prices of Preferred Securities                                           65
</TABLE>

         Except for the parts of the 1999 Annual Report  expressly  incorporated
by reference,  such report is not deemed filed with the  Securities and Exchange
Commission.

         Information  appearing in this report,  in  documents  incorporated  by
reference  herein and in documents  subsequently  filed with the  Securities and
Exchange  Commission  which are not  statements of  historical  fact may include
forward-looking  statements with respect to the financial condition,  results of
operations  and business of First Banks.  These  forward-looking  statements are
subject to certain risks and uncertainties, not all of which can be predicted or
anticipated.  Factors that may cause actual  results to differ  materially  from
those  contemplated  by the  forward-looking  statements  herein  include market
conditions as well as conditions  affecting the banking  industry  generally and
factors  having a specific  impact on First Banks,  including but not limited to
fluctuations  in  interest  rates  and in the  economy;  the  impact of laws and
regulations   applicable  to  First  Banks  and  changes  therein;   competitive
conditions  in the  markets  in  which  First  Banks  conducts  its  operations,
including  competition from banking and non-banking companies with substantially
greater resources than First Banks, some of which may offer and develop products
and services  not offered by First Banks;  the ability of First Banks to control
the  composition  of the loan portfolio  without  adversely  affecting  interest
income; and the ability of First Banks to respond to changes in technology. With
regard to First Banks' efforts to grow through acquisitions,  factors that could
affect the accuracy or  completeness  of  forward-looking  statements  contained
herein include the potential for higher than acceptable  operating costs arising
from the geographic  dispersion of the offices of First Banks,  as compared with
competitors  operating solely in contiguous  markets;  the competition of larger
acquirers with greater resources than First Banks, fluctuations in the prices at
which acquisition  targets may be available for sale and in the market for First
Banks'  securities;  and the potential for difficulty or unanticipated  costs in
realizing the benefits of particular  acquisition  transactions.  Readers of the
Annual  Report  should  therefore  not place undue  reliance on  forward-looking
statements.

Item 1.  Business

General. First Banks,  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  ("BHC  Act").  The  principal  function of the
Company is to assist management of its banking subsidiaries.

         At December 31, 1999,  First Banks had $4.87  billion in total  assets,
$4.00 billion in total loans, net of unearned  discount,  $4.25 billion in total
deposits and $294.9 million in total stockholders'  equity. First Banks operates
through  its  subsidiary  bank  holding  companies  and  financial  institutions
("Subsidiary Banks") as follows:

        First Bank, headquartered in St. Louis County, Missouri ("First Bank");
        First Bank & Trust, headquartered in Newport Beach, California ("FB&T");
        First Banks America, Inc., headquartered in St. Louis County, Missouri
           ("FBA"), and its wholly owned subsidiaries:
               First Bank Texas N.A., headquartered in Houston, Texas,
               ("FB Texas");
               First Bank of California, headquartered in Roseville, California
               ("FB California"); and,
               Redwood Bank, headquartered in San Francisco, California.


<PAGE>


          The  Subsidiary  Banks are  wholly  owned by their  respective  parent
companies except FBA, which was 76.8% owned by First Banks at December 31, 1998.
On February 17, 1999,  First Banks  completed its purchase of 314,848  shares of
FBA  common  stock  pursuant  to a tender  offer  that  increased  First  Banks'
ownership  interest in FBA to 82.3% of the  outstanding  voting stock of FBA. At
December 31, 1999, First Banks' ownership interest in FBA was 83.4%.

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

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

         The following table summarizes selected data about the Subsidiary Banks
at December 31, 1999:
<TABLE>
<CAPTION>

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

<S>                                                           <C>     <C>                <C>              <C>
     First Bank......................................         87      $ 3,028,046        2,527,649        2,689,671
     FB&T............................................         28          944,013          736,828          804,976
     FBA:
         FB California...............................         10          431,838          379,632          367,563
         FB Texas....................................          6          278,988          213,731          244,248
         Redwood Bank................................          4          199,988          138,902          173,703

 </TABLE>
         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 and Chief Executive  Officer,  and members of
his immediate  family.  Accordingly,  Mr.  Dierberg  controls the management and
policies  of First  Banks  and the  election  of its  directors.  The  Preferred
Securities  are publicly held and listed on the Nasdaq Stock  Market's  National
Market system. The Preferred  Securities have no voting rights except in certain
limited circumstances.

         At December 31, 1999, the Company, Mr. Dierberg and an affiliate of Mr.
Dierberg own 18.08%, 0.20% and 4.33%, respectively, of the outstanding shares of
common stock of Southside Bancshares  Corporation  ("Southside")  located in St.
Louis, Missouri.

         Further  discussion  of the business  operations of First Banks and the
Subsidiary  Banks and the Company's  policies are set forth in the  Management's
Discussion and Analysis of Financial Condition and Results of Operations section
of the 1999 Annual Report which is incorporated herein by reference.

Acquisitions.  Prior to 1994, First Banks'  acquisitions  had been  concentrated
within the market areas of eastern  Missouri and central and southern  Illinois.
The premiums required to successfully pursue  acquisitions  escalated sharply in
1993,  reducing the economic  viability of many potential  acquisitions  in that
area. Recognizing this, First Banks began to expand the geographic area in which
it approached acquisition candidates. 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'  eastern  Missouri  and central and  southern  Illinois
acquisition   area.  As  a  result,   while  First  Banks  continued  to  pursue
acquisitions within these areas, it turned much of its attention to institutions
which could be  acquired  at more  attractive  prices  which were  within  major
metropolitan areas outside of these market areas. This led to the acquisition of
FB Texas in 1994,  which had offices in Dallas and Houston,  Texas, and numerous
acquisitions of financial  institutions that had offices in Los Angeles,  Orange
County, Santa Barbara, San Francisco, San Jose and Sacramento, California during
the past five years ended December 31, 1999.


<PAGE>


         For the three years ended December 31, 1999, First Banks completed five
acquisitions and four branch office purchases. These transactions provided total
assets of $697.4  million and 21 banking  locations.  For a description of these
acquisitions,  see "Management's  Discussion and Analysis of Financial Condition
and  Results  of  Operations  -  Acquisitions"  and  Note 2 to the  Consolidated
Financial Statements of the 1999 Annual Report.

Market  Area.  As of  December  31,  1999,  the  Subsidiary  Banks' 135  banking
facilities were located throughout  eastern Missouri and in Illinois,  Texas and
California.  First  Banks'  primary  market  area  is the  St.  Louis,  Missouri
metropolitan  area.  First  Banks'  second and third  largest  market  areas are
central  and  southern   Illinois   and   southern   and  northern   California,
respectively.  First Banks also has locations in the Houston, Dallas, Irving and
McKinney,  Texas  metropolitan  areas,  rural  eastern  Missouri and the greater
Chicago, Illinois metropolitan area.

         The  following  table  lists the market  areas in which the  Subsidiary
Banks operate,  total  deposits,  deposits as a percentage of total deposits and
number of locations as of December 31, 1999:
<TABLE>
<CAPTION>

                                                                              Total         Deposits       Number
                                                                            deposits     as a percentage    of
                                   Geographic area                        (in millions) of total deposits locations
                                   ---------------                         ----------- ------------------ ---------

<S>                                                                        <C>                <C>            <C>
     St. Louis, Missouri metropolitan area (1)..........................   $   987.9          23.2%          29
     Rural eastern Missouri (1).........................................       394.3           9.3           15
     Central and southern Illinois (1)..................................       984.9          23.2           42
     Northern Illinois (1)..............................................       300.0           7.1            2
     Texas (2)..........................................................       238.7           5.6            6
     Southern and central California (3)................................       763.2          17.9           27
     Northern California (4)............................................       583.0          13.7           14
                                                                           ---------         -----        -----
         Total deposits.................................................   $ 4,252.0         100.0%         135
                                                                           =========         =====        =====
</TABLE>
   ------------------------
   (1) First Bank operates in the St. Louis  metropolitan area, in rural eastern
       Missouri,  in central and  southern  Illinois  and in northern  Illinois,
       including Chicago.
   (2) FB  Texas  operates  in  the  Houston,   Dallas,   Irving  and  McKinney
       metropolitan areas.
   (3) FB&T  operates in the greater Los Angeles  metropolitan  area,  including
       Orange  County,  California.  Three of the  branches  are also located in
       Santa Barbara County, California.
   (4) FB&T,  FB  California  and Redwood Bank  operate in northern  California,
       including the greater San Francisco, San Jose and Sacramento metropolitan
       areas.

Competition  and Branch  Banking.  The activities in which the Subsidiary  Banks
engage are highly  competitive.  Those  activities  and the  geographic  markets
served  primarily  involve  competition  with  other  banks,  some of which  are
affiliated with large regional or national holding companies.  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 state regulations governing  state-chartered  banks. As a result, such
non-bank  competitors may have certain  advantages over the Company in providing
some services.

         The trend in  Missouri,  Illinois,  Texas and  California  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.


<PAGE>


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

Supervision and Regulation

General.  The Company and the Subsidiary  Banks are extensively  regulated under
federal and state laws designed primarily to protect depositors and customers of
the  Subsidiary  Banks.  To the extent this  discussion  refers to  statutory or
regulatory  provisions,  it is not intended to summarize all of such  provisions
and is qualified in its  entirety by  reference  to the relevant  statutory  and
regulatory  provisions.  Changes in applicable  laws,  regulations or regulatory
policies  may have a  material  effect  on the  business  and  prospects  of the
Company. The Company is unable to predict the nature or extent of the effects on
its business and earnings that new federal and state  legislation  or regulation
may have. The enactment of the  legislation  described  below has  significantly
affected the banking industry generally and is likely to have ongoing effects on
the Company and the Subsidiary Banks 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 ("FRB"). First Banks is required to file
annual reports with the FRB and to provide to the FRB additional  information as
it may require.

         First  Bank is  chartered  by the State of  Missouri  and is subject to
supervision,  regulation and  examination  by the State of Missouri  Division of
Finance.  FB&T,  FB  California  and Redwood Bank are  chartered by the State of
California and are subject to  supervision,  regulation  and  examination by the
California Department of Financial Institutions. FB Texas is a national bank and
is therefore subject to supervision, regulation and examination by the Office of
the Comptroller of the Currency ("OCC"). The Subsidiary Banks are also regulated
by the Federal Deposit Insurance  Corporation  ("FDIC"),  which provides deposit
insurance of up to $100,000 for each insured depositor.

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

         First  Banks is also  subject  to  capital  requirements  applied  on a
consolidated  basis  which are  substantially  similar to those  required of the
Subsidiary Banks (briefly  summarized  below).  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 a 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  anti-competitive result, unless the anti-competitive
effects of the proposed  transaction are clearly  outweighed by a greater public
interest in meeting the convenience and needs of the community to be served. The
FRB also considers  capital adequacy and other financial and managerial  factors
in reviewing acquisitions and mergers.

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

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

         Under the risk-based capital standard,  the minimum  consolidated ratio
of total capital to risk-adjusted  assets required for bank holding companies is
8%. At least  one-half of the total  capital must be composed of common  equity,
retained earnings, qualifying noncumulative perpetual preferred stock, a limited
amount of qualifying cumulative perpetual preferred stock and minority interests
in the equity accounts of consolidated subsidiaries,  less certain items such as
goodwill and certain other intangible  assets ("Tier 1 capital").  The remainder
may consist of qualifying hybrid capital instruments,  perpetual debt, mandatory
convertible debt securities,  a limited amount of subordinated  debt,  preferred
stock that does not qualify as Tier 1 capital  and a limited  amount of loan and
lease loss reserves ("Tier 2 capital").

         In  addition  to the  risk-based  standard,  the  Company is subject to
minimum  requirements  with  respect  to the ratio of its Tier 1 capital  to its
average assets less goodwill and certain other intangible  assets (the "Leverage
Ratio").  Applicable requirements provide for a minimum Leverage Ratio of 3% for
bank holding companies that have the highest supervisory rating, while all other
bank holding  companies must maintain a minimum Leverage Ratio of at least 4% to
5%.

         The OCC and the FDIC have  established  capital  requirements for banks
under their respective  jurisdictions  that are consistent with those imposed by
the FRB on bank holding  companies.  Information  regarding  First Banks and the
Subsidiary Banks under the federal capital  requirements is contained in Note 19
to  the  Consolidated   Financial  Statements  and  is  incorporated  herein  by
reference.

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

         The federal regulatory agencies have adopted  regulations  establishing
relevant capital measures and relevant capital levels. Under the regulations,  a
bank will be: (i) "well  capitalized"  if it has a total capital ratio of 10% or
greater,  a Tier 1 capital ratio of 6% or greater and a Leverage  Ratio of 5% or
greater  and is not  subject  to any  order  or  written  directive  by any such
regulatory  authority  to meet and  maintain  a specific  capital  level for any
capital measure;  (ii) "adequately  capitalized" if it has a total capital ratio
of 8% or greater,  a Tier 1 capital ratio of 4% or greater and a Leverage  Ratio
of 4% or greater (3% in certain circumstances);  (iii)  "undercapitalized" if it
has a total  capital  ratio of less than 8%, a Tier 1 capital ratio of less than
4% or a  Leverage  Ratio of less  than 4% (3% in  certain  circumstances);  (iv)
"significantly  undercapitalized"  if it has a total  capital ratio of less than
6%, a Tier 1 capital ratio of less than 3% or a Leverage  Ratio of less than 3%;
and (v) "critically undercapitalized" if its tangible equity is equal to or less
than 2% of average quarterly tangible assets. A depository institution's primary
federal  regulatory  agency is  authorized  to lower the  institution's  capital
category  under  certain  circumstances.  The banking  agencies are permitted to
establish  individualized  minimum  capital  requirements  exceeding the general
requirements  described  above.  Generally,  a bank which does not  maintain the
status of "well  capitalized"  or  "adequately  capitalized"  will be subject to
restrictions and limitations on its business that are progressively more severe.

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

Dividends.  First Banks' primary source of funds in the future is the dividends,
if any, paid by the Subsidiary Banks. The ability of the Subsidiary Banks to pay
dividends is limited by federal laws,  by  regulations  promulgated  by the bank
regulatory agencies and by principles of prudent bank management.  The amount of
dividends the  Subsidiary  Banks may pay to the Company is also limited by First
Banks' credit  agreement with a group of  unaffiliated  financial  institutions.
Additional  information  concerning limitations on the ability of the Subsidiary
Banks  to  pay  dividends  appears  in  Note  20 to the  Consolidated  Financial
Statements and is incorporated herein by reference.

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

Community  Reinvestment  Act.  The  Community  Reinvestment  Act of 1977 ("CRA")
requires that, in connection with examinations of financial  institutions 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 other applications to expand.

The  Gramm-Leach-Bliley  Act.  The  activities  of bank holding  companies  have
historically  been  limited to the business of banking and  activities  "closely
related" or  "incidental"  to banking.  The  enactment  in November  1999 of the
Gramm-Leach-Bliley  Act will relax the previous limitations and permit some bank
holding  companies to engage in a broader  range of financial  activities.  Bank
holding  companies  may elect to become  financial  holding  companies  that may
affiliate  with  securities  firms and  insurance  companies and engage in other
activities that are financial in nature. In addition to lending, activities that
will be deemed "financial in nature" include securities underwriting, dealing in
or  making a market  in  securities,  sponsoring  mutual  funds  and  investment
companies,  insurance  underwriting  and  agency  activities,  merchant  banking
activities and other  activities  which the FRB determines to be closely related
to banking.  A bank holding company may become a financial  holding company only
if each of its subsidiary  banks is well  capitalized and well managed and has a
rating of  satisfactory  or higher under CRA. A bank holding company that ceases
to be in compliance with those  requirements may be required to stop engaging in
specified  activities.  Any bank holding company that does not elect to become a
financial holding company will remain subject to current restrictions.

         Under the new legislation, the FRB will have supervisory authority over
each  parent  company  and  limited   authority  over  its   subsidiaries.   The
determination of which federal regulatory agency is given primary authority over
a  subsidiary  of a  financial  holding  company  will  depend  on the  types of
activities   conducted  by  the  subsidiary.   In  that  regard,   broker-dealer
subsidiaries will be regulated primarily by securities  regulators and insurance
subsidiaries will primarily be regulated by insurance authorities.  Implementing
regulations under the Gramm-Leach-Bliley Act have not yet been promulgated,  and
First  Banks is not able to  predict  the  likely  extent  of the  impact of the
legislation.

Reserve Requirements;  Federal Reserve System and Federal Home Loan Bank System.
The FRB requires all depository  institutions to maintain reserves against their
transaction accounts and non-personal time deposits.  The balances maintained to
meet  the  reserve  requirements  imposed  by the 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 advances from
Federal Home Loan Banks  ("FHLBs"),  before  borrowing from the Federal  Reserve
Bank.

         Certain of the  Subsidiary  Banks are  members of the  Federal  Reserve
System  (First Bank and FB Texas) and the Federal  Home Loan Bank System  (First
Bank, FB Texas, FB&T, and FB California) and are required to hold investments in
regional  banks within those systems.  The  Subsidiary  Banks were in compliance
with these  requirements at December 31, 1999, with investments of $10.3 million
in stock of the FHLB of Des Moines held by First Bank,  $1.4 million in stock of

<PAGE>

the FHLB of Dallas held by FB Texas,  $2.9  million and $1.3 million in stock of
the FHLB of San Francisco  held by FB&T and FB  California,  respectively,  $4.9
million in stock of the Federal  Reserve  Bank of St.  Louis held by First Bank,
and $863,000 in stock of the Federal Reserve Bank of Dallas held by FB Texas.

Monetary  Policy and  Economic  Control.  The  commercial  banking  business  is
affected  not only by  legislation,  regulatory  policies  and general  economic
conditions,  but  also by the  monetary  policies  of the  FRB.  Changes  in the
discount  rate on member  bank  borrowings,  the  availability  of credit at the
"discount window," open market operations,  the imposition of changes in reserve
requirements against deposits and assets of foreign branches, and the imposition
of and changes in reserve  requirements  against certain borrowings by banks and
their affiliates 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
this use may affect interest rates charged on loans or paid on liabilities.  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.  Such
policies 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 or the
Subsidiary Banks cannot be predicted.

Employees

         As  of  March  20,  2000,  the  Company  employed  approximately  1,670
employees.  None  of  the  employees  are  subject  to a  collective  bargaining
agreement.  The Company  considers  its  relationships  with its employees to be
good.

Executive Officers of the Registrant

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

Item 2.  Properties

         The Company owns the office  building which houses the principal  place
of  business of the  Company,  which is located at 135 North  Meramec,  Clayton,
Missouri 63105.  The property is in good condition and consists of approximately
41,763 square feet, of which approximately 3,115 square feet is currently leased
to others.  Of First  Banks'  other 134 branch  offices and  facilities,  81 are
located  in  buildings  owned  by  First  Banks  and 53 are  located  in  leased
facilities.

         The Company considers the properties at which it does business to be in
good  condition,  suitable for the business  conducted at each location.  To the
extent that its properties or those acquired in connection  with the acquisition
of other entities  provide space in excess of that  effectively  utilized in the
operations of the Subsidiary  Banks, the Company seeks to lease or sub-lease any
excess space to third parties. Additional information regarding the premises and
equipment utilized by the Subsidiary Banks appears in Note 5 to the Consolidated
Financial Statements incorporated herein by reference.

Item 3.  Legal Proceedings

         There are various  claims and pending  actions  against First Banks and
the Subsidiary  Banks in the ordinary  course of business.  It is the opinion of
management of First Banks,  in  consultation  with legal  counsel,  the ultimate
liability,  if any,  resulting from such claims and pending actions will have no
material  adverse  effect on the financial  position or results of operations of
First Banks.

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

         None.




<PAGE>


                                     PART II


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

Market  Information.  There is no  established  public  trading market for First
Banks' common stock. All of First Banks' 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 and Chief Executive Officer, and members of his immediate family.

Dividends.  In recent years, the Company has paid minimal dividends on its Class
A Convertible  Adjustable Rate Preferred  Stock and its Class B  Non-Convertible
Adjustable Rate Preferred  Stock, and has paid no dividends on its Common Stock.
The ability of a bank holding  company  such as First Banks to pay  dividends is
limited by regulatory  requirements and by the receipt of dividend payments from
the Subsidiary  Banks,  which are also subject to regulatory  requirements.  See
Note 20 to the Consolidated Financial Statements.

Item 6. Selected Financial Data

         The  information  required  by this  item  is  incorporated  herein  by
reference  from page 2 of the 1999 Annual  Report  under the  caption  "Selected
Consolidated and Other Financial Data."

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  from pages 3 through 31 of the 1999 Annual  Report  under the caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

         The  information  required  by this  item  is  incorporated  herein  by
reference from page 14 of the 1999 Annual Report under the caption "Management's
Discussion and Analysis - Interest Rate Risk Management."

Item 8.  Financial Statements and Supplementary Data

         The consolidated  financial  statements of First Banks are incorporated
herein by reference from pages 34 through 62 of the 1999 Annual Report under the
captions  "Consolidated  Balance Sheets,"  "Consolidated  Statements of Income,"
"Consolidated  Statements of Changes in Stockholders'  Equity and  Comprehensive
Income,"  "Consolidated  Statements  of  Cash  Flows,"  "Notes  to  Consolidated
Financial Statements" and "Independent Auditors' Report."

         Supplementary   Financial   Information   regarding   First   Banks  is
incorporated  herein by reference  from page 32 of the 1999 Annual  Report under
the caption "Quarterly Condensed Financial Data - Unaudited."

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

         None.




<PAGE>


                                    PART III


Item 10. Directors and Executive Officers of the Registrant

Board of Directors

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

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


<S>                             <C>     <C>       <C>
James F. Dierberg               62      1979      Chairman of the Board of Directors  and Chief  Executive Officer of
                                                  the Company  since 1988; President of the Company from 1979 to 1992
                                                  and from 1994 to October 1999;  Chairman of the Board of Directors,
                                                  President and Chief Executive Officer of FBA since 1994; Trustee of
                                                  First Preferred Capital Trust and First America Capital Trust since
                                                  1997 and 1998, respectively.

Allen H. Blake                  57      1988      President  of  the  Company  since  October  1999;  Executive  Vice
                                                  President and Chief  Financial  Officer of the Company from 1996 to
                                                  September 1999; Chief Operating  Officer of the Company since 1998;
                                                  Senior Vice  President and Chief  Financial  Officer of the Company
                                                  from 1992 to 1996;  Secretary of the Company since 1988;  Director,
                                                  Executive Vice President,  Chief Operating Officer and Secretary of
                                                  FBA  since  1998;  Chief  Financial  Officer  of FBA  from  1994 to
                                                  September  1999;  Director,  Senior Vice President and Secretary of
                                                  FBA from 1994 to 1998;  Director and  Executive  Vice  President of
                                                  FCB from 1995 until its merger  into FBA in 1998;  Trustee of First
                                                  Preferred  Capital Trust and First America Capital Trust since 1997
                                                  and 1998, respectively.

Donald Gunn, Jr. (1)            64      1992      Director of the Company;  Practicing  Attorney and  Shareholder  in
                                                  the law firm of Gunn & Gunn, P.C., St. Louis, Missouri.

George J. Markos (1)            51      1992      Director of the Company;  President of Profit  Management  Systems,
                                                  Richardson,  Texas,  a company that  provides  consulting  services
                                                  primarily  to banks,  savings  and loans  and  related  businesses,
                                                  including the Company.
</TABLE>
-----------------------
(1) Member of the Audit Committee.



<PAGE>


Executive Officers

         The executive officers of the Company, each of whom were elected to the
office(s)  indicated  by the Board of  Directors,  as of March 20,  2000 were as
follows:
<TABLE>
<CAPTION>

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

<S>                            <C>                                        <C>
James F. Dierberg              62   Chairman  of the Board of  Directors  See  Item  10 -  "Directors  and Executive
                                    and Chief Executive Officer.          Officers  of  the  Registrant  -  Board of
                                                                          Directors."

Allen H. Blake                 57   President,  Chief Operating  Officer  See  Item 10 -  "Directors  and  Executive
                                    and Secretary.                        Officers  of the  Registrant  -  Board  of
                                                                          Directors."

Michael F. Hickey              42   Executive  Vice  President and Chief  Executive   Vice   President   and   Chief
                                    Information  Officer;   Director  of  Information  Officer of First  Banks since
                                    First  Bank;   President   of  First  November  1999;  Director  of  First  Bank
                                    Services, L.P.                        since  November  of  1999;   President  of
                                                                          First  Services,  L.P.  since  November of
                                                                          1999;   Vice   President  -  Senior  Group
                                                                          Manager    of     Information     Systems,
                                                                          Mercantile  Bank,  St.  Louis,   Missouri,
                                                                          from 1996 to November 1999;  Group Manager
                                                                          of Information  Systems,  Mercantile Bank,
                                                                          from 1992 to 1996.

Terrance M. McCarthy           45   Executive Vice President;  Executive  Mr.  McCarthy has been employed in various
                                    Vice  President of FBA;  Chairman of  executive   capacities  with  First  Banks
                                    the  Board of  Directors,  President  since 1995.
                                    and Chief  Executive  Officer  of FB
                                    California;  Director, President and
                                    Chief  Executive   Officer  of  Red-
                                    wood Bank and Lippo Bank.

Frank H. Sanfilippo            37   Executive  Vice  President and Chief  Executive   Vice   President   and   Chief
                                    Financial Officer.                    Financial  Officer of FBA since  September
                                                                          1999; Director, Executive Vice  President,
                                                                          Chief Financial  Officer,  Secretary   and
                                                                          Treasurer  of  First  Bank since September
                                                                          1999; Senior Vice President and   Director
                                                                          of  Management  Accounting of   Mercantile
                                                                          Bancorporation, Inc., St. Louis, Missouri,
                                                                          from   1998   to   September  1999;   Vice
                                                                          President and Chief Financial  Officer   -
                                                                          Mercantile Bank Operations Division,  from
                                                                          1996 to 1997; Vice President and Assistant
                                                                          Comptroller of  Mercantile  Bank N.A. from
                                                                          1994 to 1996.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>



<S>                            <C>  <C>                                   <C>
John A. Schreiber              49   Executive Vice  President;  Chairman  Mr.   Schreiber   has  been   employed  in
                                    of   the    Board   of    Directors,  various  executive  capacities  with First
                                    President   and   Chief    Executive  Banks since 1992.
                                    Officer of First Bank.

Mark T. Turkcan                44   Executive  Vice President - Consumer  Mr.  Turkcan has been  employed in various
                                    Lending   and   Mortgage    Banking;  executive   capacities  with  First  Banks
                                    Director    and    Executive    Vice  since 1994.
                                    President of First Bank.

Donald W. Williams             52   Executive  Vice  President and Chief  Mr.  Williams has been employed in various
                                    Credit Officer; Director,  Executive  executive   capacities  with  First  Banks
                                    Vice   President  and  Chief  Credit  since 1993.
                                    Officer   of   FBA;   Director   and
                                    Executive  Vice  President  of First
                                    Bank;  Director  of FB  Texas,  FB&T
                                    and FB  California;  Chairman of the
                                    Board of Directors of First  Capital
                                    Group,  Inc., Redwood Bank and Lippo
                                    Bank.
</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  ("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, 1999.



<PAGE>


Item 11.  Executive Compensation

         The   following   table  sets  forth  certain   information   regarding
compensation earned by the named executive officers for the years ended December
31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>

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

<S>                                                         <C>         <C>              <C>            <C>
James F. Dierberg                                           1999        $  543,000       20,000         5,000
Chairman of the Board of Directors                          1998           536,000            0         5,000
and Chief Executive Officer                                 1997           492,000            0         4,750

Allen H. Blake                                              1999           204,800       20,000         5,000
President and                                               1998           157,300       40,000         5,000
Chief Operating Officer                                     1997           147,500       30,000         4,750

John A. Schreiber                                           1999           208,750       36,600         5,000
Executive Vice President                                    1998           181,900       40,000         5,000
                                                            1997           166,250       30,000         4,750

Mark T. Turkcan                                             1999           156,250       15,000         4,956
Executive Vice President                                    1998           140,800       15,000         4,725
Consumer Lending and Mortgage Banking                       1997           133,750       15,000         4,012

Donald W. Williams                                          1999           208,750       35,000         5,000
Executive Vice President                                    1998           182,600       40,000         5,000
and Chief Credit Officer                                    1997           166,250       40,000         4,750
</TABLE>
-----------------------
(1) All   other  compensation   reported   represents   First  Banks'   matching
    contributions to the 401(k) Plan for the year indicated.

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

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

         Under the terms of the employment contracts, if either Mr. Schreiber or
Mr.  Williams  is  terminated  for  a  reason  other  than  retirement,   death,
"disability"  or for  "cause,"  as those  terms are  defined  in the  employment
agreements,  or are terminated  due to a change in control of the Company,  each
such individual will be entitled to receive two years base salary. Should either
Mr. Schreiber or Mr. Williams voluntarily  terminate employment with the Company
and First  Bank,  he would be entitled to receive the balance of his base salary
for that year or a minimum of six months salary,  provided that neither would be
permitted to accept a position  with any bank or trust  company for the duration
of that year.  Finally, in the event of the death of either Mr. Schreiber or Mr.
Williams,  their  respective  employment  agreements  provide that their estates
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 retainer  of $1,000 per quarter and a fee of $500 per
Board meeting  attended.  No directors are  compensated  for attendance at Audit
Committee  meetings,  which is the only  committee  of the  Board of  Directors.
Messrs. Gunn and Markos each received $6,000 in director's fees during 1999.

         In addition to Board  meeting fees,  during 1999,  the Company paid Mr.
Markos,  directly  or  indirectly,  consulting  fees  in the  amount  of  $2,000
exclusive of reimbursement for his travel expenses. It is anticipated Mr. Markos
will continue to provide  consulting  services to the Company during the current
fiscal year.

         During 1999, the Company paid approximately $245,000 in legal fees to a
law  firm of  which  Mr.  Donald  Gunn,  one of the  Company's  directors,  is a
shareholder.  It is  anticipated  Mr.  Gunn's law firm will  continue to provide
legal services to the Company during the current fiscal year.

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

Compensation  Committee Interlocks and Insider Participation.  Messrs.  Dierberg
and Blake,  who are executive  officers of the Company,  are also members of the
Board  of  Directors  and  executive  officers  of  FBA.  FBA  does  not  have a
compensation  committee,  but its Board of Directors  performs the  functions of
such a committee.  Except for the foregoing, no executive officer of First Banks
served  during  1999 as a member  of the  compensation  committee,  or any other
committee performing similar functions,  or as a director of another entity, any
of whose  executive  officers or  directors  served on the Board of Directors of
First Banks.

         During  1999,  1998  and  1997,  Tidal  Insurance  Limited  (Tidal),  a
corporation owned indirectly by First Banks' Chairman and his children, received
approximately  $316,000,  $280,000  and  $214,000,  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 subsequently  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  ceded  to an
unaffiliated third-party insurer.

         During 1999, 1998 and 1997,  First  Securities  America,  Inc. (FSA), a
trust  established  and  administered  by and for the  benefit  of First  Banks'
Chairman and members of his immediate family,  received approximately  $194,000,
$265,000 and $206,000,  respectively,  in commissions and insurance premiums for
policies  purchased  by First Banks or customers  of the  Subsidiary  Banks from
unaffiliated,  third-party  insurors  to which First Banc  Insurors  placed such
policies.  The insurance premiums on which the  aforementioned  commissions were
earned were  competitively  bid and First Banks deems the commissions FSA earned
from  unaffiliated  third-party  companies to be  comparable to those that would
have been earned by an unaffiliated third-party agent.

         First Brokerage America,  L.L.C., a limited liability corporation which
is  indirectly  owned by First  Banks'  Chairman  and  members of his  immediate
family,  received  approximately $2.3 million, $1.8 million and $707,000 for the
years ended December 31, 1999, 1998 and 1997, respectively,  in commissions paid
by unaffiliated  third-party companies.  The commissions received were primarily
in connection  with the sales of annuities and  securities  and other  insurance
products to individuals, including customers of the Subsidiary Banks.

         First Services,  L.P., a limited partnership  indirectly owned by First
Banks'  Chairman  and  his  children,  provides  data  processing  services  and
operational  support for First Banks,  Inc. and its Subsidiary  Banks. Fees paid
under agreements with First Services L.P. were $16.4 million,  $12.2 million and
$6.4 million for the years ended December 31, 1999, 1998 and 1997, respectively.
During 1999, 1998 and 1997, First Services,  L.P. paid First Banks $1.2 million,
$799,000  and $1.1  million,  respectively,  in rental  fees for the use of data
processing  and other  equipment  owned by First  Banks.  The fees paid by First
Banks for data processing  services are at least as favorable as could have been
obtained from unaffiliated third parties.


<PAGE>


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The  following  table  sets  forth,  as  of  March  20,  2000,  certain
information  with respect to the  beneficial  ownership of all classes of voting
capital  stock of the  Company  by each  person  known to the  Company to be the
beneficial  owner of more than five  percent  of the  outstanding  shares of the
respective classes of stock:
<TABLE>
<CAPTION>

                                                                                                   Percent of
                                                                         Number of                    Total
                          Title of Class                                  Shares         Percent     Voting
                         and Name of Owner                                 Owned        of Class      Power
                         -----------------                                 -----        --------      -----

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

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

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

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

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

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

All executive officers and directors
    other than Mr. James F. Dierberg
    and members of his immediate family...........................             0              0%       0.0%
</TABLE>
--------------------
   *   Represents less than 1.0%
  (1)  Each of the above-named trustees and  beneficial owners are United States
       citizens,  and the business address for each such individual is 135 North
       Meramec  Avenue,  Clayton,  Missouri 63105.  Mr. James F.  Dierberg,  the
       Company's Chairman of the Board and Chief  Executive  Officer,  and  Mrs.
       Mary W. Dierberg, are husband and wife, and Messrs. James F. Dierberg II,
       Michael  J.  Dierberg  and  Mrs. Ellen  D. Schepman,  formerly  Ellen  C.
       Dierberg, are their adult children.
  (2)  Due to the relationship between Mr. James F. Dierberg, his wife and their
       children,  Mr.  Dierberg is deemed to share voting and  investment  power
       over the Company's common stock.
  (3)  Due to  the  relationship  between  Mr. James F.  Dierberg,  his wife and
       First Bank,  Mr.  Dierberg is deemed to share voting and investment power
       over these shares.
  (4)  Convertible into common stock, based on the appraised value of the common
       stock at the  date of  conversion.  Assuming  an  appraised  value of the
       common  stock  equal to the book  value,  the  number of shares of common
       stock into which the Class A Preferred  Stock is  convertible at December
       31, 1999 is 1,212, which shares are not included in the above table.
  (5)  Sole voting and investment power.



<PAGE>


Item 13. Certain Relationships and Related Transactions

         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  that  which 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.

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

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




<PAGE>


                                     PART IV

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

           (a)    1.    Financial  Statements  and   Supplemental   Data  -  The
                        financial  statements  and  supplemental  data filed  as
                        part of this Report are listed under Item 8.

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

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

           (b)    Reports on Form 8-K.

                        First  Banks  filed no  reports  on Form  8-K during the
                        quarter ended December 31, 1999.

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



<PAGE>


                                   SIGNATURES

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

                                      FIRST BANKS, INC.



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



                                      By: /s/ Frank H. Sanfilippo
                                         ------------------------
                                              Frank H. Sanfilippo
                                              Executive Vice President and
                                              Chief Financial Officer
                                              (Principal Financial Officer)



                                      By: /s/  Lisa K. Vansickle
                                          ----------------------
                                               Lisa K. Vansickle
                                               Vice President and Controller
                                               (Principal Accounting Officer)


Date:    March 27, 2000
<TABLE>
<CAPTION>

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

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


<S>                                                            <C>                                 <C>
       /s/ James F. Dierberg                                   Director                            March 27, 2000
       -------------------------------------------
           James F. Dierberg


       /s/ Allen H. Blake                                      Director                            March 27, 2000
       ------------------------------------------
           Allen H. Blake


       /s/ Donald J. Gunn, Jr.                                 Director                            March 27, 2000
       ------------------------------------------
           Donald J. Gunn, Jr.


</TABLE>


<PAGE>


                                INDEX TO EXHIBITS


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

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

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

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

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

    4.3     Agreement As To  Expenses and Liabilities  (incorporated  herein  by
            reference to Exhibit 4(a) to the Company's  Report  on Form 10-Q for
            the quarter ended March 31, 1997).

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

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

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

   10.1     Shareholders'   Agreement  by  and  among  James F. Dierberg, II and
            Mary  W.  Dierberg,  Trustees    under    Living  Trust  of James F.
            Dierberg II,  dated  July  24, 1989,  Michael  James   Dierberg  and
            Mary  W.  Dierberg,  Trustees  under  the  Living  Trust  of Michael
            James Dierberg,  dated July 24, 1989;  Ellen C. Dierberg and Mary W.
            Dierberg,  Trustees  under Living  Trust of  Ellen C. Dierberg dated
            July  17,  1992,  and First  Banks,   Inc.  (incorporated herein  by
            reference to Exhibit 10.3 to the Company's Registration Statement on
            Form  S-1,  File  No 33-50576, dated August 6, 1992).

   10.2     Comprehensive   Banking   System   License  and  Service   Agreement
            dated   as  of   July  24,  1991,  by and  between  the  Company and
            FiServ  CIR,  Inc.  (incorporated  herein  by  reference  to Exhibit
            10.4  to  the  Company's  Registration  Statement  on Form S-1, File
            No. 33-50576, dated August 6, 1992).

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

   10.5*    Employment   Agreement  by  and  among  the Company,  First Bank and
            Donald  W. Williams  dated  March  22,  1993  (incorporated   herein
            by reference to Exhibit  10(iii)(A) to  the  Company's Form 10-K for
            the year ended December 31, 1993).


<PAGE>


   10.6           $100,000,000  Amended and Restated  Secured Credit  Agreement,
                  dated as of August 25,  1999,  among  First  Banks,  Inc.  and
                  Mercantile Bank National  Association,  American National Bank
                  and Trust  Company of Chicago,  Harris Trust and Savings Bank,
                  the Frost  National  Bank,  Norwest Bank  Minnesota,  National
                  Association and Mercantile Bank National Association, as Agent
                  (incorporated  herein  by  reference  to  Exhibit  10.6 to the
                  Company's  Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1999).

   10.7           Stock  Purchase and Operating  Agreement by  and  between  the
                  Company and   BancTEXAS   Group,  Inc.,  dated  May  19,  1994
                  (incorporated   herein  by  reference  to  Exhibit 2  to   the
                  Company's  Quarterly Report on Form 10-Q for the quarter ended
                  June 30, 1994).

   10.8*          Service  Agreement  by and between  First  Services,  L.P. and
                  First  Bank  dated  April  1,  1997  (incorporated  herein  by
                  reference to Exhibit 10.8 of the  Company's  Annual  Report on
                  Form 10-K for the year ended December 31, 1997).

   10.9*          Service  Agreement  by and between  First  Services,  L.P. and
                  First Bank & Trust dated April 1, 1997  (incorporated   herein
                  by reference  to Exhibit  10.9 of the  Company's Annual Report
                  on Form 10-K for the year ended  December 31, 1997).

  10.10*          Service  Agreement  by  and  between First Services,  L.P. and
                  BankTEXAS  N.A.  dated  April 1, 1997 (incorporated  herein by
                  reference to Exhibit 10.10 of the Company's Annual  Report  on
                  Form 10-K for the year ended December 31, 1997).

  10.11*          Management Services Agreement by and between First Banks, Inc.
                  and Redwood Bank, dated June 1, 1999  (incorporated  herein by
                  reference to Exhibit 10.11 to the Company's  Quarterly  Report
                  on Form 10-Q for the quarter ended September 30, 1999).

   13.1           The  Company's  1999  Annual  Report  to   Shareholders  filed
                  herewith.  Portions    not    specifically   incorporated   by
                  reference  in   this  Report  are  not deemed  "filed" for the
                  purposes of   the  Securities  Exchange  Act  of  1934 - filed
                  herewith.

   21.1           Subsidiaries of the Company - filed herewith.

   27.1           Financial Data Schedule (EDGAR only).

-------------------
*    Exhibits  designated  by an  asterisk  in the Index to  Exhibits  relate to
     management contracts and/or compensatory plans or arrangements.





<PAGE>

                                                       Exhibit 13.1

                                FIRST BANKS, INC.

                               1999 ANNUAL REPORT









<PAGE>



                                FIRST BANKS, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>




                                                                                                             Page
                                                                                                             ----

<S>                                                                                                            <C>
LETTER TO SHAREHOLDERS..............................................................................           1

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

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

QUARTERLY CONDENSED FINANCIAL DATA - UNAUDITED......................................................          32

INDEPENDENT AUDITORS' REPORT........................................................................          33

FINANCIAL STATEMENTS:

     CONSOLIDATED BALANCE SHEETS....................................................................          34

     CONSOLIDATED STATEMENTS OF INCOME..............................................................          36

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
         AND COMPREHENSIVE  INCOME..................................................................          37

     CONSOLIDATED STATEMENTS OF CASH FLOWS..........................................................          38

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.....................................................          39

DIRECTORS AND SENIOR MANAGEMENT.....................................................................          63

INVESTOR INFORMATION................................................................................          65


</TABLE>


<PAGE>






To Our Valued Shareholders, Customers and Friends:

         First Banks,  Inc. is pleased to report our  accomplishments  for 1999.
Net income  increased  32% in 1999 to $44.2  million from $33.5 million in 1998.
Earnings  per  share,  on a diluted  basis,  were  $1,775.47  in  comparison  to
$1,337.09 in 1998. The improved earnings were primarily driven by strong revenue
gains that were a product of an  improved  earning  asset and funding  mix,  the
addition  of  Redwood  Bancorp  and  Century  Bank  and  gains  on the  sale  of
non-strategic  branches. The revenue gains were partially offset by an increased
provision  for  possible  loan losses due to strong loan growth and by increased
operating expenses as we continue to invest in personnel and technology, thereby
better serving our customer base.

         First  Banks'  strategic   objective  of  generating   progressive  and
profitable  growth  continued  during the past year.  Total assets  increased to
$4.87 billion at December 31, 1999,  an increase of $313 million over 1998.  Our
continued  emphasis in  developing  our  existing  franchise  drove this growth.
Indicative  of this  development  is the  growth  of the loan  portfolio,  which
increased by $416 million during 1999.

         Facilitating  the  development  of First Banks'  presence in our target
market  areas  were the  acquisitions  of  Redwood  Bancorp  and  Century  Bank,
providing total assets of $184 million and $156 million,  respectively,  and ten
banking locations in key California markets. In addition, First Banks is pleased
to report the  completion of the  acquisitions  of Lippo Bank and certain assets
and  liabilities of First Capital Group,  Inc. on February 29, 2000.  Lippo Bank
provides three additional locations in California,  approximately $85 million in
assets  and  certain  international  business  banking  capabilities,   such  as
import/export  letters of credit.  First  Capital  Group,  Inc.  specializes  in
commercial  equipment leasing and had approximately  $64.5 million in net leases
at the  acquisition  date.  We are  excited  about these new  organizations  and
welcome their management, staff and customers to our family.

         In  closing,  I would  like to extend my sincere  appreciation  for the
dedication  of our  employees,  and the  continued  support of our customers and
investors.

Sincerely,




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


<PAGE>
                                FIRST BANKS, INC.

               Selected Consolidated and Other Financial Data (1)

         The selected consolidated financial data set forth below, insofar as it
relates to the five years ended  December 31, 1999,  is derived from the audited
consolidated  financial  statements of First Banks, Inc. and subsidiaries (First
Banks or the Company).  Such data is qualified by reference to the  consolidated
financial  statements  of First  Banks  included  herein  and  should be read in
conjunction  with such  consolidated  financial  statements  and  related  notes
thereto and  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations."
<TABLE>
<CAPTION>
                                                                        Year ended December 31, (1)
                                                        ---------------------------------------------------------
                                                            1999         1998        1997        1996        1995
                                                            ----         ----        ----        ----        ----
                                                           (dollars expressed in thousands, except per share data)
Income Statement Data:
<S>                                                     <C>            <C>         <C>          <C>         <C>
    Interest income...................................  $  353,082     327,860     295,101      266,021     261,621
    Interest expense..................................     158,701     162,179     148,831      141,670     144,945
                                                        ----------    --------    --------    ---------   ---------
    Net interest income...............................     194,381     165,681     146,270      124,351     116,676
    Provision for possible loan losses................      13,073       9,000      11,300       11,494      10,361
                                                        ----------    --------    --------    ---------   ---------
    Net interest income after provision
      for possible loan losses........................     181,308     156,681     134,970      112,857     106,315
    Noninterest income................................      41,650      36,497      25,697       20,721      19,407
    Noninterest expense...............................     150,807     138,704     110,287      105,741      91,566
                                                        ----------    --------    --------    ---------   ---------
    Income before provision for income taxes
      and minority interest in (income) loss
      of subsidiaries.................................      72,151      54,474      50,380       27,837      34,156
    Provision for income taxes........................      26,313      19,693      16,083        6,960      11,038
                                                        ----------    --------    --------    ---------   ---------
    Income before minority interest in (income) loss
      of subsidiaries.................................      45,838      34,781      34,297       20,877      23,118
    Minority interest in (income) loss
      of subsidiaries.................................      (1,660)     (1,271)     (1,270)        (659)      1,353
                                                        ----------    --------    --------    ---------   ---------
    Net income........................................  $   44,178      33,510      33,027       20,218      24,471
                                                        ==========    ========    ========    =========   =========
Dividends:
    Preferred stock...................................  $      786         786       5,067       5,728        5,736
    Common stock......................................          --          --          --          --           --
    Ratio of total dividends declared to net income...        1.78%       2.35%      15.34%      28.33%       23.44%
Per Share Data:
    Earnings per common share:
      Basic...........................................  $ 1,833.91    1,383.04    1,181.69      612.46       791.82
      Diluted.........................................    1,775.47    1,337.09    1,134.28      596.83       759.09
    Weighted average common stock outstanding.........      23,661      23,661      23,661      23,661       23,661
Balance Sheet Data (at year-end):
    Investment securities.............................  $  451,647     534,796     795,530     552,801      508,323
    Loans, net of unearned discount...................   3,996,324   3,580,105   3,002,200   2,767,969    2,744,219
    Total assets......................................   4,867,747   4,554,810   4,165,014   3,689,154    3,622,962
    Total deposits....................................   4,251,814   3,939,985   3,684,595   3,238,567    3,183,691
    Notes payable.....................................      64,000      50,048      55,144      76,330       88,135
    Guaranteed preferred beneficial interests
      in First Banks, Inc. and First Banks
      America, Inc. subordinated debentures...........     127,611     127,443      83,183          --          --
    Common stockholders' equity.......................     281,842     250,300     218,474     184,439     166,542
    Total stockholders' equity........................     294,905     263,363     231,537     251,389     234,605
Earnings Ratios:
    Return on average total assets....................        0.95%       0.78%       0.87%       0.57%       0.70%
    Return on average total stockholders' equity......       15.79       13.64       12.91        8.43       10.79
Asset Quality Ratios:
    Allowance for possible loan losses to loans.......        1.72        1.70        1.68        1.69        1.92
    Nonperforming loans to loans (2)..................        0.99        1.22        0.80        1.09        1.44
    Allowance for possible loan losses to
      nonperforming loans (2).........................      172.66      140.04      209.88      154.55      133.70
    Nonperforming assets to loans and
      other real estate (3)...........................        1.05        1.32        1.04        1.47        1.71
    Net loan charge-offs to average loans.............        0.22        0.05        0.27        0.72        0.41
Capital Ratios:
    Average total stockholders' equity to
      average total assets............................        6.00        5.73        6.70        6.79        6.49
    Total risk-based capital ratio....................       10.05       10.28       10.26        9.23        9.34
    Leverage ratio....................................        7.14        7.77        6.80        5.99        5.32
</TABLE>
    ------------------------------
(1)  The  comparability  of the  selected  data  presented  is  affected  by the
     acquisitions  of ten banks and three thrifts  during the  five-year  period
     ended December 31, 1999. These acquisitions were accounted for as purchases
     and,  accordingly,  the selected data  includes the financial  position and
     results  of  operations  of each  acquired  entity  only  for  the  periods
     subsequent to its respective date of acquisition.
(2)  Nonperforming  loans  consist of  nonaccrual  loans and certain  loans with
     restructured terms.
(3)  Nonperforming assets consist of nonperforming loans and other real estate.
<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The discussion set forth in the Letter to Shareholders and Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
contains  certain  forward-looking  statements  with  respect  to the  financial
condition,   results  of   operations   and  business  of  First  Banks.   These
forward-looking  statements are subject to certain risks and uncertainties,  not
all of which can be  predicted  or  anticipated.  Factors  that may cause actual
results to differ  materially  from those  contemplated  by the  forward-looking
statements herein include market conditions as well as conditions  affecting the
banking industry  generally and factors having a specific impact on First Banks,
including but not limited to  fluctuations in interest rates and in the economy;
the  impact  of laws and  regulations  applicable  to First  Banks  and  changes
therein; competitive conditions in the markets in which First Banks conducts its
operations,  including  competition from banking and non-banking  companies with
substantially  greater  resources than First Banks,  some of which may offer and
develop  products and services not offered by First Banks;  the ability of First
Banks to  control  the  composition  of the  loan  portfolio  without  adversely
affecting  interest income; and the ability of First Banks to respond to changes
in technology. With regard to First Banks' efforts to grow through acquisitions,
factors  that could  affect the  accuracy  or  completeness  of  forward-looking
statements  contained  herein  include the potential for higher than  acceptable
operating  costs arising from the geographic  dispersion of the offices of First
Banks, as compared with competitors  operating solely in contiguous markets; the
competition  of larger  acquirers  with  greater  resources  than  First  Banks,
fluctuations  in the prices at which  acquisition  targets may be available  for
sale and in the  market  for First  Banks'  securities;  and the  potential  for
difficulty  or  unanticipated  costs in  realizing  the  benefits of  particular
acquisition  transactions.  Readers of the Annual  Report  should  therefore not
place undue reliance on forward-looking statements.

Company Profile

         First  Banks is a  registered  bank  holding  company  incorporated  in
Missouri and headquartered in St. Louis County,  Missouri. At December 31, 1999,
First Banks had $4.87 billion in total assets, $4.00 billion in total loans, net
of unearned  discount,  $4.25  billion in total  deposits and $294.9  million in
total  stockholders'  equity.  First Banks operates  through its subsidiary bank
holding companies and financial  institutions  (collectively  referred to as the
Subsidiary Banks) as follows:

        First Bank, headquartered in St. Louis County, Missouri (First Bank);
        First Bank & Trust, headquartered in Newport Beach, California (FB&T);
        First Banks America, Inc., headquartered in St. Louis County, Missouri
           (FBA), and its wholly owned subsidiaries:
              First Bank Texas N.A., headquartered in Houston, Texas (FB Texas);
              First Bank of California, headquartered in  Roseville, California
              (FB California); and,
              Redwood Bank, headquartered in San Francisco, California.

         The  Subsidiary  Banks  are  wholly  owned by their  respective  parent
companies except FBA, which was 76.8% owned by First Banks at December 31, 1998.
On February 17, 1999,  First Banks  completed its purchase of 314,848  shares of
FBA common stock pursuant to a tender offer.  The tender offer  increased  First
Banks'  ownership  interest in FBA to 82.3% of the  outstanding  voting stock of
FBA. First Banks' ownership interest in FBA at December 31, 1999 was 83.4%.
         As discussed under "--Acquisitions," in February 1998, First Commercial
Bancorp, Inc. (FCB), a majority-owned subsidiary of First Banks, was acquired by
FBA and its subsidiary  bank,  First  Commercial  Bank (First  Commercial),  was
merged into FB California.  The  acquisition of FCB and First  Commercial by FBA
and FB California, respectively, did not have a material impact on the financial
condition or results of operations of First Banks.
         Through  the  Subsidiary  Banks,  First  Banks  offers a broad range of
commercial  and  personal  banking  services  including  certificate  of deposit
accounts,  individual  retirement and other time deposit accounts,  checking and
other demand deposit accounts,  interest checking accounts, savings accounts and
money market accounts.  Loans include  commercial,  financial and  agricultural,
real estate  construction  and  development,  commercial  and  residential  real
estate,  consumer and  installment,  student and Small  Business  Administration
loans.  Other financial  services  include  mortgage  banking,  credit and debit
cards, brokerage services,  credit-related insurance, automatic teller machines,
telephone  banking,  safe deposit boxes,  trust and private banking services and
cash management services.
         First Banks  centralizes  overall  corporate  policies,  procedural and
administrative  functions and operational  support  functions for the Subsidiary
Banks. Primary responsibility for managing the Subsidiary Banks remains with the
officers and directors.


<PAGE>


         The following table recaps selected data about the Subsidiary  Banks at
December 31, 1999:
<TABLE>
<CAPTION>

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

<S>                                                           <C>     <C>                <C>              <C>
         First Bank..................................         87      $ 3,028,046        2,527,649        2,689,671
         FB&T .......................................         28          944,013          736,828          804,976
         FBA:
              FB California..........................         10          431,838          379,632          367,563
              FB Texas...............................          6          278,988          213,731          244,248
              Redwood Bank...........................          4          199,988          138,902          173,703
</TABLE>

         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 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.
         As more  fully  described  under  "--Financial  Condition  and  Average
Balances" and in Note 9 to the accompanying  consolidated  financial statements,
in February 1997, First Preferred  Capital Trust (FPCT), a newly formed Delaware
statutory  business trust subsidiary of First Banks,  issued 3.45 million shares
of 9.25% Guaranteed  Preferred Beneficial Interests in First Banks' Subordinated
Debentures (FPCT Preferred  Securities) for $86.25 million. In addition, in July
1998, First America Capital Trust (FACT), a newly formed Delaware business trust
subsidiary  of FBA,  issued 1.84 million  shares of 8.50%  Guaranteed  Preferred
Beneficial   Interests  in  FBA's   Subordinated   Debentures   (FACT  Preferred
Securities)  for  $46.0  million.  The FPCT  Preferred  Securities  and the FACT
Preferred  Securities  are publicly held and traded on the Nasdaq Stock Market's
National  Market  System and the New York Stock  Exchange,  respectively.  These
preferred   securities   have  no  voting  rights  except  in  certain   limited
circumstances. Distributions on these preferred securities are payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year.

General

         In  the  development  of  its  banking   franchise,   First  Banks  has
traditionally   placed   primary   emphasis  upon  acquiring   other   financial
institutions  as a means of achieving its growth  objectives.  Acquisitions  may
serve to enhance  its  presence in a given  market,  to expand the extent of its
market area or to enter new or  noncontiguous  markets.  However,  because First
Banks has historically used cash in its acquisitions, the characteristics of the
acquisition  arena at any  given  point in time  may  place it at a  competitive
disadvantage  relative to other acquirers offering stock  transactions.  This is
the result of the market attractiveness of other financial  institutions' stock,
the  advantages  of  tax-free  exchanges  to the selling  shareholders,  and the
financial  reporting  flexibility  inherent in structuring  stock  transactions.
Consequently,  First Banks'  acquisition  activities are somewhat  sporadic,  in
which multiple transactions are consummated in a particular period,  followed by
substantially  less active  acquisition  periods.  Furthermore,  the  intangible
assets  recorded  in  conjunction  with such  acquisitions  create an  immediate
reduction in  regulatory  capital.  This  reduction,  as required by  regulatory
policy,  provides  further  financial  disincentives to paying large premiums in
cash acquisitions.
         Recognizing  these facts,  First Banks has followed certain patterns in
its  acquisitions.  First,  it tends to acquire  several  smaller  institutions,
sometimes over an extended period of time, rather than a single larger one. This
is attributable to the constraints imposed by the amount of funds required for a
larger transaction, as well as the opportunity to minimize the aggregate premium
required   through   smaller   individual   transactions.   Secondly,   in  some
acquisitions,  First Banks may  acquire  institutions  having  more  significant
problems,  which reduces their attractiveness to other potential acquirers,  and
therefore reduces 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, or pursue internal
growth more  aggressively.  These  patterns  have been  evident in First  Banks'
growth during the five years ended December 31, 1999.
         During 1994 and 1995, First Banks completed twelve  acquisitions  which
provided  an  aggregate  of $1.96  billion  in total  assets  and 43  locations.
Relative to the entire organization,  these acquisitions represented an increase
in First Banks' total assets of 78% over the same  two-year  time period.  These
acquisitions  provided  First Banks with access  into  several new major  market
areas  and,  accordingly,  an  attractive  opportunity  for  future  growth  and
profitability. As acquisition pricing in these areas escalated dramatically, the
level of acquisition activity decreased from 1996 through 1999. For a summary of
acquisitions  completed  during the three years ended  December  31,  1999,  see

<PAGE>

"--Acquisitions"  and  Note  2  to  the  accompanying   consolidated   financial
statements.  During the past  three  years,  management  has  continued  to meld
acquired  entities  into its  operations,  systems and culture,  and achieve the
efficiencies and opportunities  envisioned when the entities were acquired. Many
of the acquired  institutions  exhibited elements of financial distress prior to
their   acquisitions   which  contributed  to  marginal  earnings   performance.
Generally,  these elements were the result of asset quality problems and/or high
overhead expenses.
         Following   acquisition,   the  most   immediate   tasks  included  the
improvement  of asset  quality  and the  elimination  of  unnecessary  expenses.
Although many improvements were instituted  shortly after  acquisition,  many of
the problems which existed were indigenous,  requiring a much longer time period
to resolve.  This involved not only many problem  assets,  which had no apparent
short-term  solution,   but  also  other  elements  of  expense,  such  as:  (1)
maintaining,   repairing  and,  in  some  cases,   refurbishing   bank  premises
necessitated  by the  deferral of such  projects by the acquired  entities;  (2)
renegotiating  or subleasing  long-term leases which provided space in excess of
that necessary for banking  activities  and/or rates in excess of current market
rates;  (3) relocating of branch  offices which were not adequate,  conducive or
convenient for banking  operations;  and (4) managing lawsuits that existed with
respect to  acquired  entities  to minimize  the  overall  cost of  negotiation,
settlement or litigation.
         However,  the process which was required after acquisition was not only
one of reducing  expenses and  improving  asset  quality,  but the  combining of
separate and distinct  entities  together to form cohesive  organization  groups
with common objectives and focus.  This involved a significant  post-acquisition
investment of resources by First Banks to reorganize  staff,  recruit  personnel
where needed,  and establish the direction and focus  necessary for the combined
entities to take advantage of the  opportunities  available to them.  While this
contributed to the increases in noninterest  expense during the five years ended
December 31,  1999,  it also  resulted in the  creation of new banking  entities
which were unlike any of the merged entities individually. These banks were able
to convey a consistent image and quality of service, provide a complete array of
financial  products  to  their  customers  and  compete   effectively  in  their
marketplaces,  even in the presence of other  financial  institutions  with much
greater resources.
         While some of these  activities  did not  contribute  to  reductions of
noninterest  expense,  they  contributed to the  commercial and retail  business
development  efforts of the banks,  and  ultimately to their overall  profile to
improve future  profitability.  The  contribution to consolidated net income for
California (FB&T, FB California and Redwood Bank), Texas (FB Texas) and Missouri
and Illinois (First Bank) is reflected in the following table:
<TABLE>
<CAPTION>

                                                  California                 Texas             Missouri and Illinois
                                             ---------------------    --------------------     ---------------------
                                             1999    1998     1997    1999    1998    1997     1999    1998     1997
                                             ----    ----     ----    ----    ----    ----     ----    ----     ----
                                                                  (dollars expressed in thousands)

Year ended December 31:
<S>                                       <C>        <C>     <C>     <C>     <C>     <C>      <C>     <C>      <C>
     Equity in income of subsidiaries.... $14,275    7,168   7,488   3,303   2,303   1,675    40,737  33,271   31,686
     Average investment in subsidiaries.. 156,235   91,243  76,330  24,682  23,389  25,178   252,146 232,518  220,134
     Return on average investment........    9.14%    7.86%   9.81%  13.38%   9.85%   6.65%    16.16%  14.31%   14.39%
</TABLE>

         Anticipating that increasing  acquisition pricing would eventually make
growth solely by acquisition  economically  less viable,  and  recognizing  that
rapid  consolidation  within the  banking  industry  would  create new  business
development  opportunities,  beginning  in 1993,  First Banks began a continuing
program of  substantial  enhancement of its  capabilities  to achieve and manage
internal growth.  This program required  significant  increases in the resources
dedicated to  commercial  and retail  business  development,  financial  service
product line and delivery systems, branch development and training,  advertising
and marketing programs and administrative and operational support. These efforts
were manifested during this period in various changes within the organization.
         The enhanced business development  resources of First Banks assisted in
the realignment of certain  acquired loan  portfolios,  which were skewed toward
loan types which  reflected the abilities and  experiences  of the management of
the acquired entities.  This was particularly evident in acquisitions of savings
banks,  which  had  portfolios  heavily  concentrated  in single  family  and/or
multi-family  residential  real  estate  lending,  and in FB Texas,  which had a
portfolio consisting primarily of indirect automobile loans. In order to achieve
a more diversified portfolio,  to address asset quality issues in the portfolios
and to achieve a higher  interest  yield on the loan  portfolio,  a  substantial
portion of the loans which were acquired  during this time were reduced  through
payments,  refinancing with other financial institutions,  charge-offs,  and, in
two instances,  sales of loans. As a result, the portfolio of one-to-four family
residential  real estate  loans,  after  reaching a maximum of $1.20  billion at
December 31,  1995,  was reduced to $1.06  billion at December 31, 1996,  $915.2
million at December  31,  1997,  $739.4  million at December 31, 1998 and $720.6
million  at  December  31,  1999.  Similarly,  the  portfolio  of  consumer  and
installment loans, net of unearned  discount,  the majority of which is indirect
automobile loans,  decreased from $413.6 million at December 31, 1995, to $333.3
million, $279.3 million, $274.4 million and $225.3 million at December 31, 1996,
1997, 1998 and 1999, respectively.


<PAGE>


         As these components of the loan portfolio decreased, they were replaced
with more  diversified,  better  quality  and  higher  yielding  loans that were
internally   generated  by  the   business   development   function.   With  the
acquisitions, the business development function was expanded into the new market
areas  in  which  First  Banks  was then  operating.  Consequently,  in spite of
relatively  large  reductions  in  acquired   portfolios,   the  aggregate  loan
portfolio,  net of unearned  discount,  increased from $2.74 billion at December
31, 1995 to $2.77  billion,  $3.00  billion,  $3.58 billion and $4.00 billion at
December 31, 1996, 1997, 1998 and 1999, respectively.
         While this  restructuring  of the loan portfolio was  occurring,  First
Banks  was  also  changing  the  composition  of its  deposits.  Several  of the
institutions  which  First Banks has  acquired  since 1990 were  savings  banks.
Traditionally,  savings banks have placed greater reliance on time deposits as a
source of funding than their  commercial  banking  counterparts.  Although  time
deposits are generally a stable source of funds,  they are typically the highest
cost deposits  available,  the  depositors  tend to be  relatively  sensitive to
interest rates in the market, and frequently the customers have no other banking
relationships with the financial institution. These characteristics suggest that
many of these  customers  move their  deposits  between  financial  institutions
readily and have limited  loyalty to any particular  institution.  Consequently,
First Banks' deposit  development  programs have been directed toward  increased
transaction  accounts,  such as demand and  savings  accounts,  rather than time
deposits, and have emphasized attracting more than one account relationship with
customers by cross  selling them through  packaging  various  account  types and
offering  incentives  to  deposit  customers  on other  deposit  or  non-deposit
services.  In addition,  commercial  borrowers are  encouraged to maintain their
operating  deposit  accounts  with First Banks.  As a result,  the net growth in
deposits has been focused in transaction accounts rather than time accounts.  At
December 31, 1995 and 1996,  total time  deposits  were $1.80  billion and $1.81
billion,  or 56.4% and 55.9% of total  deposits,  respectively.  Although  total
deposits  have  continued  to  increase,  average time  deposits  have  remained
relatively  constant  at $1.90  billion,  but have  decreased  to 46.7% of total
deposits at December 31, 1999.
         As further  discussed  under  "--Net  Interest  Income,  Comparison  of
Results of Operations for 1999 and 1998, and Comparison of Results of Operations
for  1998 and  1997,"  the  simultaneous  growth  by  acquisition  of  financial
institutions  and  the  building  of the  infrastructure  necessary  to  achieve
significant  internal growth has had an adverse impact on the operating  results
of First Banks.  However,  despite the significant expenses First Banks incurred
in the  amalgamation  of the acquired  entities into its  corporate  culture and
systems, and in the expansion of its organizational  capabilities,  the earnings
of the acquired entities and the improved net interest income resulting from the
transition  in  the  composition  of  the  loan  and  deposit   portfolios  have
contributed  to improving net income  during 1999 and 1998.  For the years ended
December  31, 1999 and 1998,  net income was $44.2  million  and $33.5  million,
respectively,  compared with $33.0  million,  $20.2 million and $24.5 million in
1997,  1996 and  1995,  respectively.  While  First  Banks  anticipates  certain
short-term   adverse   effects  on  its  operating   results   associated   with
acquisitions,  as evidenced in recent years,  management  believes the long-term
benefits  of First  Banks'  acquisition  program  exceed the  short-term  issues
encountered with selected acquisitions. As such, in addition to concentrating on
internal  growth  through  continued  efforts to further  develop its  corporate
infrastructure  and  product  and  service  offerings,  First  Banks  expects to
continue to identify and pursue  opportunities  for growth through  acquisitions
within its primary market areas.

Acquisitions

         In enhancing its banking  franchise,  First Banks places  emphasis upon
acquiring other financial  institutions as a means of accelerating its growth to
significantly  expand its presence in a given market,  to increase the extent of
its  market  area or to  enter  new or  noncontiguous  market  areas.  After  an
acquisition is consummated,  First Banks expects to enhance the franchise of the
acquired entity by supplementing the marketing and business  development efforts
to broaden the customer bases, strengthening particular segments of the business
or filling voids in the overall market coverage.  First Banks has utilized cash,
borrowings, FBA's voting stock and the issuance of additional securities to meet
its growth objectives under the acquisition program.


<PAGE>
         During the three years ended December 31, 1999,  First Banks  completed
five acquisitions and four branch office purchases. As demonstrated below, First
Banks'  acquisitions  during this period have  primarily  served to increase its
presence  in markets  that were  originally  entered  into  during  1995.  These
transactions, as more fully described in Note 2 to the accompanying consolidated
financial statements, are summarized as follows:
<TABLE>
<CAPTION>

                                                                     Loans, net of                             Number of
                                                            Total      unearned    Investment                   banking
             Entity                       Date             assets      discount    securities    Deposits      locations
             ------                       ----             ------      --------    ----------    --------      ---------
                                                                          (dollars expressed in thousands)
1999
----

   Brentwood Bank of California
<S>                                                       <C>              <C>        <C>           <C>             <C>
   Malibu, California
     branch office (1)            September 17, 1999      $ 23,600         6,300           --       17,300          1

   Century Bank
   Beverly Hills, California (2)     August 31, 1999       156,000        94,800       26,100      132,000          6

   Redwood Bancorp
   San Francisco, California (3)       March 4, 1999       183,900       134,400       34,400      162,900          4
                                                          --------      --------      -------     --------        ---
                                                          $363,500       235,500       60,500      312,200         11
                                                          ========      ========      =======     ========        ===

1998
----

   Republic Bank
   Torrance, California (2)       September 15, 1998      $124,100        97,900        7,500      117,200          3

   Bank of America
   Solvang, California
   branch office (1)                  March 19, 1998        15,500            --           --       15,500          1

   Pacific Bay Bank
   San Pablo, California (4)        February 2, 1998        38,300        29,700          232       35,200          1
                                                          --------      --------      -------     --------        ---
                                                          $177,900       127,600        7,732      167,900          5
                                                          ========      ========      =======     ========        ===

1997
----

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

   Highland Federal
   Savings Bank, F.S.B.
   Woodland Hills, California
   branch office (5)              September 30, 1997        42,500           100           --       42,400          1

   Highland Federal Savings Bank,
   F.S.B. Long Beach, California
   branch offices (5)                 March 31, 1997        40,500           100           --       40,400          2
                                                          --------      --------      -------     --------        ---
                                                          $155,800        54,600       11,800      150,300          5
                                                          ========      ========      =======     ========        ===
</TABLE>
-------------------------
(1)  The Malibu  branch office of Brentwood  Bank of California  and the Solvang
     branch  office of Bank of America were  acquired by FB&T through a purchase
     of certain  assets and  assumption  of  deposit  liabilities  of the branch
     office.  Total assets consist primarily of cash received upon assumption of
     the deposit liabilities and selected loans.
(2)  Century Bank and Republic Bank were merged into FB&T.
(3)  Redwood  Bancorp  is a wholly  owned  subsidiary  of FBA.  Redwood  Bancorp
     operates through its wholly owned subsidiary bank, Redwood Bank.
(4)  Pacific Bay Bank and Surety Bank were merged into FB California.
(5)  The  Woodland  Hills  branch  office and the Long Beach  branch  offices of
     Highland  Federal  Savings  Bank,  F.S.B.  were  acquired by FB&T through a
     purchase of certain  assets and  assumption of deposit  liabilities  of the
     branch  offices.  Total  assets  consist  primarily of cash  received  upon
     assumption of deposit liabilities and selected loans.


<PAGE>


         Except for the  acquisition  of Surety Bank,  these  acquisitions  were
funded by First Banks from available cash reserves,  proceeds from the sales and
maturities of available-for-sale  investment securities,  borrowings under First
Banks' credit  agreement with a group of unaffiliated  banks (Credit  Agreement)
and the proceeds of the preferred securities.
         As more  fully  discussed  in Note 2 to the  accompanying  consolidated
financial statements, the 49% cash portion of the acquisition of Surety Bank was
funded from available  cash. The remaining 51% was acquired  through an exchange
of shares of FBA common stock.  In February  1998, FCB was acquired by FBA in an
exchange  of FBA common  stock for FCB common  stock.  In  connection  with this
transaction,  FCB was  merged  into a  wholly  owned  subsidiary  of FBA,  First
Commercial was merged into FB California and First Banks' ownership  interest in
FBA increased.
         On February 29, 2000,  First Banks  completed its  acquisition of Lippo
Bank, San Francisco,  California,  in exchange for $17.2 million in cash.  Lippo
Bank  operates  three  banking  locations  in San  Francisco,  San  Jose and Los
Angeles, California. The acquisition was funded from available cash. At the time
of the transaction,  Lippo Bank had $85.3 million in total assets, $40.9 million
in loans, net of unearned discount,  $37.4 million in investment  securities and
$76.4  million in deposits at the  acquisition  date.  Lippo Bank will be merged
into FB California.
         On February 29, 2000,  First Banks completed its acquisition of certain
assets and  liabilities of First Capital Group,  Inc.,  Albuquerque,  New Mexico
(FCG),  in exchange  for $65.1  million in cash.  FCG is a leasing  company that
specializes in commercial  leasing and operates a multi-state  leasing business.
The acquisition was funded from available cash. At the time of the  transaction,
FCG had $64.6  million in total assets,  consisting  almost solely of commercial
leases,  net of unearned income, of $64.5 million.  FCG is operating as a direct
subsidiary of First Banks, Inc.

Financial Condition and Average Balances

         First Banks' average total assets were $4.66 billion for the year ended
December 31,  1999,  compared to $4.29  billion and $3.82  billion for the years
ended  December  31, 1998 and 1997,  respectively.  Total assets at December 31,
1999 were $4.87 billion,  an increase of $312.9  million,  or 6.87%,  over total
assets of $4.55 billion at December 31, 1998.
         The  increase  of $377.6  million in total  average  assets for 1999 is
primarily  attributable  to: (a) the  acquisitions  of Redwood and Century Bank,
which provided total assets of $183.9 million and $156.0 million,  respectively;
(b) the  purchase of the deposit  accounts  of the  Malibu,  California  banking
location of Brentwood  Bank of  California;  (c) internal loan growth  resulting
from the continued expansion and development of the business  development staff;
and (d) the issuance of the FACT  Preferred  Securities.  The increase in assets
for 1999 was primarily funded by an increase in total average deposits of $283.3
million to $4.06 billion at December 31, 1999, an increase in average short-term
borrowings of $26.2 million and a decrease in average  investment  securities of
$221.3  million.  Similarly,  the  increase  in assets for 1998 was funded by an
increase  in  average  total  deposits  of $427.7  million  to $3.78  billion at
December 31, 1998,  from $3.35  billion at December 31, 1997,  and a decrease in
average  investment  securities  of $58.0 million  during 1998.  The increase in
deposits for 1998 is attributable to the acquisitions of Republic Bank,  Pacific
Bay Bank,  the  purchase of the  deposit  accounts  of the  Solvang,  California
banking  location  of Bank of  America  and  internal  deposit  growth  of $92.1
million.
         Loans, net of unearned discount,  averaged $3.81 billion, $3.25 billion
and  $2.85  billion  for the  years  ended  December  31,  1999,  1998 and 1997,
respectively.  As summarized under  "--Acquisitions," the acquisitions completed
during 1999 and 1998 provided loans, net of unearned discount, of $235.5 million
and $127.6  million,  respectively.  In  addition  to growth  provided  by these
acquisitions,  for 1999,  $363.4  million  of net loan  growth was  provided  by
corporate  banking  business  development,  consisting  of an increase of $148.3
million of commercial,  financial and agricultural  loans, $31.5 million of real
estate  construction and land development loans and $183.6 million of commercial
real  estate  loans.   These  increases  were  partially  offset  by  continuing
reductions in  residential  real estate loans of $126.4  million and in consumer
and installment  loans,  net of unearned  discount,  which consist  primarily of
indirect automobile loans, of $56.3 million. These changes are the result of the
focus which First Banks has placed on its business  development  efforts and the
portfolio  repositioning  which began in 1995. This  repositioning  provided for
substantially  all of the  conforming  residential  mortgage loan  production of
First Banks to be sold in the secondary  mortgage  market and the origination of
indirect  automobile loans to be substantially  reduced.  Tables summarizing the
composition of the loan portfolio are presented  under  "--Lending and Allowance
for Possible Loan Losses."

<PAGE>

         Investment  securities  averaged  $454.4  million,  $675.7  million and
$617.7  million  for  the  years  ended  December  31,  1999,   1998  and  1997,
respectively.  The average balance of investment  securities decreased by $221.3
for the year ended December 31, 1999. This decrease is primarily attributable to
the  liquidation  of  certain  acquired  investment   securities  and  sales  of
investment  securities  necessary to provide an  additional  source of funds for
First Banks' loan growth.  The decrease was partially  offset by the  investment
securities  obtained in conjunction with the acquisitions of Redwood and Century
Bank and retained in First Banks' portfolio.
         Deposits  are the  primary  funding  source  for  First  Banks  and are
acquired  from a broad base of local  markets,  including  both  individual  and
corporate  customers.  Deposits averaged $4.06 billion,  $3.78 billion and $3.35
billion for the years ended December 31, 1999, 1998 and 1997, respectively.  The
increases are primarily  attributable to the  acquisitions  completed during the
respective  periods  and  the  expansion  of the  deposit  product  and  service
offerings  available to First Banks'  customer  base.  The overall  increase was
partially  offset by the divestiture of certain branches in 1999, which resulted
in a reduction in First Bank's deposit base of  approximately  $54.8 million.  A
summary of the composition of deposits is presented under "--Deposits."
         During July 1998,  FACT issued 1.84  million  shares of FACT  Preferred
Securities at $25 per share in an underwritten  public  offering.  Proceeds from
FACT's  offering,   net  of  underwriting  fees  and  offering  expenses,   were
approximately  $44.0  million  and were used to reduce  borrowings,  to  support
possible  repurchases  of FBA's  common  stock from time to time and for general
corporate purposes.  The remaining proceeds were temporarily  invested by FBA in
interest-bearing  deposits and were used to fund the acquisition of Redwood.  In
addition,  in February  1997,  FPCT issued 3.45 million shares of FPCT Preferred
Securities at $25 per share in an  underwritten  public  offering.  The proceeds
from FPCT's offering, net of underwriting fees and offering expenses, were $83.1
million and were used to reduce  borrowings,  for purchases of shares of Class C
9.00% Increasing Rate, Redeemable, Cumulative Preferred Stock (Class C Preferred
Stock) and for various short-term investments.
         Stockholders' equity averaged $279.8 million, $245.6 million and $255.9
million for the years ended December 31, 1999, 1998 and 1997, respectively.  The
increase for 1999 is primarily attributable to net income of $44.2 million and a
reduction  of the  deferred tax  valuation  reserve of $811,000  relating to the
utilization of tax net operating  losses  incurred by certain  Subsidiary  Banks
prior to completing quasi-reorganizations.  The increase was partially offset by
a $9.4  million  reduction in other  comprehensive  income,  resulting  from the
change  in  unrealized  gains  and  losses  on   available-for-sale   investment
securities,  and repurchases by FBA of common stock for treasury during the year
ended December 31, 1999. The increase for 1998 was primarily attributable to net
income and First Banks'  continued  practice of retaining most of its net income
to further  support future growth.  In addition,  in December 1997,  First Banks
redeemed  all of its  remaining  outstanding  Class C Preferred  Stock for $47.1
million.  The effect of the  redemption  was a reduction  of First  Banks' total
stockholders' equity, and consequently  regulatory capital, by the amount of the
redemption. However, the structure of the FPCT Preferred Securities and the FACT
Preferred Securities  described above satisfies the regulatory  requirements for
inclusion in First Banks'  capital base,  subject to certain  limitations,  in a
manner similar to the Class C Preferred Stock.



<PAGE>


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

                                                                         For the years ended December 31,
                                                ---------------------------------------------------------------------------------
                                                          1999                        1998                         1997
                                                ------------------------     ----------------------      ------------------------
                                                         Interest                    Interest                     Interest
                                                Average   income/ Yield/     Average  income/ Yield/     Average   income/ Yield/
                                                balance   expense  rate      balance  expense  rate      balance   expense  rate
                                                -------   -------  ----      -------  -------  ----      -------   -------  ----
                                                                       (dollars expressed in thousands)
                   ASSETS
                   ------

Interest-earning assets:
    Loans: (1) (2) (3)
<S>                                          <C>         <C>        <C>   <C>         <C>       <C>   <C>         <C>       <C>
       Taxable............................   $3,805,351  322,703    8.48% $3,243,183  283,661   8.75% $2,837,190  252,089   8.89%
       Tax-exempt (4).....................        7,157      775   10.83       7,536      794  10.54       8,967    1,042  11.62
    Investment securities:
       Taxable............................      435,189   26,206    6.02     657,385   39,898   6.07     598,660   35,248   5.89
       Tax-exempt (4).....................       19,247    1,442    7.49      18,318    1,515   8.27      19,056    1,552   8.15
    Federal funds sold....................       49,464    2,617    5.29      46,509    2,630   5.65     125,825    5,322   4.23
    Other.................................        1,878      115    6.12       2,853      170   5.96      12,138      757   6.24
                                             ----------  -------          ----------  -------          ---------   ------
         Total interest-earning assets....    4,318,286  353,858    8.19   3,975,784  328,668   8.27   3,601,836  296,010   8.22
                                                         -------                      -------                     -------
Nonearning assets.........................      344,942                      309,811                     215,890
                                             ----------                   ----------                   ---------
         Total assets.....................   $4,663,228                   $4,285,595                  $3,817,726
                                             ==========                   ==========                  ==========

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

Interest-bearing liabilities:
    Interest-bearing deposits:
       Interest-bearing demand deposits...   $  391,892    5,098    1.30% $  357,463    5,135   1.44% $  332,712    5,648   1.70%
       Savings deposits...................    1,220,425   44,101    3.61   1,076,524   42,591   3.96     761,052   27,383   3.60
       Time deposits of $100 or more (3)..      230,520   12,480    5.41     212,691   12,442   5.85     183,223   11,008   6.01
       Other time deposits (3)............    1,668,698   89,173    5.34   1,669,638   95,577   5.72   1,681,014  100,954   6.01
                                             ----------  -------          ----------  -------         ----------  -------
         Total interest-bearing deposits..    3,511,535  150,852    4.30   3,316,316  155,745   4.70   2,958,001  144,993   4.90
    Short-term borrowings (3).............       87,374    4,220    4.83      61,178    2,959   4.84      75,016    2,463   3.28
    Notes payable and other...............       56,376    3,629    6.44      50,718    3,475   6.85      17,883    1,375   7.69
                                             ----------  -------          ----------  -------         ----------   ------
         Total interest-bearing
           liabilities....................    3,655,285  158,701    4.34   3,428,212  162,179   4.73   3,050,900  148,831   4.88
                                                         -------                      -------                     -------
Noninterest-bearing liabilities:
    Demand deposits.......................      552,029                      463,939                     394,580
    Other liabilities.....................      176,102                      147,849                     116,359
                                             ----------                   ----------                  ----------
         Total liabilities................    4,383,416                    4,040,000                   3,561,839
Stockholders' equity......................      279,812                      245,595                     255,887
                                             ----------                   ----------                  ----------
         Total liabilities and
           stockholders' equity...........   $4,663,228                   $4,285,595                  $3,817,726
                                             ==========                   ==========                  ==========
Net interest income.......................               195,157                      166,489                     147,179
                                                         =======                      =======                     =======
Interest rate spread......................                          3.85                        3.54                        3.34
Net interest margin.......................                          4.52%                       4.19%                       4.09%
                                                                    ====                        ====                        ====
</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)   Includes the effects of interest rate exchange agreements.
(4)   Information is presented on a tax-equivalent  basis assuming a tax rate of
      35%. The tax-equivalent adjustments were approximately $776,000,  $808,000
      and  $909,000  for the  years  ended  December  31,  1999,  1998 and 1997,
      respectively.


<PAGE>


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

                                                          Increase (decrease) attributable to change in:
                                                ----------------------------------------------------------------
                                                  December 31, 1999 compared         December 31, 1998 compared
                                                     to December 31, 1998               to December 31, 1997
                                                ----------------------------       -------------------------
                                                                          Net                                Net
                                               Volume        Rate       Change     Volume       Rate       Change
                                               ------        ----       ------     ------       ----       ------
                                                               (dollars expressed in thousands)

Interest earned on:
    Loans: (1) (2) (3)
<S>                                          <C>           <C>         <C>        <C>         <C>         <C>
       Taxable...........................    $ 48,009      (8,967)     39,042     35,476      (3,904)     31,572
       Tax-exempt (4)....................         (41)         22         (19)      (157)        (91)       (248)
    Investment securities:
       Taxable...........................     (13,366)       (326)    (13,692)     3,545       1,105       4,650
       Tax-exempt (4)....................          74        (147)        (73)       (60)         23         (37)
    Federal funds sold...................         161        (174)        (13)    (5,759)      3,067      (2,692)
    Other................................         (59)          4         (55)      (554)        (33)       (587)
                                             --------      ------      ------     ------      ------      ------
           Total interest income.........      34,778      (9,588)     25,190     32,491         167      32,658
                                             --------      ------      ------     ------      ------      ------
Interest paid on:
    Interest-bearing demand deposits.....         480        (517)        (37)       486        (999)       (513)
    Savings deposits.....................       5,445      (3,935)      1,510     12,252       2,956      15,208
    Time deposits of $100 or more (3)....       1,007        (969)         38      1,718        (284)      1,434
    Other time deposits (3)..............         (54)     (6,350)     (6,404)      (661)     (4,716)     (5,377)
    Short-term borrowings (3)............       1,267          (6)      1,261       (314)        810         496
    Notes payable and other..............         371        (217)        154      2,233        (133)      2,100
                                             --------      ------      ------     ------      -------     ------
           Total interest expense........       8,516     (11,994)     (3,478)    15,714      (2,366)     13,348
                                             --------     -------      ------     ------      ------      ------
           Net interest income...........    $ 26,262       2,406      28,668     16,777       2,533      19,310
                                             ========     =======      ======     ======      ======      ======
</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)  Includes the effect of interest rate exchange agreements.
(4)  Information is presented on a tax-equivalent basis assuming a tax rate
     of 35%.

Net Interest Income

         The primary source of First Banks' income is net interest income, which
is the difference between the interest earned on its interest-earning assets and
the interest  paid on its  interest-bearing  liabilities.  Net  interest  income
(expressed on a  tax-equivalent  basis) improved to $195.2 million,  or 4.52% of
average  interest-earning  assets,  for the year ended  December 31, 1999,  from
$166.5 million,  or 4.19% of  interest-earning  assets,  and $147.2 million,  or
4.09% of  interest-earning  assets,  for the years ended  December  31, 1998 and
1997,  respectively.  The improved net interest income is primarily attributable
to the net interest-earning assets provided by the acquisitions of Century Bank,
Redwood,  Pacific  Bay  Bank and  Republic  Bank,  internal  loan  growth  and a
reduction  in  the  overall  cost  of  deposits.   As  further  discussed  under
"--Financial  Condition  and Average  Balances,"  average  total  loans,  net of
unearned  discount,  increased by $561.8  million to $3.81  billion for the year
ended  December  31, 1999 from $3.25  billion and $2.85  billion for years ended
December 31, 1998 and 1997,  respectively.  Contributing further to the improved
net interest income was the effect of: (a) the reduction of First Bank's deposit
base associated with the divested branches,  which was primarily concentrated in
certificates  of  deposit;  and (b) a decrease  in the cost of  interest-bearing
liabilities to 4.34% from 4.73% and 4.88% for the years ended December 31, 1999,
1998 and 1997, respectively.
         Although the net interest rate margin  improved,  the yield on the loan
portfolio  declined to 8.48% for the year ended  December 31, 1999 in comparison
to 8.75% and 8.89% for the years ended December 31, 1998 and 1997, respectively.
This reduction primarily results from the overall decline in prevailing interest
rates that  occurred  during the latter  part of 1998.  In  addition,  increased
competition  within the market  areas  served by First  Banks has led to reduced
lending  rates.  The  effect  of the  reduced  yield on the loan  portfolio  was
partially  mitigated by the earnings impact of the interest rate swap agreements
and a reduced  rate paid on  interest-bearing  liabilities.  For the years ended
December  31,  1999,  1998 and 1997,  the  aggregate  weighted  rate paid on the
deposit portfolio was 4.30%, 4.70% and 4.90%,  respectively,  representing First
Banks' ongoing realignment of the portfolio.

<PAGE>
         During the three  years  ended  December  31,  1999,  First  Banks' net
interest income and net interest rate margin have continued to improve. However,
during  1996 and 1995,  the net  interest  rate  margin  fell below  average for
commercial banks. During periods of rapid growth through cash acquisitions,  the
net  interest  margin  frequently  decreases  because the  reduction of interest
income on  internally  generated  funds used in  acquisitions  and the  interest
expense  on debt  incurred  in the  transactions  offsets a  portion  of the net
interest  income of the  entities  acquired.  As a result,  during this  period,
interest-earning   assets  increase  more  rapidly  than  net  interest  income,
contributing  to a lower net interest  margin.  In addition,  since 1990,  First
Banks  has  acquired  ten  thrifts  in  various  transactions.   The  regulatory
requirements  and the  historic  customer  bases of  thrifts  tend to  result in
balance sheets which are predominantly  comprised of residential mortgage loans,
frequently  supplemented by  mortgage-backed  securities,  for  interest-earning
assets, and certificates of deposit as a primary source of funds. Because of the
competitive,  homogeneous nature of residential  mortgage loans and certificates
of deposit,  the  interest  rate spreads  between them tend to be narrower  than
other types of loans and funding sources.
         First Banks' average yield on residential real estate loans and average
cost of certificates of deposit, compared to those of other segments of its loan
portfolio and interest-bearing deposits, respectively, were as follows:
<TABLE>
<CAPTION>

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

         Year ended December 31, 1999:
<S>                                                             <C>             <C>       <C>           <C>
              Residential mortgage loans......................  $   797,137     20.91%    $  61,505     7.72%
              Other loans.....................................    3,015,371     79.09       261,973     8.69
                                                                -----------   -------     ---------
                  Total loans.................................  $ 3,812,508    100.00%    $ 323,478     8.48
                                                                ===========   =======     =========     ====

              Certificates of deposit.........................  $ 1,899,218     54.09%    $ 101,653     5.35%
              Other interest-bearing deposits.................    1,612,317     45.91        49,199     3.05
                                                                -----------   -------     ---------
                  Total interest-bearing deposits.............  $ 3,511,535    100.00%    $ 150,852     4.30
                                                                ===========    ======     =========     ====
        Year ended December 31, 1998:
              Residential mortgage loans......................  $   928,805     28.57%    $  74,792     8.05%
              Other loans.....................................    2,321,914     71.43       209,663     9.03
                                                                -----------   -------     ---------
                  Total loans.................................  $ 3,250,719    100.00%    $ 284,455     8.75
                                                                ===========    ======     =========     ====

              Certificates of deposit.........................  $ 1,882,329     56.76%    $ 108,019     5.74%
              Other interest-bearing deposits.................    1,433,987     43.24        47,726     3.33
                                                                -----------   -------     ---------
                  Total interest-bearing deposits.............  $ 3,316,316    100.00%    $ 155,745     4.70
                                                                ===========    ======     =========     ====
         Year ended December 31, 1997:
              Residential mortgage loans......................  $ 1,025,442     36.03%    $  83,248     8.12%
              Other loans.....................................    1,820,715     63.97       169,883     9.33
                                                                -----------   -------     ---------
                  Total loans.................................  $ 2,846,157    100.00%    $ 253,131     8.89
                                                                ===========    ======     =========     ====

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

         In addition  to the narrow  interest  rate spread  between the yield on
residential  mortgage  loans  and the rates  paid on  certificates  of  deposit,
residential  mortgage  loans  introduce  various  prepayment   alternatives  for
borrowers  which,  when combined  with  inexpensive  refinancing  opportunities,
accelerate  principal repayments in periods of declining interest rates, thereby
exacerbating their inherent interest rate risk.
         In order to enhance its net interest income through increased yields on
its loan  portfolio  and to  reduce  the  interest  rate  risk  associated  with
residential  mortgage loans, First Banks has reduced its reliance on residential
mortgage  loans within its portfolio.  This change in the portfolio  composition
required  the   concurrent   internal   generation  of  other  types  of  loans,
particularly  commercial,  financial and agricultural,  real estate construction
and development, and commercial real estate loans, a process that had previously
been  initiated.  This  process  focused on  continuing  to build this  business
development  function,  as well as the control and servicing  staff necessary to
support it. As the growth of other loans  developed,  First Banks  expanded  its
sale of conforming residential mortgage loans in the secondary market to include
essentially all new loan production.

<PAGE>

         In order to limit its interest rate risk, First Banks expanded its risk
management capabilities to improve its risk measurement techniques and reporting
and increase its risk control  alternatives.  This included initiating a program
of using  derivative  financial  instruments  to reduce  interest rate exposure.
First Banks uses a combination  of interest rate swap,  floor and cap agreements
to reduce its exposure and although these financial instruments are effective in
reducing interest rate risk, the expense associated with them has had an overall
negative impact on net interest income. As discussed under "--Interest Rate Risk
Management," for 1999, the increase in the cost of such financial instruments is
reflective of the  liquidation of a portion of the  underlying  interest-bearing
liabilities,  primarily associated with the branch divestitures,  which resulted
in the additional recognition of a portion of the related deferred losses on the
previously  terminated  interest  rate  swap  agreements.  The  following  table
summarizes the cost of the interest rate swap,  floor and cap agreements for the
periods indicated:
<TABLE>
<CAPTION>

                                                                                                 Reduction of
                                                                     Reduction of                net interest
                                                                  net interest income             margin (1)
                                                           --------------------------------     --------------
                                                           (dollars expressed in thousands)     (expressed  in
                                                                                                 basis points)
          Year ended December 31:

<S>            <C>                                                     <C>                          <C>
               1999...............................................     $ 5,397                      0.12
               1998...............................................       3,810                      0.10
               1997...............................................       6,574                      0.18
</TABLE>
------------------------
(1) Effect on net interest  margin is expressed as a  reduction of  net interest
    income divided by average interest-earning assets.

Interest Rate Risk Management

         For financial institutions,  the maintenance of a satisfactory level of
net interest income is a primary factor in achieving  acceptable  income levels.
However,  the maturity and repricing  characteristics  of the institution's loan
and investment portfolios,  relative to those within its deposit structure,  may
differ significantly.  These characteristics are influenced by the nature of the
loan and deposit markets within which such institution  operates, as well as its
objectives for business  development  within those markets at any point in time.
In addition,  the ability of borrowers to repay loans and depositors to withdraw
funds prior to stated maturity dates introduces divergent option characteristics
which operate  primarily as interest  rates change.  These factors cause various
elements of the institution's balance sheet to react in different manners and at
different  times  relative  to changes in  interest  rates,  thereby  leading to
increases  or decreases in net  interest  income over time.  Depending  upon the
nature and velocity of interest rate  movements and their effect on the specific
components  of the  institution's  balance  sheet,  the effects on net  interest
income can be substantial. Consequently, a fundamental requirement in managing a
financial  institution is establishing  effective control of the exposure of the
institution to changes in interest rates.
         First Banks manages its interest rate risk by: (1) maintaining an Asset
Liability  Committee ("ALCO")  responsible to First Banks' Board of Directors to
review the overall  interest rate risk  management  activity and approve actions
taken to reduce risk; (2) maintaining an effective simulation model to determine
First  Banks'  exposure  to changes in  interest  rates;  (3)  coordinating  the
lending, investing and deposit-generating functions to control the assumption of
interest  rate  risk;  and (4)  employing  various  off-balance-sheet  financial
instruments to offset inherent interest rate risk when it becomes excessive. The
objective of these  procedures  is to limit the adverse  impact which changes in
interest rates may have on net interest income.
         The ALCO has overall  responsibility  for the  effective  management of
interest rate risk and the approval of policy guidelines.  The ALCO includes the
Chairman and Chief  Executive  Officer,  the senior  executives of  investments,
credit,  banking support and finance,  and certain other  officers.  The ALCO is
supported by the Asset Liability  Management Group which monitors  interest rate
risk,  prepares analyses for review by the ALCO and implements actions which are
either specifically directed by the ALCO or established by policy guidelines.
         The objective and primary focus of interest  sensitivity  management is
to  optimize   earnings   results,   while  managing,   within  internal  policy
constraints,  interest rate risk.  First Banks' policy on rate sensitivity is to
manage  exposure to potential risks  associated with changing  interest rates by
maintaining a balance  sheet posture in which annual net interest  income is not
significantly  impacted by  reasonably  possible  near-term  changes in interest
rates.  To measure the effect of interest rate changes,  First Banks  calculates
its net income over two  one-year  horizons on a pro forma  basis.  The analysis

<PAGE>

assumes  various  scenarios  for  increases  and  decreases  in  interest  rates
including both instantaneous and gradual and parallel and non-parallel shifts in
the yield curve,  in varying  amounts.  For  purposes of arriving at  reasonably
possible  near-term  changes in interest rates,  First Banks includes  scenarios
based on actual changes in interest  rates,  which have occurred over a two-year
period,   simulating  both  a  declining  and  rising  interest  rate  scenario.
Consistent  with the table  presented  below,  which  indicates  First  Banks is
"asset-sensitive,"  First Banks'  simulation model indicates a loss of projected
net income should  interest rates decline.  While a decline in interest rates of
less than 100 basis points has a minimal  impact on the earnings of First Banks,
a decline in interest  rates of 100 basis points  indicates a projected  pre-tax
loss of net income equivalent to approximately 7.1% of net interest income based
on assets and liabilities at December 31, 1999.
         As  previously  discussed,   First  Banks  utilizes   off-balance-sheet
derivative  financial  instruments  to assist in the management of interest rate
sensitivity and 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.  Derivative  financial  instruments  held by First Banks for  purposes of
managing interest rate risk are summarized as follows:
<TABLE>
<CAPTION>

                                                                                  December 31,
                                                               ---------------------------------------------------
                                                                          1999                       1998
                                                               ------------------------  -------------------------
                                                               Notional        Credit       Notional       Credit
                                                                amount        exposure       amount       exposure
                                                                ------        --------       ------       --------
                                                                         (dollars expressed in thousands)

     Interest rate swap agreements - pay
<S>                                                            <C>             <C>          <C>            <C>
         adjustable rate, receive adjustable rate............  $ 500,000          --             --           --
     Interest rate swap agreements - pay
         adjustable rate, receive fixed rate.................    455,000       3,349        280,000        3,526
     Interest rate floor agreements..........................     35,000          13         70,000           29
     Interest rate cap agreements............................     10,000          26         10,000          132
     Forward commitments to sell
         mortgage-backed securities..........................     33,000          --         95,000          237
                                                               =========      ======        =======       ======
</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 and the other terms of the  derivatives are determined
by  reference to the notional  amounts and other terms of the  derivatives.  The
credit  exposure  represents the accounting  loss First Banks would incur in the
event the counterparties  failed completely to perform according to the terms of
the derivative  financial  instruments  and the  collateral  held to support the
credit exposure was of no value.
         Previously,  First Banks  utilized  interest  rate swap  agreements  to
extend the repricing characteristics of certain interest-bearing  liabilities to
more closely correspond with its assets,  with the objective of stabilizing cash
flow, and  accordingly,  net interest  income,  over time. These swap agreements
were terminated in July 1995, November 1996 and July 1997 due to a change in the
composition of First Banks' balance sheet.  The change in the composition of the
balance sheet was primarily driven by the significant  decline in interest rates
experienced  during 1995, which caused an increase in the principal  prepayments
of residential  mortgage loans. The net interest  expense  associated with these
agreements,  consisting  primarily of amortization of deferred losses,  was $5.7
million,  $3.7 million and $6.4  million for the years ended  December 31, 1999,
1998 and 1997,  respectively.  The deferred losses on terminated swap agreements
were amortized over the remaining lives of the agreements, unless the underlying
liabilities  were  repaid,  in which case the deferred  losses were  immediately
charged to operations.  There were no remaining  unamortized  deferred losses on
the terminated swap agreements at December 31, 1999. The unamortized  balance of
these  losses was $5.7  million and $9.4  million at December 31, 1998 and 1997,
respectively, and was included in other assets.
         During 1998, First Banks entered into $280.0 million notional amount of
interest rate swap  agreements.  The swap  agreements  effectively  lengthen the
repricing  characteristics of certain interest-earning assets to correspond more
closely with its funding source with the objective of stabilizing cash flow, and
accordingly,  net interest  income,  over time. The swap agreements  provide for
First  Banks to  receive a fixed rate of  interest  and pay an  adjustable  rate
equivalent to the 90-day London  Interbank  Offering Rate (LIBOR).  The terms of
the swap agreements provide for First Banks to pay quarterly and receive payment
semiannually. The amount receivable by First Banks under the swap agreements was
$4.1 million and $4.2 million at December 31, 1999 and 1998,  respectively,  and
the amount  payable by First Banks under the swap  agreements  was  $770,000 and
$640,000 at December 31, 1999 and 1998, respectively.

<PAGE>

         During May 1999,  First  Banks  entered  into $500.0  million  notional
amount of interest rate swap  agreements  with the objective of stabilizing  the
net  interest  margin  during the  six-month  period  surrounding  the Year 2000
century date change. The swap agreements  provided for First Banks to receive an
adjustable  rate of interest  equivalent to the daily  weighted  average  30-day
LIBOR and pay an adjustable  rate of interest  equivalent to the daily  weighted
average prime lending rate minus 2.665%. The terms of the swap agreements, which
had an effective  date of October 1, 1999 and a maturity date of March 31, 2000,
provided  for First Banks to pay and receive  interest  on a monthly  basis.  In
January  2000,  First  Banks  determined  these swap  agreements  were no longer
necessary  based  upon the  results  of the Year 2000  century  date  change and
terminated these agreements at a cost of $150,000.
         During September 1999, First Banks entered into $175.0 million notional
amount of interest rate swap  agreements to  effectively  lengthen the repricing
characteristics  of certain  interest-earning  assets to correspond more closely
with its  funding  source  with the  objective  of  stabilizing  cash flow,  and
accordingly,  net interest  income,  over time. The swap agreements  provide for
First  Banks to  receive a fixed rate of  interest  and pay an  adjustable  rate
equivalent to the weighted  average prime lending rate minus 2.70%. The terms of
the swap  agreements  provide for First  Banks to pay and receive  interest on a
quarterly basis. The amount  receivable by First Banks under the swap agreements
was  $119,000 at December  31, 1999 and the amount  payable by First Banks under
the swap agreements was $141,000 at December 31, 1999.
         The maturity dates, notional amounts, interest rates paid and received,
and fair values of interest rate swap agreements  outstanding as of December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>

                                                                  Notional   Interest rate Interest rate  Fair value
                       Maturity date                               amount        paid        received     gain (loss)
                       -------------                               ------        ----        --------     -----------
                                                                         (dollars expressed in thousands)

         December 31, 1999:
<S>                                                            <C>               <C>           <C>       <C>
             March 31, 2000..................................  $  350,000        5.84%         6.45%     $      87
             March 31, 2000..................................      75,000        5.84          6.45             19
             March 31, 2000..................................      50,000        5.84          6.45             12
             March 31, 2000..................................      25,000        5.84          6.45              6
             September 27, 2001..............................      75,000        5.80          6.14           (685)
             September 27, 2001..............................      45,000        5.80          6.14           (411)
             September 27, 2001..............................      40,000        5.80          6.14           (365)
             September 27, 2001..............................      15,000        5.80          6.14           (137)
             June 11, 2002...................................      15,000        6.12          6.00           (291)
             September 16, 2002..............................     175,000        6.12          5.36         (6,574)
             September 16, 2002..............................      20,000        6.12          5.36           (751)
             September 18, 2002..............................      40,000        6.14          5.33         (1,543)
             September 18, 2002..............................      30,000        6.14          5.33         (1,157)
                                                               ----------                                ---------
                                                               $  955,000        5.91          6.08      $ (11,790)
                                                               ==========       =====         =====      =========

         December 31, 1998:
             June 11, 2002...................................      15,000        5.24          6.00      $     363
             September 16, 2002..............................     175,000        5.22          5.36            761
             September 16, 2002..............................      20,000        5.22          5.36             87
             September 18, 2002..............................      40,000        5.23          5.33            123
             September 18, 2002..............................      30,000        5.23          5.33             92
                                                               ----------                                ---------
                                                               $  280,000        5.23          5.48      $   1,426
                                                               ==========       =====         =====      =========
</TABLE>

         First Banks also  utilizes  interest  rate cap and floor  agreements to
limit the interest expense associated with certain interest-bearing  liabilities
and  the  net  interest  expense  of  certain  interest  rate  swap  agreements,
respectively.  At December  31, 1999 and 1998,  the  unamortized  costs of these
agreements were $32,000 and $159,000,  respectively,  and were included in other
assets.
         As more  fully  described  in Note 1 to the  accompanying  consolidated
financial  statements,  in the event of early  termination  of the interest rate
swap  agreements,  the net proceeds  received or paid are deferred and amortized
over the shorter of the  remaining  contract life or the maturity of the related
asset. If, however,  the amount of the underlying asset is repaid, then the fair
value  gains or  losses on the  interest  rate swap  agreements  are  recognized
immediately in the consolidated statements of income.


<PAGE>


         As  discussed  under  "--Mortgage   Banking   Activities,"   derivative
financial  instruments issued by First Banks consist of commitments to originate
fixed-rate loans. Commitments to originate fixed-rate loans consist primarily of
residential  real  estate  loans.  These  loan  commitments,  net  of  estimated
underwriting  fallout, and loans held for sale are hedged with forward contracts
to sell mortgage-backed securities.
         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, 1999,  adjusted to account
for anticipated prepayments:
<TABLE>
<CAPTION>

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

Interest-earning assets:
<S>       <C>                                     <C>            <C>         <C>          <C>          <C>       <C>
    Loans (1)..................................   $2,362,848     265,534     489,082      843,979      34,881    3,996,324
    Investment securities......................      154,056      22,272      97,498      109,598      68,223      451,647
    Federal funds sold.........................       42,500          --          --           --          --       42,500
    Interest-bearing deposits with other
      financial institutions...................        1,324         250          --          100          --        1,674
                                                 -----------    --------   ---------    ---------   ---------   ----------
        Total interest-earning assets..........    2,560,728     288,056     586,580      953,677     103,104    4,492,145
    Effect of interest rate swap agreements....     (455,000)         --          --      455,000          --           --
                                                 -----------    --------   ---------    ---------   ---------   ----------
        Total interest-earning assets
           after the effect of interest
           rate swap agreements................   $2,105,728     288,056     586,580    1,408,677     103,104    4,492,145
                                                  ==========    ========   =========    =========   =========   ==========

Interest-bearing liabilities:
    Interest-bearing demand accounts...........  $   153,592      95,476      62,267       45,662      58,116      415,113
    Savings accounts...........................      115,973      95,507      81,863      115,973     272,879      682,195
    Money market demand accounts...............      516,119          --          --           --          --      516,119
    Time deposits..............................      413,602     455,947     776,916      385,135         723    2,032,323
    Other borrowed funds.......................      137,010          --          --          544          --      137,554
                                                 -----------    --------   ---------     --------   ---------   ----------
        Total interest-bearing liabilities.....  $ 1,336,296     646,930     921,046      547,314     331,718    3,783,304
                                                 ===========    ========   =========     ========   =========   ==========
Interest sensitivity gap:
     Periodic..................................  $   769,432    (358,874)   (334,466)     861,363    (228,614)     708,841
                                                                                                                ==========
     Cumulative................................      769,432     410,558      76,092      937,455     708,841
                                                 ===========    ========   =========     ========   =========
Ratio of interest-sensitive assets
    to interest-sensitive liabilities:
     Periodic.................................         1.58        0.45        0.64         2.57        0.31         1.19
                                                                                                                     =====
     Cumulative...............................         1.58        1.21        1.03         1.27        1.19
                                                      ======       =====        ====         ====        ====
</TABLE>
-----------------------
(1) Loans are presented net of unearned discount.
<PAGE>

           Management  made certain  assumptions  in preparing  the table above.
These  assumptions  included:  Loans will repay at projected  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 rates ranging from 11% to 37% and 12% to 40%
, respectively,  of the remaining balance for each period  presented;  and fixed
maturity  deposits  will not be  withdrawn  prior  to  maturity.  A  significant
variance  in  actual  results  from  one or  more  of  these  assumptions  could
materially affect the results reflected in the table.
         At December 31, 1999 and 1998, First Banks' asset-sensitive position on
a cumulative basis through the twelve-month  time horizon was $76.1 million,  or
1.56%  of  total  assets,  and  $333.2  million,   or  7.32%  of  total  assets,
respectively. The asset sensitive position is attributable to the composition of
the loan and investment security portfolios as compared to the deposit base. The
decrease for 1999 is primarily attributable to the interest rate swap agreements
entered into in June 1998, September 1998 and September 1999.
         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 risk 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  residential mortgage loans. Other loans,  including  adjustable-rate
and nonconforming  residential  mortgage loans, are sold on a servicing released
basis.
         For the three years ended December 31, 1999, 1998 and 1997, First Banks
originated  and  purchased  loans for resale  totaling  $452.9  million,  $628.5
million  and $174.3  million  and sold loans  totaling  $507.1  million,  $521.0
million  and $148.4  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 gain realized upon sale,
the interest  income earned while the loan is held awaiting sale and the ongoing
loan servicing fees from the loans sold with servicing rights retained. Mortgage
loans  serviced for investors  aggregated  $957  million,  $923 million and $784
million at December 31, 1999, 1998 and 1997, respectively.
         The gain on mortgage loans originated for resale,  including loans sold
and held for sale,  was $6.9  million,  $5.6  million and $716,000 for the years
ended  December  31, 1999,  1998 and 1997,  respectively.  These  gains,  net of
losses,  are  determined  on a lower of cost or market basis and are realized at
the time of sale.  The cost basis  reflects:  (1)  adjustments  of the  carrying
values of loans held for sale to the lower of cost, adjusted to include the cost
of  hedging  the  loans  held  for  sale,  or  current  market  values;  and (2)
adjustments  for any gains or losses on loan  commitments for which the interest
rate has been established,  net of anticipated  underwriting "fallout," adjusted
for the cost of hedging these loan commitments.  The increases for 1999 and 1998
are  attributable to First Banks'  continued  expansion of its mortgage  banking
activities  into the  California  and Texas  markets and the related  additional
volume of nonconforming loans prominent in that market.
         The  interest  income on loans held for sale was $4.9  million  for the
year ended  December 31, 1999 in comparison to $6.8 million and $3.2 million for
the years ended December 31, 1998 and 1997, respectively. The amount of interest
income  realized on loans held for sale is a function of the average  balance of
loans held for sale,  the period for which the loans are held and the prevailing
interest  rates when the loans are made.  The average  balance of loans held for
sale was $79.1  million,  $102.7  million and $35.4  million for the years ended
December 31, 1999,  1998 and 1997,  respectively.  On an annualized  basis,  the
yield on the portfolio of loans held for sale was 6.19%, 6.62% and 7.07% for the
years ended December 31, 1999, 1998 and 1997,  respectively.  This compares with
First  Banks'  cost  of  funds,  as a  percentage  of  average  interest-bearing
liabilities,  of 4.34%,  4.73% and 4.88% for the years ended  December 31, 1999,
1998 and 1997, respectively.
         Mortgage  loan  servicing  fees are  reported  net of  amortization  of
mortgage  servicing  rights,  interest  shortfall and  mortgage-backed  security
guarantee fee expense. Loan servicing fees, net, were $657,000, $1.0 million and
$1.6 million for the years ended December 31, 1999, 1998 and 1997, respectively.
The  decrease in loan  servicing  fees is  primarily  attributable  to increased
amortization  of mortgage  servicing  rights  attributable  to high  refinancing
activity;   and  First  Banks'   strategy  of  selling  the  new  production  of
adjustable-rate  and  nonconforming  residential  mortgage  loans on a servicing
released  basis.  In addition,  mortgage-backed  security  expense  increased by
$333,000 to $1.2 million from $867,000 for the years ended December 31, 1999 and
1998,  respectively,  reflecting the increased level of serviced loans sold into
the  secondary  market  in the form of  securities.  Interest  shortfall  is the
difference  between the interest  collected from a loan-servicing  customer upon
prepayment  of the loan  and a full  month's  interest  that is  required  to be
remitted to the security owner.

<PAGE>

         As described  under  "--Interest  Rate Risk  Management,"  First Banks'
interest rate risk  management  policy provides  certain  hedging  parameters to
reduce the interest rate risk exposure  arising from changes in loan prices from
the time of  commitment  until the sale of the security or loan.  To reduce this
exposure,   First   Banks   uses   forward   commitments   to  sell   fixed-rate
mortgage-backed  securities at a specified  date in the future.  At December 31,
1999,  1998 and 1997,  First Banks had $31.5  million,  $103.1 million and $67.4
million,  respectively,  of loans held for sale and related commitments,  net of
committed loan sales and estimated underwriting fallout, of which $33.0 million,
$95.0 million and $60.0  million,  respectively,  were hedged through the use of
such forward commitments.

Comparison of Results of Operations for 1999 and 1998

         Net Income.  Net income was $44.2 million,  or $1,775.47 per share on a
diluted basis, for the year ended December 31, 1999,  compared to $33.5 million,
or $1,337.09  per share on a diluted  basis,  for 1998.  The improved  operating
results for 1999 as compared to 1998 are primarily  attributable to First Banks'
efforts  to  realign  the  composition  of the loan  portfolio  through  further
diversification   and  growth;   the  improvement  in  the  composition  of  the
interest-earning  assets and  interest-bearing  liabilities;  the results of the
acquisitions of Century Bank and Redwood; and, the divestiture of certain branch
facilities.  As previously  discussed under  "--Financial  Condition and Average
Balances" and "--Net  Interest  Income," net interest  income improved to $195.2
million,  or 4.52% of average  interest-earning  assets, from $166.5 million, or
4.19% of average interest-earning assets, for 1999 and 1998, respectively.
        The  improvement  in net income  was  partially  offset by an  increased
provision  for possible  loan losses and an increase in operating  expenses.  As
previously  discussed under  "--General" and as more fully described  below, the
increased  operating expenses are reflective of: the additional cost of the FACT
Preferred  Securities  issued by FBA in July 1998; the  continuing  expansion of
commercial and retail banking  activities;  the acquisitions of Century Bank and
Redwood;  increased legal, examination and professional fees; and increased data
processing fees primarily associated with Year 2000 activities.

         Provision  for Possible  Loan Losses.  The  provision for possible loan
losses was $13.1 million and $9.0 million for the years ended  December 31, 1999
and 1998,  respectively.  The increase in the provision for possible loan losses
for  1999  is  primarily  attributable  to the  continued  growth  and  changing
composition  of  the  loan   portfolio   combined  with  an  increase  in  loans
charged-off.  Net loan charge-offs were $8.4 million for the year ended December
31,  1999,  compared  to  $1.7  million  for  1998.  The  increase  in net  loan
charge-offs  is reflective of overall growth in the loan portfolio and increased
risk  associated  with  the  continued  change  in the  composition  of the loan
portfolio.  In addition,  as further  discussed under "--Loans and Allowance for
Possible  Loan  Losses,"  nonperforming  assets have,  in general,  increased at
December 31, 1999 and 1998, in comparison to previous  periods.  The  allowances
for  possible  loan  losses  of  Redwood  and  Century  Bank at  their  dates of
acquisition  added  approximately  $3.0  million  to First  Banks'  consolidated
allowance for possible loan losses.
         The following  table  represents a summary of loan loss  experience and
nonperforming  assets by geographic  area for the years ended  December 31, 1999
and 1998:
<TABLE>
<CAPTION>

                                                                                  Missouri and
                                             California           Texas              Illinois               Total
                                           -------------      -------------     -----------------      --------------
                                           1999     1998      1999     1998      1999        1998      1999      1998
                                           ----     ----      ----    -----      ----        ----      ----      ----
                                                                 (dollars expressed in thousands)

<S>                                   <C>          <C>     <C>       <C>      <C>        <C>        <C>       <C>
    Total loans...................... $1,255,362   888,540 213,731   201,426  2,527,231  2,490,139  3,996,324 3,580,105
    Total assets.....................  1,575,997 1,203,319 288,723   311,732  3,003,027  3,039,759  4,867,747 4,554,810
    Provision for possible
       loan losses...................      4,093     1,415      90       335      8,890      7,250     13,073     9,000
    Net loan (charge-offs)
       recoveries....................     (2,524)     (344)    578      (245)    (6,494)    (1,150)    (8,440)   (1,739)
    Net loan (charge-offs)
       recoveries as a percentage
       of average loans..............      (0.23)%   (0.05)%  0.27%    (0.13)%    (0.26)%    (0.05)%    (0.22)    (0.05)%
    Nonperforming loans.............. $   16,204    24,954      40        90     23,493     18,494     39,737    43,538
    Nonperforming assets.............     16,593    25,889      40        90     25,233     21,268     41,866    47,247

</TABLE>


<PAGE>


         Noninterest   Income  and  Expense.   The  following  table  summarizes
noninterest income and noninterest expense for the years ended December 31, 1999
and 1998:
<TABLE>
<CAPTION>

                                                                                  December 31,       Increase (decrease)
                                                                                ----------------     -------------------
                                                                                 1999       1998      Amount       %
                                                                                 ----       ----      ------    ------
                                                                                   (dollars expressed in thousands)

     Noninterest income:
<S>                                                                         <C>           <C>         <C>        <C>
        Service charges on deposit accounts and customer service fees....   $  17,676     14,876      2,800      18.82%
        Credit card fees.................................................         409      2,999     (2,590)    (86.36)
        Loan servicing fees, net.........................................         657      1,017       (360)    (35.40)
        Gain on mortgage loans sold and held for sale....................       6,909      5,563      1,346      24.20
        Net gain on sales of available-for-sale securities...............         791      1,466       (675)    (46.04)
        Net (loss) gain on trading securities............................        (303)       607       (910)   (149.92)
        Gain on sales of branches, net of expenses.......................       4,406         --      4,406        --
        Other............................................................      11,105      9,969      1,136      11.40
                                                                            ---------   --------    -------
              Total noninterest income...................................   $  41,650     36,497      5,153      14.12
                                                                            =========   ========    =======    =======

     Noninterest expense:
         Salaries and employee benefits..................................   $  61,524     55,907      5,617      10.05%
         Occupancy, net of rental income.................................      12,518     11,037      1,481      13.42
         Furniture and equipment.........................................       8,520      8,122        398       4.90
         Federal Deposit Insurance Corporation premiums..................       1,310      1,370        (60)     (4.38)
         Postage, printing and supplies..................................       4,244      5,230       (986)    (18.85)
         Data processing fees............................................      18,567     13,917      4,650      33.41
         Legal, examination and professional fees........................       9,109      5,326      3,783      71.03
         Credit card.....................................................         667      3,396     (2,729)    (80.36)
         Communications..................................................       2,488      2,874       (386)    (13.43)
         Advertising and business development............................       3,734      4,668       (934)    (20.01)
         (Gain) losses on sales of  other real estate, net of expenses...        (622)        81       (703)   (867.90)
         Guaranteed preferred debentures.................................      12,050      9,842      2,208      22.43
         Other...........................................................      16,698     16,934       (236)     (1.39)
                                                                            ---------   --------    -------
              Total noninterest expense..................................   $ 150,807    138,704     12,103       8.73
                                                                            =========   ========    =======    =======
</TABLE>

         Noninterest  Income.  Noninterest income was $41.7 million for the year
ended December 31, 1999, compared to $36.5 million for 1998.  Noninterest income
consists  primarily of service charges on deposit  accounts and customer service
fees, mortgage banking revenues and other income.
         Service charges on deposit accounts and customer service fees increased
to $17.7 million for 1999,  from $14.9 million for 1998. The increase in service
charges and  customer  service fees is  attributable  to (a)  increased  deposit
balances  provided by internal  growth;  (b) the  acquisitions  of Century Bank,
Redwood,  Pacific  Bay Bank and  Republic  Bank;  (c)  additional  products  and
services  available  and utilized by First Banks'  expanding  base of retail and
commercial  customers;  (d) increased  fee income  resulting  from  revisions of
customer  service charge rates effective April 1, 1999, and enhanced  control of
fee waivers;  and (e) increased  interchange  income  associated  with automatic
teller machine  services and debit and credit cards.  As described  below,  this
increase  was  partially  offset by the  foregone  revenue  associated  with the
divestiture of certain  branches in 1999, which resulted in a reduction in First
Bank's deposit base of approximately $54.8 million.
         Credit card fees  declined to $409,000 for 1999,  from $3.0 million for
1998.  The  reduction  in such fees is  primarily  attributable  to First Banks'
liquidation of its merchant credit card processing  operation effective December
31, 1998.
         As more fully described under "--Mortgage  Banking  Activities,"  First
Banks' mortgage banking revenues consist  primarily of loan servicing fees, net,
and gain on mortgage  loans sold and held for sale.  Loan servicing  fees,  net,
decreased to $657,000  from $1.0  million for the years ended  December 31, 1999
and  1998,  respectively.  The  decrease  in loan  servicing  fees is  primarily
attributable  to aggregate  increases of $698,000 in additional  amortization of
mortgage  servicing  rights,  interest  shortfall and  mortgage-backed  security
expense.  This  decrease was partially  offset by an increase in loan  servicing
fees  resulting from the increase in the portfolio of loans serviced for others.
The gain on mortgage loans sold and held for sale increased to $6.9 million from
$5.6 million for 1999 and 1998,  respectively.  This increase is attributable to
an  increased  volume  of loans  sold and held  for sale  including  fixed  rate
residential  mortgage loans,  which are sold on a servicing  retained basis, and
adjustable-rate and non-conforming residential mortgage loans, which are sold on
a servicing released basis.

<PAGE>

         Net gain on sales of  available-for-sale  securities  was  $791,000 and
$1.5 million for the years ended December 31, 1999 and 1998, respectively. These
gains  resulted  from  sales  of  available-for-sale   securities  necessary  to
facilitate the funding of loan growth.
         Net loss on sales of trading securities was $303,000 for the year ended
December 31, 1999, in  comparison  to a net gain of $607,000 for the  comparable
period in 1998. The loss for 1999 resulted from the  termination of First Banks'
trading  division,  effective  December 31,  1998,  and the  liquidation  of all
trading portfolio securities.
         The gain on sales of branches, net of expenses of $4.4 million resulted
from the  divestiture  of seven  branches in the central and  northern  Illinois
market areas.
         Other  income was $11.1  million and $10.0  million for the years ended
December 31, 1999 and 1998, respectively. The primary components of the increase
are attributable to increased  income earned on First Banks'  investment in bank
owned life insurance (BOLI) and expanded brokerage and private banking and trust
services.  The BOLI income  increased to $3.9 million for 1999, in comparison to
$3.1 million for 1998. This increase is primarily  attributable to twelve months
of earnings on FBA's investment in BOLI in 1999, in comparison to nine months of
earnings  in 1998.  In  addition,  private  banking  and trust  services  income
increased  to $1.8  million  for  1999  from  $1.4  million  for 1998 due to the
continued  expansion of these  services  primarily in the  California  and Texas
market areas.

         Noninterest  Expense.  Noninterest  expense increased to $150.8 million
for the year ended  December 31, 1999 from $138.7 million for 1998. The increase
is reflective of: (a) the  acquisitions  of Century Bank,  Redwood,  Pacific Bay
Bank and Republic Bank; (b) increased data processing fees primarily  associated
with First  Banks' Year 2000  Program:  (c)  increased  legal,  examination  and
professional  fees and (d) FBA's  issuance of the FACT  Preferred  Securities in
July 1998. The overall increase in noninterest expense was partially offset by a
decline in credit card  expenses  and a reduction  in  advertising  and business
development expenses, postage, printing and supplies expenses and communications
expenses, and is consistent with management's efforts to more effectively manage
these expenditures.
         Specifically,  salaries and employee benefits increased by $5.6 million
to $61.5  million from $55.9  million for the years ended  December 31, 1999 and
1998, respectively. The increase is attributable to the newly acquired banks and
First Banks' continued commitment to expanding its commercial,  mortgage banking
and retail business development  capabilities  associated with the expansion and
delivery of its products and  services.  The overall  increase also reflects the
competitive  environment in the employment  market that has resulted in a higher
demand for limited  resources,  thus  escalating  industry  salary and  employee
benefit costs.
         Data  processing fees were $18.6 million and $13.9 million for 1999 and
1998  respectively.  As more  fully  discussed  in  Note 17 to the  accompanying
consolidated financial statements,  First Services,  L.P., a limited partnership
indirectly  owned by First  Banks'  Chairman  and his  children,  provides  data
processing and various related  services to First Banks and the Subsidiary Banks
under the terms of data processing  agreements.  The increase in data processing
fees is attributable to growth and  technological  advancements  consistent with
First Banks' product and service offerings,  increased expenses  attributable to
communication  data  lines  related  to  the  expansion  of the  branch  network
infrastructure and expenses associated with the Year 2000 Program.
         Legal,  examination and professional  fees increased by $3.8 million to
$9.1 million in 1999,  from $5.3  million in 1998.  The increase in such fees is
primarily   attributable  to  First  Banks'  expanded  utilization  of  external
consultants  in  conjunction  with the  development  and  expansion  of selected
business  initiatives.   Contributing  further  to  the  overall  increase  were
increased  legal   expenditures   associated  with  the  settlement  of  certain
litigation.
         Credit card  expenses  declined by $2.7  million to $667,000  from $3.4
million  for the  years  ended  December  31,  1999 and 1998,  respectively.  As
previously discussed,  this decline is primarily due to First Banks' liquidation
of its merchant credit card processing operation, effective December 31, 1998.
         Guaranteed  preferred  debentures  increased  by $2.2  million to $12.1
million  from $9.8  million  for the years  ended  December  31,  1999 and 1998,
respectively.  The increase for 1999 is  attributable  to FBA's  issuance of the
FACT  Preferred  Securities  in  July  1998  as  described  in  Note  9  to  the
accompanying consolidated financial statements.
<PAGE>

Comparison of Results of Operations for 1998 and 1997

         Net Income.  Net income for the year ended  December 31, 1998 was $33.5
million,  compared to $33.0  million for 1997.  Earnings  per common  share were
$1,337.09 per share and $1,134.28 per share,  on a diluted basis,  for the years
ended December 31, 1998 and 1997, respectively. The increase in diluted earnings
per share primarily  reflects the effect of the redemption of First Banks' Class
C Preferred Stock in 1997, and the resulting  reduction of First Banks' dividend
requirement for the year ended December 31, 1998.  Dividends paid on the Class C
Preferred  Stock  totaled  $4.3  million for 1997.  The funds  required  for the
redemption were borrowed,  resulting in an increase in interest  expense of $3.4
million for 1998. Since the Class C Preferred Stock dividend  requirement is not
deducted in the  determination  of net income,  whereas interest expense is, the
effect of this was to reduce 1998 net income by $2.2 million, compared to 1997.
         The overall  improvement in operating  results for 1998, as compared to
1997, is attributable to the improvement in the composition of  interest-earning
assets and  interest-bearing  liabilities and noninterest  income. As previously
discussed under "--Financial Condition and Average Balances" and "--Net Interest
Income,"  net  interest  income   improved  to  $166.5  million,   or  4.19%  of
interest-earning  assets,  from  $147.2  million,  or 4.09% of  interest-earning
assets, for 1998 and 1997, respectively. This improvement, coupled with improved
noninterest income, was substantially  offset by increased  noninterest expense.
During  1998,  noninterest  expense  increased  to $138.7  million,  or 3.24% of
average total assets, from $110.3 million, or 2.89% of average total assets, for
1997. As previously  discussed  under  "--General"  and as more fully  described
below, the increase in noninterest  expense of $28.4 million,  or 0.66% of total
average  assets,  reflects  the  additional  costs of acquired  entities and the
continued  investment  in improving  First Banks'  technology  and  franchise to
achieve planned growth.

         Provision  for Possible  Loan Losses.  The  provision for possible loan
losses was $9.0 million for the year ended December 31, 1998,  compared to $11.3
million  for 1997.  Net loan  charge-offs  were $1.7  million for the year ended
December 31, 1998,  compared to $7.6 million for 1997.  The increased  provision
for possible  loan losses for 1998 is primarily  attributable  to the  continued
growth and changing  composition of the portfolio.  As the portfolio has changed
from one with a significant  preponderance  in residential real estate loans, to
one having substantial portions of commercial, financial and agricultural loans,
real estate construction and development loans and commercial real estate loans,
the credit risk profile of the portfolio increases. Typically,  residential real
estate  lending  has  resulted  in  relatively  minor  credit  losses.  However,
commercial  lending carries with it greater credit risk which,  although managed
through  appropriate  loan  policies  and  procedures,  underwriting  and credit
administration, must be recognized through adequate allowances for possible loan
losses.  Associated with the increased level of commercial lending activities is
the increase in  nonperforming  and other  problem  loans of $12.8 million as of
December  31, 1998,  compared to December  31,  1997.  The increase is primarily
attributable to two loans totaling $6.0 million and the acquisitions of Republic
Bank and Pacific Bay Bank.
         The following is a summary of loan loss  experience  and  nonperforming
assets by geographic area for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>

                                                                                   Missouri and
                                             California           Texas              Illinois                 Total
                                           -------------      -------------       ---------------        ---------------
                                           1998     1997      1998     1997       1998       1997        1998       1997
                                           ----     ----      ----     ----       ----       ----        ----       ----
                                                                     (dollars expressed in thousands)

<S>                                   <C>          <C>      <C>      <C>      <C>        <C>         <C>        <C>
    Total loans...................... $  888,540   640,366  201,426  176,341  2,490,139  2,185,493   3,580,105  3,002,200
    Total assets.....................  1,203,319 1,042,979  311,732  271,686  3,039,759  2,850,349   4,554,810  4,165,014
    Provision for possible
      loan losses....................      1,415     2,500      335    1,500      7,250      7,300       9,000     11,300
    Net loan charge-offs.............        344     1,510      245    1,091      1,150      5,001       1,739      7,602
    Net loan charge-offs
      as a percentage
      of average loans...............       0.05%     0.30%    0.13%    0.63%      0.05%      0.23%       0.05%      0.27%
    Nonperforming loans.............. $   24,954     5,548       90      211     18,494     18,307      43,538     24,066
    Nonperforming assets.............     25,889     7,717       90      296     21,268     23,377      47,247     31,390

</TABLE>


<PAGE>


         Noninterest   Income  and  Expense.   The  following  table  summarizes
noninterest income and noninterest expense for the years ended December 31, 1998
and 1997:
<TABLE>
<CAPTION>

                                                                                  December 31,       Increase (decrease)
                                                                                ----------------     -------------------
                                                                                 1998       1997      Amount       %
                                                                                 ----       ----      ------    ------
                                                                                   (dollars expressed in thousands)

     Noninterest income:
<S>                                                                         <C>           <C>         <C>        <C>
         Service charges on deposit accounts and customer service fees...   $  14,876     12,491      2,385      19.09%
         Credit card fees................................................       2,999      2,914         85       2.92
         Loan servicing fees, net........................................       1,017      1,628       (611)    (37.53)
         Gain on mortgage loans sold and held for sale...................       5,563        716      4,847     676.96
         Trust and brokerage fees........................................       1,506        893        613      68.65
         Net gain on sales of securities.................................       2,073      2,456       (383)    (15.59)
         Other...........................................................       8,463      4,599      3,864      84.02
                                                                            ---------   --------    -------
              Total noninterest income...................................   $  36,497     25,697     10,800      42.03
                                                                            =========   ========    =======   ========

     Noninterest expense:
         Salaries and employee benefits..................................   $  55,907     43,011     12,896      29.98%
         Occupancy, net of rental income.................................      11,037     10,617        420       3.96
         Furniture and equipment.........................................       8,122      7,618        504       6.62
         Federal Deposit Insurance Corporation premiums..................       1,370        804        566      70.40
         Postage, printing and supplies..................................       5,230      4,187      1,043      24.91
         Data processing fees............................................      13,917      8,450      5,467      64.70
         Legal, examination and professional fees........................       5,326      4,587        739      16.11
         Credit card.....................................................       3,396      3,343         53       1.59
         Communications..................................................       2,874      2,611        263      10.07
         Advertising and business development............................       4,668      4,054        614      15.15
         Losses and expenses on other real estate, net of gains..........          81       (331)       412    (124.47)
         Guaranteed preferred debentures.................................       9,842      7,322      2,520      34.42
         Other...........................................................      16,934     14,014      2,920      20.84
                                                                            ---------   --------    -------
              Total noninterest expense..................................   $ 138,704    110,287     28,417      25.77
                                                                            =========   ========    =======   ========
</TABLE>

         Noninterest  Income.  Noninterest income was $36.5 million for the year
ended  December 31, 1998,  compared to $25.7  million for 1997.  The increase is
primarily  attributable  to core  operating  units of First Banks which realized
improved service charges on deposit accounts and customer service fees, gains on
mortgage loans sold and held for sale and trust and brokerage fees.
         Service charges on deposit accounts and customer service fees increased
to $14.9  million from $12.5  million for the years ended  December 31, 1998 and
1997, respectively.  The increase in service charges corresponds to the increase
in deposit  balances  provided by internal  growth,  the  acquisitions of Surety
Bank,  Pacific Bay Bank and Republic Bank and the additional  services available
and utilized by First Banks' commercial customers.
         As more fully described under "--Mortgage  Banking  Activities,"  First
Banks' mortgage banking revenues consist  primarily of loan servicing fees, net,
and gain on mortgage  loans sold and held for sale.  Loan servicing  fees,  net,
decreased  to $1.0 from $1.6 for the years  ended  December  31,  1998 and 1997,
respectively.  The decrease in loan servicing fees is primarily  attributable to
aggregate  increases  of  $827,000  consisting  of  additional  amortization  of
mortgage servicing rights and increased  interest shortfall and  mortgage-backed
security  expense.  Offsetting  the decrease was the increase in loan  servicing
fees resulting from the increase in the portfolio of loans serviced for others.
         The gain on  mortgage  loans sold and held for sale  increased  to $5.6
million  from  $716,000  for 1998  and  1997,  respectively.  This  increase  is
attributable  to an increased  volume of loans sold and held for sale  including
fixed rate residential  mortgage loans,  which are sold on a servicing  retained
basis, and adjustable-rate and non-conforming  residential mortgage loans, which
are sold on a servicing released basis.
         The gain on sales of securities was $2.1 and $2.5 million for the years
ended  December 31, 1998 and 1997,  respectively.  For 1998,  the gains resulted
from sales of  available-for-sale  securities to facilitate  the funding of loan
growth. The gain on sale of securities for 1997 is primarily attributable to the
sales of certain  residual  securities  that had been  acquired  by First  Banks
through an acquisition completed in 1995.

<PAGE>

         Other  income was $8.5  million  and $4.6  million  for the years ended
December 31, 1998 and 1997, respectively.  The primary component of the increase
consists of $3.1 million of income earned on a BOLI policy entered into in 1998.
The BOLI balance was $75.7 million at December 31, 1998 and is included in other
assets.  As more fully  described  in Note 17 to the  accompanying  consolidated
financial  statements,  other  noninterest  income also includes  rental fees of
$799,000  and  $1.1  million  for  1998 and  1997,  respectively,  paid by First
Services, L.P. for the use of data processing and other equipment owned by First
Banks. In addition,  noninterest income includes $1.6 million from the repayment
of an acquired loan in excess of First Banks' historical cost basis.

         Noninterest  Expense.  Noninterest  expense increased to $138.7 million
for the year ended  December  31,  1998 from $110.3  million for 1997.  The most
significant  changes in  noninterest  expense  were  increases  in salaries  and
employee  benefits,  data  processing fees and guaranteed  preferred  debentures
expense.
         Salaries and employee  benefits  have  increased to $55.9  million from
$43.0 million for the years ended December 31, 1998 and 1997, respectively.  The
increase is attributable to the newly acquired banks and First Banks'  continued
commitment to expanding its  commercial,  mortgage  banking and retail  business
development capabilities.
         Data  processing  fees for the year ended  December 31, 1998 were $13.9
million,  compared to $8.5  million  for 1997.  Effective  April 1, 1997,  First
Services,  L.P., a limited partnership indirectly owned by First Banks' Chairman
and his immediate  family,  began providing data processing and related services
for First Banks.  FirstServ,  Inc.  (First Serv),  a wholly owned  subsidiary of
First Banks,  previously provided these services. As a result,  expenses related
to data  processing  and related  services were recorded in various  noninterest
expense  categories  for the periods prior to April 1, 1997.  Subsequent to that
date, these expenses are reflected as data processing expenses. The increase for
1998 is primarily  attributable  to the  additional  services  provided by First
Services,  L.P. to meet the increasing  technology  requirements  of the banking
industry  and  the  additional   costs   associated  with  the  data  processing
conversions of newly acquired entities and system upgrades.  The Year 2000 costs
billed from First Services, L.P. were $600,000 for 1998.
         Contributing  further to the  increase  in  noninterest  expense is the
guaranteed  preferred  debenture expense.  For the years ended December 31, 1998
and 1997, the cost was $9.8 million and $7.3 million, respectively. The increase
for 1998 is attributable  to FBA's issuance of the FACT Preferred  Securities in
July 1998 (as  described in Note 9 to the  accompanying  consolidated  financial
statements) and First Banks' issuance of similar securities in February 1997.
         Advertising  and business  development  also  increased to $4.7 million
from $4.1 million for the years ended December 31, 1998 and 1997,  respectively.
The increase is  attributable  to programs  instituted  in prior years and First
Banks' continued commitment to expand its presence in each of its market areas.
         In addition, other noninterest expense for 1998 includes a $1.1 million
charitable  contribution  to the  Affordable  Housing  Assistance  Program and a
$500,000 charge in settlement of two lawsuits.

Investment Securities

         First Banks classifies the securities  within its investment  portfolio
as held to maturity or available for sale.  First Banks no longer engages in the
trading of investment  securities.  As more fully  described in Notes 1 and 3 to
the  accompanying   consolidated   financial  statements  of  First  Banks,  the
investment  security portfolio  consists  primarily of securities  designated as
available for sale.  The  investment  security  portfolio was $451.6  million at
December 31, 1999 compared to $534.8  million and $795.5 million at December 31,
1998 and 1997,  respectively.  See, "--Financial Condition and Average Balances"
for further discussion of the investment security portfolio.

Loans and Allowance for Possible Loan Losses

         Interest earned on the loan portfolio  represents the principal  source
of income for First Banks and its Subsidiary  Banks.  Interest and fees on loans
were  91.5%,  86.7%  and 85.7% of total  interest  income  for the  years  ended
December 31, 1999, 1998 and 1997, respectively. Loans, net of unearned discount,
represented 82.1% of total assets as of December 31, 1999, compared to 78.6% and
72.1% of total assets at December 31, 1998 and 1997, respectively.  Total loans,
net of unearned  discount,  increased $420.0 million for the year ended December
31, 1999 to $4.00  billion,  and $580.0  million for the year ended December 31,
1998 to $3.58  billion.  First Banks views the quality,  yield and growth of the
loan portfolio to be instrumental elements in its growth and profitability.
         As summarized in the  composition of the loan portfolio  table,  during
the five years ended December 31, 1999, total loans,  net of unearned  discount,
increased  46.0% from $2.74  billion at December  31,  1995 to $4.00  billion at

<PAGE>

December 31, 1999. As discussed under  "--General," in 1993, First Banks began a
process of  substantially  enhancing  its  capabilities  to  achieve  and manage
internal  growth.  A key  element  of  this  process  was the  expansion  of the
corporate  business  development  staff which is  responsible  for the  internal
development of both loan and deposit  relationships  with commercial  customers.
These customers  require loans  categorized by type of collateral as commercial,
financial and agricultural  loans, real estate construction and land development
loans and commercial real estate loans.
         While  this   process  was   occurring,   in  order  to  achieve   more
diversification,  a higher  level of interest  yield and a reduction in interest
rate risk within its loan portfolio,  First Banks also focused on  repositioning
its  portfolio.  As the  corporate  business  development  effort  continued  to
originate a substantial volume of new loans, substantially all of the conforming
residential  mortgage  loan  production  of First  Banks  has  been  sold in the
secondary mortgage market, and the origination of indirect  automobile loans has
been substantially  reduced. This allowed First Banks to fund part of the growth
in corporate  lending  through its  reductions  in  residential  real estate and
indirect automobile lending.
         In addition,  First Banks' acquisitions added substantial portfolios of
new loans.  However,  many of these  portfolios,  particularly  the acquisitions
completed in 1995, contained  significant loan problems. As First Banks resolved
the asset quality  issues,  the  portfolios of the acquired  entities  tended to
decline  because many of the resources  which would otherwise be directed toward
generating  new loans were  concentrated  on improving or  eliminating  existing
relationships.
         A summary of the effects of these factors on the loan portfolio for the
four years ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>

                                                                               Increase (decrease)
                                                               -----------------------------------------------
                                                                         for the year ended December 31,
                                                               -----------------------------------------------
                                                                   1999        1998         1997        1996
                                                                   ----        ----         ----        ----
                                                                        (dollars expressed in thousands)

        Internal loan volume increase (decrease):
<S>                                                            <C>            <C>         <C>         <C>
             Commercial lending.............................   $ 363,486      633,660     378,882     209,251
             Residential real estate lending................    (126,418)    (152,849)   (144,707)   (164,400)
             Consumer lending, net of unearned discount.....     (56,349)     (30,506)    (54,305)    (82,231)

        Loans provided by acquisitions......................     235,500      127,600      54,361      61,130
                                                               ---------   ----------   ---------   ---------
             Total increase in loans,
                net of unearned discount....................   $ 416,219      577,905     234,231      23,750
                                                               =========   ==========  ==========   =========

        Increase (decrease) in potential problem loans (1)..   $  11,200       12,800      (9,800)    (25,500)
                                                               =========   ==========   =========   =========
</TABLE>
---------------------
(1)  Potential  problem  loans  include  nonperforming  loans  and  other  loans
     identified by management as having potential credit problems.

         First   Banks'   lending   strategy   stresses   quality,   growth  and
diversification  by  collateral,   geography  and  industry.   A  common  credit
underwriting  structure  is in place  throughout  First  Banks.  The  commercial
lenders focus  principally on small to middle-market  companies.  Retail lenders
focus principally on residential loans, including home equity loans,  automobile
financing and other consumer  financing needs arising out of First Banks' branch
banking network.
         Commercial,  financial  and  agricultural  loans include loans that are
made primarily  based on the borrowers'  general credit  strength and ability to
generate  repayment  cash flows from income  sources  even though such loans may
also be secured by real estate or other  assets.  Real estate  construction  and
development  loans,  primarily  relating to  residential  properties and smaller
commercial properties,  represent interim financing secured by real estate under
construction.  Real estate mortgage loans consist  primarily of loans secured by
single-family,   owner-occupied  properties  and  various  types  of  commercial
properties  on which the income  from the  property  is the  intended  source of
repayment.  Consumer and installment  loans are loans to individuals and consist
primarily of loans  secured by  automobiles.  Loans held for sale are  primarily
fixed and  adjustable  rate  residential  loans  pending  sale in the  secondary
mortgage market in the form of a mortgage-backed security, or to various private
third-party investors.


<PAGE>


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

                                                                                December 31,
                                             ---------------------------------------------------------------------------------
                                                   1999              1998            1997             1996             1995
                                             --------------    -------------     -------------    ------------     -----------
                                               Amount   %       Amount    %      Amount     %     Amount    %     Amount     %
                                               ------   -       ------    -      ------     -     ------    -     ------     -
                                                                         (dollars expressed in thousands)

<S>                                       <C>         <C>    <C>        <C>   <C>         <C>   <C>        <C>    <C>         <C>
Commercial, financial
  and agricultural......................  $1,086,919  27.4%  $ 920,007  26.7% $ 621,618   21.1% $ 457,186  16.7%  $  364,018   13.5%
Real estate construction
  and development.......................     795,081  20.1     720,910  20.9    413,107   14.0    289,378  10.5      209,802    7.8
Real estate mortgage:
    One-to-four-family
     residential loans..................     720,630  18.2     739,442  21.5    915,205   31.1  1,059,770  38.7    1,199,491   44.4
    Other real estate loans.............   1,130,939  28.6     789,735  22.9    713,910   24.3    600,810  21.9      512,264   19.0
Consumer and installment, net of
    unearned discount...................     225,343   5.7     274,392   8.0    279,279    9.5    333,340  12.2      413,609   15.3
                                          ---------- -----  ---------- ----- ----------  -----  --------- -----   ----------  -----
         Total loans, excluding
            loans held for sale.........   3,958,912 100.0%  3,444,486 100.0% 2,943,119  100.0% 2,740,484 100.0%   2,699,184  100.0%
                                                     =====             =====             =====            =====               =====
Loans held for sale.....................      37,412           135,619           59,081            27,485             45,035
                                          ----------        ----------       ----------         ---------         ----------
         Total loans....................  $3,996,324        $3,580,105       $3,002,200        $2,767,969         $2,744,219
                                          ==========        ==========       ==========        ==========         ==========
</TABLE>


     Loans at December 31, 1999 mature as follows:

<TABLE>
<CAPTION>
                                                                             Over one year
                                                                             through five
                                                                                 years          Over five years
                                                                           -----------------    ---------------
                                                              One year     Fixed    Floating    Fixed  Floating
                                                              or less      rate       rate      rate     rate      Total
                                                              --------     ----       ----      ----     ----      -----
                                                                      (dollars expressed in thousands)

<S>                                                         <C>           <C>         <C>      <C>         <C>  <C>
Commercial, financial and agricultural....................  $   904,017   142,382     30,007   10,286      227  1,086,919
Real estate construction and development..................      765,037     8,776     19,758    1,173      337    795,081
Real estate mortgage......................................      889,691   433,884    281,482  176,901   69,611  1,851,569
Consumer and installment, net of unearned discount........       54,334   164,078        513    6,348       70    225,343
Loans held for sale.......................................       37,412        --         --       --       --     37,412
                                                            -----------  --------   --------  -------   ------  ---------
         Total loans......................................  $ 2,650,491   749,120    331,760  194,708   70,245  3,996,324
                                                            ===========  ========   ========  =======   ======  =========
</TABLE>


<PAGE>


         The following  table is a summary of loan loss  experience for the five
years ended December 31, 1999:
<TABLE>
<CAPTION>

                                                                               December 31,
                                                           ------------------------------------------------------
                                                           1999        1998        1997         1996         1995
                                                           ----        ----        ----         ----         ----
                                                                       (dollars expressed in thousands)

<S>                                                     <C>            <C>        <C>          <C>           <C>
Allowance for possible loan losses,
  beginning of period................................ $   60,970      50,509      46,781       52,665        28,410
Acquired allowances for possible loan losses.........      3,008       3,200          30        2,338        24,655
                                                      ----------  ----------  ----------    ---------      --------
                                                          63,978      53,709      46,811       55,003        53,065
                                                      ----------  ----------  ----------    ---------      --------
Loans charged-off:
    Commercial, financial and agricultural...........    (10,855)     (3,908)     (2,308)      (8,918)       (2,337)
    Real estate construction and development.........       (577)       (185)     (2,242)      (1,241)         (275)
    Real estate mortgage.............................     (2,561)     (2,389)     (6,250)     (10,308)       (5,948)
    Consumer and installment.........................     (3,728)     (3,701)     (6,032)      (8,549)       (7,060)
                                                      ----------  ----------  ----------    ---------      --------
            Total....................................    (17,721)    (10,183)    (16,832)     (29,016)      (15,620)
                                                      ----------  ----------  ----------    ---------      --------
Recoveries of loans previously charged-off:
    Commercial, financial and agricultural...........      3,602       3,417       2,146        2,642         1,714
    Real estate construction and development.........        849         342         269          495           666
    Real estate mortgage.............................      2,357       2,029       3,666        3,255           290
    Consumer and installment.........................      2,473       2,656       3,149        2,908         2,189
                                                      ----------  ----------  ----------    ---------     ---------
            Total....................................      9,281       8,444       9,230        9,300         4,859
                                                      ----------  ----------  ----------    ---------     ---------
            Net loans charged-off....................     (8,440)     (1,739)     (7,602)     (19,716)      (10,761)
                                                      ----------  ----------  ----------    ---------     ---------
Provision for possible loan losses...................     13,073       9,000      11,300       11,494        10,361
                                                      ----------  ----------  ----------    ---------     ---------
Allowance for possible loan losses, end of period.... $   68,611      60,970      50,509       46,781        52,665
                                                      ==========  ==========  ==========    =========     =========

Loans outstanding:
    Average.......................................... $3,812,508   3,250,719   2,846,157    2,726,297     2,598,936
    End of period....................................  3,996,324   3,580,105   3,002,200    2,767,969     2,744,219
    End of period, excluding loans held for sale.....  3,958,912   3,444,486   2,943,119    2,740,484     2,699,184
                                                      ==========  ==========  ==========    =========     =========

    Ratio of allowance for possible loan
      losses to loans outstanding:
         Average.....................................       1.80%       1.88%       1.77%        1.72%         2.03%
         End of period...............................       1.72        1.70        1.68         1.69          1.92
         End of period, excluding
           loans held for sale.......................       1.73        1.77        1.72         1.71          1.95
    Ratio of net charge-offs
      to average loans outstanding...................       0.22        0.05        0.27         0.72          0.41
    Ratio of current year recoveries to
       preceding year's total charge-offs............      91.14       50.17       31.81        59.54         72.57
                                                      ==========  ==========  ==========    =========    ==========

Allocation of allowance for possible
  loan losses at end of period:
    Commercial, financial and agricultural........... $   24,898      19,239      14,879       13,579        12,501
    Real estate construction and development.........     13,264      15,073       7,148        4,584         4,665
    Real estate mortgage.............................     20,750      18,774      18,317       14,081        19,849
    Consumer and installment.........................      4,390       5,180       5,089       10,296        10,016
    Unallocated......................................      5,309       2,704       5,076        4,241         5,634
                                                      ----------  ----------  ----------    ---------    ----------
            Total.................................... $   68,611      60,970      50,509       46,781        52,665
                                                      ==========  ==========  ==========    =========    ==========

Percent of categories to loans,
  net of unearned discount:
    Commercial, financial and agricultural...........      27.20%      25.70%      20.71%       16.52%       13.27%
    Real estate construction and development.........      19.90       20.14       13.76        10.45         7.65
    Real estate mortgage.............................      46.33       42.71       54.26        60.00        62.49
    Consumer and installment.........................       5.64        7.66        9.30        12.04        14.95
    Loans held for sale..............................       0.93        3.79        1.97         0.99         1.64
                                                      ----------  ----------  ----------    ---------    ---------
            Total....................................     100.00%     100.00%     100.00%      100.00%      100.00%
                                                      ==========  ==========  ==========    =========    =========

</TABLE>

<PAGE>


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

                                                                                  December 31,
                                                             -----------------------------------------------------
                                                             1999        1998         1997        1996        1995
                                                             ----        ----         ----        ----        ----
                                                                        (dollars expressed in thousands)

Commercial, financial and agricultural:
<S>                                                    <C>              <C>            <C>         <C>        <C>
    Nonaccrual.......................................  $    18,397      15,385         4,017       4,113      9,930
    Restructured terms...............................           29          --            --         130         --
Real estate construction and development:
    Nonaccrual.......................................        1,886       3,858         4,097         817      2,002
Real estate mortgage:
    Nonaccrual.......................................       16,414      18,858        10,402      24,486     27,159
    Restructured terms...............................        2,979       5,221         5,456         278         --
Consumer and installment:
    Nonaccrual.......................................           32         216            94         440        300
    Restructured terms...............................           --          --            --           5         --
                                                       -----------   ---------     ---------   ---------  ---------
          Total nonperforming loans..................       39,737      43,538        24,066      30,269     39,391
Other real estate....................................        2,129       3,709         7,324      10,607      7,753
                                                       -----------   ---------     ---------   ---------  ---------
          Total nonperforming assets.................  $    41,866      47,247        31,390      40,876     47,144
                                                       ===========   =========     =========   =========  =========

Loans, net of unearned discount......................  $ 3,996,324   3,580,105     3,002,200   2,767,969  2,744,219
                                                       ===========   =========     =========   =========  =========

Loans past due 90 days or more and still accruing....  $     5,844       4,674         2,725       3,779      8,474
                                                       ===========   =========     =========   =========  =========

Allowance for possible loan losses to loans..........         1.72%       1.70%         1.68%       1.69%      1.92%
Nonperforming loans to loans.........................         0.99        1.22          0.80        1.09       1.44
Allowance for possible loan losses to
    nonperforming loans..............................       172.66      140.04        209.88      154.55     133.70
Nonperforming assets to loans and
    other real estate................................         1.05        1.32          1.04        1.47       1.71
                                                       ===========   =========    ==========   =========  =========
</TABLE>

         Nonperforming  loans (also considered  impaired  loans),  consisting of
loans on nonaccrual status and certain restructured loans, were $39.7 million at
December 31, 1999 in  comparison  to $43.5  million at December  31,  1998.  The
decrease  in  nonperforming  loans  in 1999  primarily  results  from  continued
aggressive collection efforts and management's  continued efforts to effectively
monitor and manage the loan  portfolios  of  acquired  entities.  As  previously
discussed, certain acquired loan portfolios,  particularly those acquired during
1994 and 1995,  exhibited varying degrees of distress prior to their purchase by
First Banks.  While these  problems had been  identified  and  considered in the
acquisition pricing, the acquisitions led to an increase in nonperforming assets
and problem loans (as defined  below) to $95.0 million at December 31, 1995 from
$41.3 million at December 31, 1994. As First Banks worked to correct these asset
quality  problems,  such assets were  reduced to $59.3  million at December  31,
1997. At December 31, 1998,  nonperforming assets and problem loans increased to
$68.5  million.  The  increase  for  1998  was  primarily  attributable  to  two
commercial loans totaling $6.0 million,  net of charge-off,  the acquisitions of
Republic Bank and Pacific Bay Bank and the overall growth of the loan portfolio,
principally   within  commercial,   financial  and  agricultural,   real  estate
construction   and  development   and  commercial   real  estate  loans.   While
nonperforming  assets and problem loans have, in general,  increased in 1998 and
1999,  First Banks does not believe such  increases to be indicative of distress
or negative trends within any of the major loan concentration areas.
         As of December 31, 1999,  1998,  1997,  1996 and 1995,  $36.3  million,
$21.3 million, $27.9 million, $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  (problem loans) which raised doubt as to the ability
of the borrowers to comply with the present loan repayment terms.
         First  Banks'  credit   management   policy  and  procedures  focus  on
identifying,  measuring and controlling credit exposure. These procedures employ
a  lender-initiated  system of rating  credits,  which is  ratified  in the loan
approval  process and  subsequently  tested in internal loan  reviews,  external
audits and regulatory bank examinations. The system requires rating all loans at

<PAGE>

the time they are originated,  except for homogeneous  categories of loans, such
as residential real estate mortgage loans,  indirect automobile loans and credit
card loans.  These  homogeneous  loans are  assigned an initial  rating based on
First Banks' experience with each type of loan. Adjustments to these ratings are
based on payment experience subsequent to their origination.
         Adversely rated credits,  including  loans  requiring close  monitoring
which would not normally be considered  criticized  credits by  regulators,  are
included on a monthly loan watch list.  Loans may be added to the watch list for
reasons  which are  temporary  and  correctable,  such as the absence of current
financial  statements  of the  borrower or a deficiency  in loan  documentation.
Other loans are added whenever any adverse  circumstance is detected which might
affect  the  borrower's  ability  to meet the terms of the loan.  This  could be
initiated by the delinquency of a scheduled loan payment, a deterioration in the
borrower's  financial  condition  identified  in a review of periodic  financial
statements,  a decrease in the value of the  collateral  securing the loan, or a
change in the economic environment within which the borrower operates.  Loans on
the watch list require  periodic  detailed loan status  reports  prepared by the
responsible officer, which are discussed in formal meetings with loan review and
credit  administration  staff  members.  Downgrades  of loan risk ratings may be
initiated by the responsible loan officer at any time. However, upgrades of risk
ratings may only be made with the concurrence of selected loan review and credit
administration  staff  members  generally  at the time of the formal  watch list
review meetings.
         Each month, the credit administration  department provides First Banks'
management  with detailed  lists of loans on the watch list and summaries of the
entire loan portfolio of each Subsidiary Bank by risk rating.  These are coupled
with analyses of changes in the risk profiles of the portfolios, changes in past
due and nonperforming  loans and changes in watch list and classified loans over
time. In this manner,  the overall  increases or decreases in the levels of risk
in the  portfolios  are monitored  continually.  Factors are applied to the loan
portfolios  for each  category of loan risk to  determine  acceptable  levels of
allowance for possible loan losses. These factors are derived primarily from the
actual loss  experience  of the  Subsidiary  Banks and from  published  national
surveys of norms in the industry.  The  calculated  allowances  required for the
portfolios are then compared to the actual  allowance  balances to determine the
provisions  necessary to maintain  the  allowances  at  appropriate  levels.  In
addition,  management  exercises  judgment in its  analysis of  determining  the
overall  level of the  allowance  for  possible  loan losses.  In its  analysis,
management considers the change in the portfolio,  including growth, composition
and the ratio of net loans to total assets,  and the economic  conditions of the
regions  in  which  First  Banks  operates.   Based  on  this  quantitative  and
qualitative analysis,  the allowance for possible loan losses is adjusted.  Such
adjustments are reflected in the consolidated statements of income.
         First Banks does not engage in lending in foreign countries or based on
activities  in foreign  countries.  Additionally,  First Banks does not have any
concentrations  of loans  exceeding  10% of total  loans that are not  otherwise
disclosed in the loan portfolio composition table and Note 4 to the accompanying
consolidated  financial statements.  First Banks does not have a material amount
of interest-earning assets that would have been included in nonaccrual, past due
or restructured loans if such assets were loans.

Deposits

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

                                                                          December 31,
                                    -----------------------------------------------------------------------------------
                                               1999                        1998                         1997
                                    --------------------------  --------------------------   --------------------------
                                                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>
Noninterest-bearing demand....... $  552,029     13.59%   --%  $  463,939     12.27%    --%  $  394,580     11.77%     --%
Interest-bearing demand.........     391,892      9.65  1.30      357,463      9.45   1.44      332,712      9.92    1.70
Savings.........................    ,220,425     30.03  3.61    1,076,524     28.48   3.96      761,052     22.70    3.60
Time deposits of $100 or more...     230,520      5.67  5.41      212,691      5.63   5.85      183,223      5.47    6.01
Other time......................   1,668,698     41.06  5.34    1,669,638     44.17   5.72    1,681,014     50.14    6.01
                                  ----------    ------  ====   ----------   -------   ====   ----------     -----    ====
      Total average deposits....  $4,063,564    100.00%        $3,780,255    100.00%         $3,352,581    100.00%
                                  ==========    ======         ==========    ======          ==========    ======

</TABLE>


<PAGE>


Capital and Dividends

         Historically,  First  Banks has  accumulated  capital  to  support  its
acquisitions  by retaining  most of its  earnings.  The Company pays  relatively
small dividends on the Class A convertible,  adjustable rate preferred stock and
the Class B adjustable  rate preferred  stock,  totaling  $786,000 for the years
ended  December  31,  1999,  1998 and 1997.  The  dividends  paid on the Class C
Preferred Stock, which was redeemed in December 1997, were $4.28 million for the
year ended  December  31, 1997.  First Banks has never paid,  and has no present
intention to pay, dividends on its common stock.
         As more fully  discussed  in Note 19 to the  accompanying  consolidated
financial  statements,  management  believes as of  December  31, 1999 and 1998,
First Banks and the Subsidiary  Banks were "well  capitalized" as defined by the
Federal Deposit Insurance Corporation Improvement Act of 1991.
         As  more  fully  discussed  under  "--Company  Profile,"   "--Financial
Condition and Average  Balances,"  and Note 9 to the  accompanying  consolidated
financial statements, in February 1997 and July 1998, First Banks and FBA formed
FPCT and FACT for the  purpose  of  issuing  $86.25  million  of FPCT  Preferred
Securities and $46.0 of FACT Preferred Securities,  respectively. For regulatory
reporting  purposes,  the  FPCT  Preferred  Securities  and the  FACT  Preferred
Securities are eligible for inclusion,  subject to certain limitations, in First
Banks' Tier 1 capital.

Liquidity

         The liquidity of First Banks and the Subsidiary Banks is the ability to
maintain  a cash  flow  which  is  adequate  to fund  operations,  service  debt
obligations and meet  obligations and other  commitments on a timely basis.  The
Subsidiary  Banks  receive  funds for liquidity  from  customer  deposits,  loan
payments,  maturities  of  loans  and  investments,  sales  of  investments  and
earnings. In addition, First Banks and the Subsidiary Banks may avail themselves
of more  volatile  sources of funds  through  the  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
and other borrowings,  including First Banks' $100 million Credit Agreement. The
aggregate  funds  acquired from these more volatile  sources were $476.8 million
and $391.4 million at December 31, 1999 and 1998, respectively.
         The following table presents the maturity  structure of volatile funds,
which  consists  of  certificates  of deposit of  $100,000  or more,  short-term
borrowings and the note payable, at December 31, 1999:
<TABLE>
<CAPTION>

                                                                                         December 31, 1999
                                                                                         -----------------
                                                                                 (dollars expressed in thousands)

<S>                                                                                         <C>
                Three months or less...................................................     $ 254,255
                Over three months through six months...................................        72,488
                Over six months through twelve months..................................       106,893
                Over twelve months.....................................................        43,132
                                                                                            ---------
                         Total.........................................................     $ 476,768
                                                                                            =========
</TABLE>

         In addition to these more  volatile  sources of funds,  in 1999,  First
Bank, FB&T, FB California and FB Texas have established borrowing  relationships
with the Federal  Reserve Bank in their  respective  districts.  These borrowing
relationships,  which are secured by  commercial  loans,  provide an  additional
liquidity  facility that may be utilized for contingency  purposes.  At December
31,  1999,   First  Banks'   borrowing   capacity  under  these  agreements  was
approximately  $1.67  billion.  In addition,  the  Subsidiary  Banks'  borrowing
capacity  through  their  relationships  with the  Federal  Home Loan  Banks was
approximately $395.9 million at December 31, 1999.
         Management  believes the available  liquidity and operating  results of
the  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 FPCT Preferred  Securities and
the FACT Preferred Securities.



<PAGE>


Year 2000 Compatibility

         First Banks and the Subsidiary  Banks were subject to risks  associated
with the "Year 2000" issue,  a term which  referred to  uncertainties  about the
ability of various data  processing  hardware and software  systems to interpret
dates  correctly   surrounding  the  beginning  of  the  Year  2000.   Financial
institutions were  particularly  vulnerable to Year 2000 issues because of heavy
reliance in the  industry  on  electronic  data  processing  and funds  transfer
systems.
         As more fully  discussed  in Note 17 to the  accompanying  consolidated
financial  statements,  data processing  services are provided to First Banks by
First Services,  L.P. under the terms of data processing agreements.  To address
the Year 2000 issue,  First Banks,  working jointly with First  Services,  L.P.,
established a dedicated  team to coordinate  the overall Year 2000  Preparedness
Program  (Program)  under the  guidelines  of the  Comprehensive  Year 2000 Plan
(Plan) as approved by the Board of  Directors.  The Plan  summarized  each major
phase of the Program and the  estimated  costs to remediate  and test systems in
preparation  for the Year 2000. The Plan addressed both  Information  Technology
(IT) projects, such as data processing and data network applications, and non-IT
projects,  such as building facilities and security systems. The major phases of
the  Program   were   awareness,   assessment,   remediation,   validation   and
implementation.
         First  Banks'  critical  systems  are  purchased  from   industry-known
vendors. Such systems are generally used in their standard  configuration,  that
is, with minor  modification.  Focusing on these critical  systems,  First Banks
closely reviewed and monitored the Year 2000 progress as reported by each vendor
and tested,  in most cases,  on a system  separate  from the on-line  production
system.  For the  critical  systems  that were  modified,  the vendors  provided
remediation  for such  systems  that were not  otherwise  reported as "Year 2000
ready." As the remediation phase was completed within the stated deadline, First
Banks did not invoke any remediation contingency efforts.
         First Banks  accelerated  the replacement of its existing teller system
(ISC), since certain functions of ISC were not Year 2000 compliant. Planning for
the  replacement  of ISC had been  underway  for several  years with the primary
objectives  of  adding  functionality  to meet  expanding  product  and  service
offerings  and  improving  efficiency  in serving  customers.  As the new teller
system  (CFI) also  provided a solution for the Year 2000  problem,  the overall
implementation  schedule  was  accelerated.  The  CFI  system  installation  was
completed  during the fourth  quarter of 1999.  In  conjunction  with the teller
replacement,  First Banks also  upgraded its local area  network-based  systems,
networks and core processor, and purchased certain item processing equipment, as
the  previous  equipment,  which  was  fully  depreciated,  was  not  Year  2000
compliant.  The  cost of the  teller  replacement,  the  upgrades  and the  item
processing  equipment  was $12.3 million and is being charged to expense over 60
months.
         First Banks successfully completed all phases of the Program within the
appropriate  timeframes  established  by the regulatory  agencies.  In addition,
First Banks did not encounter any significant business disruptions or processing
problems  as a  result  of the  Year  2000  century  date  change.  Furthermore,
management is unaware of any Year 2000 issues  encountered  by First Banks' more
significant  borrowers  and vendors that would  inhibit  their  ability to repay
obligations  or provide  goods or  services.  The total cost of the  Program was
$14.9  million,  comprised of capital  improvements  of $12.3 million and direct
expenses  reimbursable  to First  Services,  L.P. of $2.6  million.  The capital
improvements,  as previously discussed, are being charged to expense in the form
of depreciation expense or lease expense,  generally over a period of 60 months.
First Banks incurred  direct  expenses  related to the Program of  approximately
$1.8  million  and  $650,000  for the years  ended  December  31, 1999 and 1998,
respectively.

Effects of New Accounting Standards

         In June 1998, the Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting  Standards  (SFAS) No. 133 -- Accounting  for
Derivative  Instruments and Hedging  Activities (SFAS 133). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  and for hedging activities.
SFAS 133 requires that an entity  recognize all  derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value.  If certain  conditions are met, a derivative may be specifically
designated as a hedge in one of three categories.  The accounting for changes in
the fair  value of a  derivative  (that is,  gains and  losses)  depends  on the
intended use of the derivative and the resulting designation. Under SFAS 133, an
entity that elects to apply hedge  accounting is required to  establish,  at the
inception of the hedge,  the method it will use for assessing the  effectiveness
of the hedging  derivative  and the  measurement  approach for  determining  the
ineffective  aspect of the hedge.  Those  methods  must be  consistent  with the
entity's  approach to managing risk.  SFAS 133 applies to all entities.  In June
1999, the FASB issued SFAS No. 137 -- Accounting for Derivative  Instruments and
Hedging  Activities - Deferral of the Effective  Date of FASB Statement No. 133,
an Amendment of FASB  Statement No. 133, which defers the effective date of SFAS
133 from fiscal years  beginning  after June 15, 1999 to fiscal years  beginning

<PAGE>

after June 15, 2000.  Initial  application  should be as of the  beginning of an
entity's fiscal quarter; on that date, hedging  relationships must be designated
and  documented  pursuant to the  provisions  of SFAS 133,  as amended.  Earlier
application  of all of the  provisions is encouraged but is permitted only as of
the beginning of any fiscal  quarter that begins after the issuance date of SFAS
133, as  amended.  Additionally,  SFAS 133,  as  amended,  should not be applied
retroactively to financial statements of prior periods. First Banks is currently
evaluating the requirements of SFAS 133, as amended,  to determine its potential
impact on the consolidated financial statements.

Effects of Inflation

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


<PAGE>


                                FIRST BANKS, INC.

                 QUARTERLY CONDENSED FINANCIAL DATA - UNAUDITED

<TABLE>
<CAPTION>


                                                                               1999 Quarter Ended
                                                                ---------------------------------------------------
                                                                 March 31     June 30   September 30    December 31
                                                                ---------     -------   ------------    -----------
                                                                          (dollars expressed in thousands)

<S>                                                             <C>            <C>          <C>           <C>
Interest income..............................................   $  82,560      85,641       89,045        95,836
Interest expense.............................................      38,966      38,150       39,544        42,041
                                                                ---------   ---------    ---------      --------
       Net interest income...................................      43,594      47,491       49,501        53,795
Provision for possible loan losses...........................       2,490       3,373        2,880         4,330
                                                                ---------   ---------    ---------      --------
       Net interest income after provision
         for possible loan losses............................      41,104      44,118       46,621        49,465
Noninterest income...........................................       9,603      13,515        9,021         9,511
Noninterest expense..........................................      35,487      37,248       37,515        40,557
                                                                ---------   ---------    ---------      --------
       Income before provision for income taxes and
         minority interest in income of subsidiaries.........      15,220      20,385       18,127        18,419
Provision for income taxes...................................       5,638       7,465        6,689         6,521
                                                                ---------   ---------    ---------      --------
       Income before minority interest in
         income of subsidiaries..............................       9,582      12,920       11,438        11,898
Minority interest in income of subsidiaries..................         311         361          416           572
                                                                ---------   ---------    ---------      --------
       Net income............................................   $   9,271      12,559       11,022        11,326
                                                                =========   =========    =========      ========
Earnings per share:
    Basic....................................................   $  383.52      525.23       457.54        467.62
    Diluted..................................................      372.57      505.15       444.11        456.94
                                                                =========   =========    =========      ========


                                                                               1998 Quarter Ended
                                                                 --------------------------------------------------
                                                                 March 31     June 30   September 30    December 31
                                                                 --------     -------   ------------    -----------
                                                                          (dollars expressed in thousands)

Interest income..............................................   $  78,930      80,940       83,756        84,234
Interest expense.............................................      40,601      41,121       40,302        40,155
                                                                ---------   ---------    ---------      --------
       Net interest income...................................      38,329      39,819       43,454        44,079
Provision for possible loan losses...........................       2,100       1,850        2,275         2,775
                                                                ---------   ---------    ---------      --------
       Net interest income after provision
         for possible loan losses............................      36,229      37,969       41,179        41,304
Noninterest income...........................................       7,794       8,357        9,000        11,346
Noninterest expense..........................................      32,059      35,037       36,106        35,502
                                                                ---------   ---------    ---------      --------
       Income before provision for income taxes and
         minority interest in income of subsidiaries.........      11,964      11,289       14,073        17,148
Provision for income taxes...................................       4,256       4,134        5,079         6,224
                                                                ---------   ---------    ---------      --------
       Income before minority interest in
         income of subsidiaries..............................       7,708       7,155        8,994        10,924
Minority interest in income of subsidiaries..................         342         279          407           243
                                                                ---------   ---------    ---------      --------
       Net income............................................   $   7,366       6,876        8,587        10,681
                                                                =========   =========    =========      ========
Earnings per share:
    Basic....................................................   $  302.99      285.02       354.65        440.38
    Diluted..................................................      293.85      274.34       343.73        428.42
                                                                =========   =========    =========      ========
</TABLE>


<PAGE>


                                FIRST BANKS, INC.

                          INDEPENDENT AUDITORS' REPORT








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, 1999 and 1998,  and the
related consolidated  statements of income,  changes in stockholders' equity and
comprehensive  income  and cash  flows for each of the  years in the  three-year
period ended December 31, 1999. 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,  1999 and 1998,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1999,  in  conformity  with  generally  accepted  accounting
principles.



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


St. Louis, Missouri
March 15, 2000



<PAGE>


                                FIRST BANKS, INC.

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

<TABLE>
<CAPTION>

                                                                                              December 31,
                                                                                       -------------------------
                                                                                        1999                1998
                                                                                        ----                ----

                                             ASSETS
                                             ------


Cash and cash equivalents:
<S>                                                                                   <C>                  <C>
     Cash and due from banks.......................................................   $    126,720         174,329
     Interest-bearing deposits with other financial institutions
       with maturities of three months or less.....................................          1,674           3,733
     Federal funds sold............................................................         42,500          36,700
                                                                                      ------------     -----------
               Total cash and cash equivalents.....................................        170,894         214,762
                                                                                      ------------     -----------

Investment securities:
     Trading, at fair value........................................................             --           3,425
     Available for sale, at fair value.............................................        430,093         509,695
     Held to maturity, at amortized cost (fair value of $21,476 and
       $22,568 at December 31, 1999 and 1998, respectively)........................         21,554          21,676
                                                                                      ------------     -----------
               Total investment securities.........................................        451,647         534,796
                                                                                      ------------     -----------

Loans:
     Commercial, financial and agricultural........................................      1,086,919         920,007
     Real estate construction and development......................................        795,081         720,910
     Real estate mortgage..........................................................      1,851,569       1,529,177
     Consumer and installment......................................................        233,374         282,549
     Loans held for sale...........................................................         37,412         135,619
                                                                                      ------------     -----------
               Total loans.........................................................      4,004,355       3,588,262
     Unearned discount.............................................................         (8,031)         (8,157)
     Allowance for possible loan losses............................................        (68,611)        (60,970)
                                                                                      ------------     -----------
               Net loans...........................................................      3,927,713       3,519,135
                                                                                      ------------     -----------

Bank premises and equipment, net of accumulated
     depreciation and amortization.................................................         75,647          63,848
Intangibles associated with the purchase of subsidiaries...........................         46,085          36,534
Mortgage servicing rights, net of amortization.....................................          8,665           9,825
Accrued interest receivable........................................................         33,491          28,465
Other real estate..................................................................          2,129           3,709
Deferred income taxes..............................................................         51,972          46,848
Other assets.......................................................................         99,504          96,888
                                                                                      ------------     -----------
               Total assets........................................................   $  4,867,747       4,554,810
                                                                                      ============     ===========
</TABLE>


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


<PAGE>





                                FIRST BANKS, INC.

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
             (dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>


                                                                                              December 31,
                                                                                        ------------------------
                                                                                        1999                1998
                                                                                        ----                ----


                                           LIABILITIES
                                           -----------
Deposits:
     Demand:
<S>                                                                                   <C>                  <C>
       Non-interest-bearing........................................................   $    606,064         561,383
       Interest-bearing............................................................        415,113         377,435
     Savings.......................................................................      1,198,314       1,198,567
     Time:
       Time deposits of $100 or more...............................................        339,214         219,996
       Other time deposits.........................................................      1,693,109       1,582,604
                                                                                      ------------     -----------
          Total deposits...........................................................      4,251,814       3,939,985
Short-term borrowings..............................................................         73,554         121,331
Note payable.......................................................................         64,000          50,048
Accrued interest payable...........................................................         11,607           5,817
Deferred income taxes..............................................................          6,582          10,920
Accrued expenses and other liabilities.............................................         25,616          20,652
Minority interest in subsidiary....................................................         12,058          15,251
                                                                                      ------------     -----------
          Total liabilities........................................................      4,445,231       4,164,004
                                                                                      ------------     -----------

Guaranteed preferred beneficial interests in:
     First Banks, Inc. subordinated debentures.....................................         83,394          83,288
     First Banks America, Inc. subordinated debentures.............................         44,217          44,155
                                                                                      ------------     -----------
          Total guaranteed preferred beneficial interests in
              subordinated debentures..............................................        127,611         127,443
                                                                                      ------------     -----------

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

Preferred stock:
     $1.00 par value, 5,000,000 shares authorized, no shares issued
       and outstanding at December 31, 1999 and 1998...............................             --              --
     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....................................................................          3,318             780
Retained earnings..................................................................        270,259         231,867
Accumulated other comprehensive income.............................................          2,350          11,738
                                                                                      ------------     -----------
          Total stockholders' equity...............................................        294,905         263,363
                                                                                      ------------     -----------
          Total liabilities and stockholders' equity...............................   $  4,867,747       4,554,810
                                                                                      ============     ===========
</TABLE>


<PAGE>

                                FIRST BANKS, INC.

                        CONSOLIDATED STATEMENTS OF INCOME
             (dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                      Years ended December 31,
                                                                                   ---------------------------
                                                                                   1999         1998        1997
                                                                                   ----         ----        ----
Interest income:
<S>                                                                             <C>           <C>          <C>
     Interest and fees on loans..............................................  $ 323,207      284,177      252,766
     Investment securities:
       Taxable...............................................................     26,206       39,898       35,248
       Nontaxable............................................................        937          985        1,008
     Federal funds sold and other............................................      2,732        2,800        6,079
                                                                               ---------     --------    ---------
         Total interest income...............................................    353,082      327,860      295,101
                                                                               ---------     --------    ---------
Interest expense:
     Deposits:
       Interest-bearing demand...............................................      5,098        5,135        5,648
       Savings...............................................................     44,101       42,591       27,383
       Time deposits of $100 or more.........................................     11,854       12,024       10,386
       Other time deposits...................................................     84,639       92,305       95,244
     Interest rate exchange agreements, net..................................      5,397        3,810        6,574
     Short-term borrowings...................................................      3,983        2,903        2,103
     Note payable............................................................      3,629        3,411        1,493
                                                                               ---------     --------    ---------
         Total interest expense..............................................    158,701      162,179      148,831
                                                                               ---------     --------    ---------
         Net interest income.................................................    194,381      165,681      146,270
Provision for possible loan losses...........................................     13,073        9,000       11,300
                                                                               ---------     --------    ---------
         Net interest income after provision for possible loan losses........    181,308      156,681      134,970
                                                                               ---------     --------    ---------
Noninterest income:
     Service charges on deposit accounts and customer service fees...........     17,676       14,876       12,491
     Credit card fees........................................................        409        2,999        2,914
     Loan servicing fees, net................................................        657        1,017        1,628
     Gain on mortgage loans sold and held for sale...........................      6,909        5,563          716
     Net gain on sales of available-for-sale securities......................        791        1,466        2,335
     Net (loss) gain on trading securities...................................       (303)         607          121
     Gain on sales of branches, net of expenses..............................      4,406           --           --
     Other...................................................................     11,105        9,969        5,492
                                                                               ---------     --------    ---------
         Total noninterest income............................................     41,650       36,497       25,697
                                                                               ---------     --------    ---------
Noninterest expense:
     Salaries and employee benefits..........................................     61,524       55,907       43,011
     Occupancy, net of rental income.........................................     12,518       11,037       10,617
     Furniture and equipment.................................................      8,520        8,122        7,618
     Federal Deposit Insurance Corporation premiums..........................      1,310        1,370          804
     Postage, printing and supplies..........................................      4,244        5,230        4,187
     Data processing fees....................................................     18,567       13,917        8,450
     Legal, examination and professional fees................................      9,109        5,326        4,587
     Credit card.............................................................        667        3,396        3,343
     Communications..........................................................      2,488        2,874        2,611
     Advertising and business development....................................      3,734        4,668        4,054
     (Gain) loss on sales of other real estate, net of expenses..............       (622)          81         (331)
     Guaranteed preferred debentures.........................................     12,050        9,842        7,322
     Other...................................................................     16,698       16,934       14,014
                                                                               ---------     --------    ---------
         Total noninterest expense...........................................    150,807      138,704      110,287
                                                                               ---------     --------    ---------
         Income before provision for income taxes and minority interest
           in  income of subsidiary..........................................     72,151       54,474       50,380
Provision for income taxes...................................................     26,313       19,693       16,083
                                                                               ---------     --------    ---------
         Income before minority interest in income of subsidiary.............     45,838       34,781       34,297
Minority interest in income of subsidiary....................................      1,660        1,271        1,270
                                                                                --------     --------    ---------
         Net income..........................................................     44,178       33,510       33,027
Preferred stock dividends....................................................        786          786        5,067
                                                                               ---------     --------    ---------
         Net income available to common stockholders.........................  $  43,392       32,724       27,960
                                                                                ========     ========    =========
Earnings per common share:
     Basic...................................................................  $1,833.91     1,383.04     1,181.69
     Diluted.................................................................   1,775.47     1,337.09     1,134.28
                                                                               =========     ========    =========

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>





                                FIRST BANKS, INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                       Three years ended December 31, 1999
             (dollars expressed in thousands, except per share data)

<TABLE>
<CAPTION>


                                                   Class C                                                           Accu-
                                                  preferred     Adjustable rate                                     mulated
                                                   stock,       preferred stock                                      other   Total
                                                                ---------------
                                                 increasing   Class A                             Compre-           compre-  stock-
                                                    rate,     conver-            Common   Capital hensive Retained  hensive holders'
                                                 redeemable    tible   Class B    stock   surplus income  earnings  income  equity
                                                 ----------    -----   -------    -----   ------- ------  --------  ------  ------

<S>                                               <C>         <C>        <C>     <C>      <C>     <C>      <C>       <C>    <C>
Consolidated balances, January 1, 1997........... $ 53,887    12,822     241     5,915    3,289            171,182   4,053  251,389
Year ended December 31, 1997:
    Comprehensive income:
      Net income.................................       --        --      --        --       --    33,027   33,027      --   33,027
      Other comprehensive income, net of tax
        Unrealized gains on securities, net of
        reclassification adjustment (1)..........       --        --      --        --       --     5,385       --   5,385    5,385
                                                                                                  -------
      Comprehensive income.......................                                                  38,412
                                                                                                  =======
    Class C preferred stock dividends,
      $2.25 per share............................       --        --      --        --       --             (4,280)     --   (4,280)
    Class A preferred stock dividends,
      $1.20 per share............................       --        --      --        --       --               (769)     --     (769)
    Class B preferred stock dividends,
      $0.11 per share............................       --        --      --        --       --                (17)     --      (17)
    Purchase and retirement of Class C
       preferred stock...........................   (6,774)       --      --        --     (161)                --      --   (6,935)
    Redemption of Class C preferred stock........  (47,113)       --      --        --       --                 --      --  (47,113)
    Effect of capital stock transactions of
       majority-owned subsidiaries...............       --        --      --        --      850                 --      --      850
                                                   -------    ------    ----     -----   ------            -------  ------  -------
Consolidated balances, December 31, 1997.........       --    12,822     241     5,915    3,978            199,143   9,438  231,537
Year ended December 31, 1998:
    Comprehensive income:
      Net income.................................       --        --      --        --       --    33,510   33,510      --   33,510
      Other comprehensive income, net of tax
        Unrealized gains on securities, net of
        reclassification adjustment (1)..........       --        --      --        --       --     2,300       --   2,300    2,300
                                                                                                  -------
      Comprehensive income.......................                                                  35,810
                                                                                                  =======
    Class A preferred stock dividends,
      $1.20 per share............................       --        --      --        --      --                (769)     --     (769)
    Class B preferred stock dividends,
      $0.11 per share............................       --        --      --        --      --                 (17)     --      (17)
    Effect of capital stock transactions of
       majority-owned subsidiaries...............       --        --      --        --  (3,198)                 --      --   (3,198)
                                                  --------    ------    ----     -----  ------             -------  ------  -------
Consolidated balances, December 31, 1998.........       --    12,822     241     5,915     780             231,867  11,738  263,363
Year ended December 31, 1999:
    Comprehensive income:
      Net income.................................       --        --      --        --      --     44,178   44,178      --   44,178
      Other comprehensive income, net of tax
        Unrealized losses on securities, net of
        reclassification adjustment (1)..........       --        --      --        --      --     (9,388)      --  (9,388)  (9,388)
                                                                                                  -------
      Comprehensive income.......................                                                  34,790
                                                                                                  =======
    Class A preferred stock dividends,
     $1.20 per share.............................       --        --      --        --      --                (769)     --     (769)
    Class B preferred stock dividends,
      $0.11 per share............................       --        --      --        --      --                 (17)     --      (17)
    Effect of capital stock transactions of
       majority-owned subsidiary.................       --        --      --        --   (3,273)                --      --   (3,273)
    Reclassification of retained earnings........       --        --      --        --    5,000             (5,000)     --       --
    Reduction of deferred tax asset
      valuation allowance........................       --        --      --        --      811                 --      --      811
                                                  --------    ------    ----     -----   ------            -------  ------  -------

Consolidated balances, December 31, 1999......... $     --    12,822     241     5,915    3,318            270,259   2,350  294,905
                                                  ========    ======    ====     =====   ======            =======  ======  =======
</TABLE>

<PAGE>

-------------------------
(1)  Disclosure of reclassification adjustment:
<TABLE>
<CAPTION>
                                                                                           Three years ended December 31, 1999
                                                                                           -----------------------------------

                                                                                                1999        1998       1997
                                                                                                ----        ----       ----

<S>                                                                                           <C>          <C>        <C>
     Unrealized (losses) gains arising during the period....................................  $(8,874)     3,253      6,903
     Less reclassification adjustment for gains included in net income......................      514        953      1,518
                                                                                              -------      -----      -----
     Unrealized (losses) gains on securities................................................  $(9,388)     2,300      5,385
                                                                                              =======      =====      =====
</TABLE>

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


<PAGE>





                                FIRST BANKS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (dollars expressed in thousands)
<TABLE>
<CAPTION>


                                                                                        Years ended December 31,
                                                                                      --------------------------
                                                                                      1999       1998        1997
                                                                                      ----       ----        ----

Cash flows from operating activities:
<S>                                                                               <C>          <C>          <C>
     Net income.................................................................  $ 44,178     33,510       33,027
     Adjustments to reconcile net income to net cash provided by
         (used in) operating activities:
       Depreciation and amortization of bank premises and equipment.............     7,609      5,293        5,687
       Amortization, net of accretion...........................................    12,632     10,494        9,512
       Originations and purchases of loans held for sale........................  (452,941)  (628,544)    (174,330)
       Proceeds from the sale of loans held for sale............................   507,077    520,994      148,350
       Provision for possible loan losses.......................................    13,073      9,000       11,300
       Provision for income taxes...............................................    26,313     19,693       16,083
       Payments of income taxes.................................................   (23,904)   (16,091)     (17,976)
       Decrease (increase) in accrued interest receivable.......................    (3,164)       256       (5,107)
       Net decrease (increase) in trading securities............................     3,425       (315)      (3,110)
       Interest accrued on liabilities..........................................   158,701    162,368      148,831
       Payments of interest on liabilities......................................  (154,056)  (167,090)    (149,380)
       Other operating activities, net..........................................    (7,201)    (5,582)      (7,284)
       Minority interest in income of subsidiary................................     1,660      1,271        1,270
                                                                                  --------    -------     --------
         Net cash provided by (used in) operating activities....................   133,402    (54,743)      16,873
                                                                                  --------    -------     --------
Cash flows from investing activities:
     Cash (paid) received for acquired entities, net of
         cash and cash equivalents received (paid)..............................   (15,961)    29,339       84,556
     Proceeds from sales of investment securities available for sale............    63,938    136,042       20,930
     Maturities of investment securities available for sale.....................   350,940    395,961      447,547
     Maturities of investment securities held to maturity.......................     2,708      2,314        1,804
     Purchases of investment securities available for sale......................  (288,023)  (167,082)    (686,474)
     Purchases of investment securities held to maturity........................    (2,627)    (4,910)        (844)
     Net increase in loans......................................................  (268,238)  (443,741)    (174,804)
     Recoveries of loans previously charged-off.................................     9,281      8,444        9,230
     Purchases of bank premises and equipment...................................   (17,099)   (14,851)      (6,413)
     Other investing activities.................................................       (10)   (13,919)     (54,681)
                                                                                  --------    -------     --------
         Net cash used in investing activities..................................  (165,091)   (72,403)    (359,149)
                                                                                  --------    -------     --------
Cash flows from financing activities:
     Decrease (increase) in demand and savings deposits.........................   (72,895)   258,757      304,193
     Increase (decrease) in time deposits.......................................   144,499   (171,207)      (8,348)
     Decrease (increase) in Federal Home Loan Bank advances.....................   (50,000)    48,485      (37,218)
     Increase in securities sold under agreements to repurchase.................     2,223     18,692       21,390
     Increase (decrease) in notes payable.......................................    13,952    (24,637)     (21,186)
     Purchase and retirement of Class C preferred stock.........................        --         --      (54,048)
     Proceeds from issuance of guaranteed preferred subordinated debentures.....        --     44,124       83,086
     Sale of branch deposits....................................................   (49,172)        --           --
     Payment of preferred stock dividends.......................................      (786)      (786)      (5,067)
                                                                                  --------    -------     --------
         Net cash (used in) provided by financing activities....................   (12,179)   173,428      282,802
                                                                                  --------    -------     --------
         Net (decrease) increase in cash and cash equivalents...................   (43,868)    46,282      (59,474)
Cash and cash equivalents, beginning of year....................................   214,762    168,480      227,954
                                                                                  --------    -------     --------
Cash and cash equivalents, end of year..........................................  $170,894    214,762      168,480
                                                                                  ========    =======     ========
Noncash investing and financing activities:
     Loans transferred to other real estate.....................................  $  4,039      3,067        4,295
     Loans exchanged for and transferred to available-for-sale
         investment securities..................................................        --     65,361           --
     Loans held for sale exchanged for and transferred to
         available-for-sale investment securities...............................     3,985     23,898           --
     Loans held for sale transferred to loans...................................    32,982         --           --
                                                                                  ========    =======     ========
</TABLE>


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


<PAGE>


                                FIRST BANKS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The accompanying consolidated financial statements of First Banks, Inc.
and  subsidiaries  (First Banks or the Company) 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
accounting 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.

         Principles of  Consolidation.  The  consolidated  financial  statements
include the accounts of First Banks, Inc. and its subsidiaries,  net of minority
interest,  as more fully described below. All significant  intercompany accounts
and transactions  have been eliminated.  Certain  reclassifications  of 1998 and
1997 amounts have been made to conform with the 1999 presentation.
         First Banks operates through its subsidiary bank holding  companies and
financial  institutions  (collectively  referred to as the Subsidiary  Banks) as
follows:

         First Bank, headquartered in St. Louis County, Missouri (First Bank);
         First Bank & Trust, headquartered in Newport Beach, California (FB&T);
         First Banks America, Inc., headquartered in St. Louis County, Missouri
            (FBA), and its wholly owned subsidiaries:
                First Bank Texas N.A., headquartered in Houston, Texas
                (FB Texas);
                First Bank of California, headquartered in Roseville, California
                (FB California); and,
                Redwood Bank, headquartered in San Francisco, California.

         The  Subsidiary  Banks  are  wholly  owned by their  respective  parent
companies except FBA, which was 76.8% owned by First Banks at December 31, 1998.
On February 17, 1999,  First Banks  completed its purchase of 314,848  shares of
FBA common stock  pursuant to a tender offer to purchase up to 400,000 shares of
FBA common stock. The tender offer increased First Banks' ownership  interest in
FBA to 82.3% of the  outstanding  voting stock of FBA.  First  Banks'  ownership
interest in FBA at December 31, 1999 was 83.4%.
         On February 2, 1998, First Commercial  Bancorp,  Inc., a majority-owned
subsidiary of First Banks,  was acquired by FBA and its subsidiary  bank,  First
Commercial  Bank,  was  merged  into FB  California.  The  combination  of these
entities did not have a material impact on the financial condition or results of
operations of First Banks.

         Cash and Cash  Equivalents.  Cash, due from banks,  federal funds sold,
and  interest-bearing  deposits with original maturities of three months or less
are considered to be cash and cash  equivalents for purposes of the consolidated
statements of cash flows.
         The  Subsidiary  Banks are required to maintain  certain  daily reserve
balances on hand in  accordance  with  regulatory  requirements.  These  reserve
balances  maintained in accordance with such requirements were $10.8 million and
$49.4 million at December 31, 1999 and 1998, respectively.

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


<PAGE>


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

         Loans Held for Portfolio. Loans held for portfolio are carried at cost,
adjusted  for  amortization  of premiums and  accretion  of discounts  using the
interest  method.  Interest and fees on loans are recognized as income using the
interest  method.  Loan  origination  fees are deferred  and  accreted  over the
estimated life of the loans using the interest method.  Loans held for portfolio
are  stated  at cost as  First  Banks  has the  ability  and it is  management's
intention to hold them to maturity.
         The accrual of interest on loans is  discontinued  when it appears that
interest or principal may not be paid in a timely manner in the normal course of
business.  Generally,  payments  received on nonaccrual  and impaired  loans are
recorded  as  principal  reductions.  Interest  income is  recognized  after all
principal  has been repaid or an  improvement  in the  condition of the loan has
occurred which would warrant resumption of interest accruals.
         A loan is considered impaired when it is probable that First Banks will
be unable to collect all amounts due, both principal and interest,  according to
the contractual  terms of the loan  agreement.  When measuring  impairment,  the
expected  future cash flows of an  impaired  loan are  discounted  at the loan's
effective interest rate.  Alternatively,  impairment is measured by reference to
an observable  market price, if one exists,  or the fair value of the collateral
for a collateral-dependent loan. Regardless of the historical measurement method
used, First Banks measures  impairment based on the fair value of the collateral
when foreclosure is probable. Additionally, impairment of a restructured loan is
measured  by  discounting  the total  expected  future  cash flows at the loan's
effective rate of interest as stated in the original loan agreement. First Banks
uses its existing nonaccrual methods for recognizing interest income on impaired
loans.

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

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

         Allowance  for Possible  Loan Losses.  The  allowance for possible loan
losses is  maintained  at a level  considered  adequate to provide for  probable
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 impaired  loans,  an overall
unallocated  allowance is established to provide for unidentified  credit losses
which are inherent in the portfolio.  As adjustments become necessary,  they are
reflected  in the  results of  operations  in the  periods in which they  become
known.

         Bank Premises and Equipment.  Bank premises and equipment are stated at
cost less accumulated  depreciation and  amortization.  Depreciation is computed
primarily using the straight-line  method over the estimated useful lives of the
related assets.  Amortization of leasehold  improvements is calculated using the
straight-line  method over the shorter of the useful life of the  improvement or
term of the lease.  Bank premises and  improvements are depreciated over five to
40 years and equipment over three 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.  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.  First
Banks reviews  intangible  assets for impairment  whenever  events or changes in
circumstances  indicate  the  carrying  value  may not be  recoverable  over the
original estimated life. As adjustments become necessary,  they are reflected in
the results of operations in the periods in which they become known.

         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.




<PAGE>


         Other  Real  Estate.  Other  real  estate,  consisting  of real  estate
acquired  through  foreclosure or deed in lieu of foreclosure,  is stated at the
lower of cost or fair value less  applicable  selling costs.  The excess of cost
over fair value of the  property  at the date of  acquisition  is charged to the
allowance for 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 Banks is
subject to a financial institutions tax which is based on income.

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

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

         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  income or interest
expense  of the  related  asset or  liability.  Premiums  and fees paid upon the
purchase of interest rate swap,  floor and cap agreements are amortized over the
life of the  agreements  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 asset
or  liability.  If,  however,  the  amount  of the  underlying  hedged  asset or
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.

         Forward Contracts to Sell Mortgage-Backed Securities.  Gains and losses
on  forward  contracts  to sell  mortgage-backed  securities,  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.

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

(2)  ACQUISITIONS AND DIVESTITURES

         On December 1, 1997,  FBA  completed  its  acquisition  of Surety Bank,
Vallejo, California, in exchange for 264,622 shares of FBA common stock and cash
of $3.8  million.  The cash portion of this  transaction,  which was paid to the
former  shareholders  of Surety Bank in January  1998,  was funded by  available
cash.  At the time of the  transaction,  Surety Bank had $72.8  million in total
assets,  $14.9 million in cash and cash  equivalents and investment  securities,
$54.4  million in total loans,  net of unearned  discount,  and $67.5 million in
total  deposits.  Surety Bank was merged into FB  California.  The excess of the
cost over the fair  value of the net assets  acquired  was $2.8  million  and is
being amortized over 15 years.
         During 1997,  First Banks  completed its assumption of the deposits and
purchase of  selected  assets of three  banking  locations  of Highland  Federal
Savings  Bank,  F.S.B.  The  transaction  resulted in the  acquisition  of $82.8
million in  deposits.  The banking  locations  operate as branches of FB&T.  The
excess  of the cost  over the fair  value of the net  assets  acquired  was $1.4
million and is being amortized over 10 years.

<PAGE>

         On February 2, 1998, FBA completed its acquisition of Pacific Bay Bank,
San Pablo,  California (Pacific Bay), in exchange for cash of $4.2 million. This
transaction was funded from an advance under First Banks' credit  agreement with
a group of unaffiliated financial institutions.  At the time of the transaction,
Pacific Bay had $38.3  million in total  assets,  $7.4  million in cash and cash
equivalents,  $29.7 million in total loans, net of unearned discount,  and $35.2
million in total deposits. The excess of the cost over the fair value of the net
assets acquired was $1.5 million and is being amortized over 15 years.
         On March 19, 1998, First Banks completed its assumption of the deposits
and purchase of selected assets of the Solvang,  California  banking location of
Bank of America.  The transaction  resulted in the acquisition of  approximately
$15.5 million in deposits and one office that operates as a branch of FB&T.  The
excess  of the cost  over the fair  value of the net  assets  acquired  was $1.8
million and is being amortized over 15 years.
         On  September  15,  1998,  First Banks  completed  its  acquisition  of
Republic Bank in exchange for $19.3 million in cash. The  transaction was funded
from  available cash of $3.3 million and borrowings of $16.0 million under First
Banks' credit agreement with a group of unaffiliated financial institutions.  At
the time of the  transaction,  Republic Bank had $124.1 million in total assets,
$97.9  million  in loans,  net of  unearned  discount,  and  $117.2  million  in
deposits.  Republic Bank, previously headquartered in Torrance,  California, was
merged into and operates as branch  offices of FB&T. The excess of the cost over
the  fair  value of the net  assets  acquired  was  $10.2  million  and is being
amortized over 15 years.
         On March 4, 1999,  FBA completed  its  acquisition  of Redwood  Bancorp
(Redwood) and its wholly owned  subsidiary,  Redwood Bank, in exchange for $26.0
million in cash. The acquisition  was funded from available  proceeds from FBA's
sale of 8.50% Guaranteed  Preferred  Beneficial  Interest in FBA's  Subordinated
Debentures  completed  in  July  1998.  Redwood  Bank  is  headquartered  in San
Francisco,  California and operates four banking  locations in the San Francisco
Bay area.  At the time of the  transaction,  Redwood Bank had $183.9  million in
total assets,  $134.4 million in loans, net of unearned discount,  $34.4 million
in investment securities and $162.9 million in deposits.  The excess of the cost
over the fair value of the net assets  acquired  was $9.5  million  and is being
amortized over 15 years.
         In March and April 1999,  First Bank completed its divestiture of seven
branches in the  northern  and central  Illinois  market  areas,  resulting in a
reduction of the deposit base of approximately  $54.8 million and a pre-tax gain
of $4.4 million recorded in other income.
         On August 31, 1999,  First Banks  completed its  acquisition of Century
Bank,  Beverly  Hills,  California,  in exchange for $31.5 million in cash.  The
transaction was funded from borrowings  under First Banks' credit agreement with
a group of unaffiliated financial institutions.  At the time of the transaction,
Century Bank had $156.0 million in total assets,  $94.8 million in loans, net of
unearned discount,  $26.1 million in investment securities and $132.0 million in
total  deposits.  Century  Bank,  previously  headquartered  in  Beverly  Hills,
California,  was merged into and operates as branch  offices of FB&T. The excess
of the cost over the fair value of the net assets  acquired was $4.5 million and
is being amortized over 15 years.
         On September 17, 1999,  FB&T  completed its  assumption of the deposits
and certain  liabilities  and the  purchase  of  selected  assets of the Malibu,
California  branch  office of  Brentwood  Bank of  California.  The  transaction
resulted in the acquisition of  approximately  $17.3 million of deposits and one
branch office that operates as a branch of FB&T. The excess of the cost over the
fair value of the net assets  acquired was $325,000 and is being  amortized over
15 years.
         The  aforementioned  acquisition  transactions were accounted for using
the purchase method of accounting and, accordingly,  the consolidated  financial
statements  include the  financial  position and results of  operations  for the
period subsequent to the respective  acquisition  dates, and the assets acquired
and liabilities  assumed were recorded at fair value at the  acquisition  dates.
Due to the immaterial effect on previously reported financial  information,  pro
forma disclosures have not been prepared for the aforementioned transactions.
         On February 29, 2000, FBA completed its  acquisition of Lippo Bank, San
Francisco,  California,  in  exchange  for $17.2  million  in cash.  Lippo  Bank
operates  three banking  locations in San  Francisco,  San Jose and Los Angeles,
California.  The  acquisition was funded from available cash. At the time of the
transaction,  Lippo Bank had $85.3  million in total  assets,  $40.9  million in
loans,  net of unearned  discount,  $37.4 million in investment  securities  and
$76.4 million in total  deposits.  This  transaction was accounted for using the
purchase method of accounting. The excess of the cost over the fair value of the
net assets acquired was  approximately  $4.0 million and is being amortized over
15 years. Lippo Bank will be merged into FB California.
         On February 29, 2000,  First Banks completed its acquisition of certain
assets and  liabilities of First Capital Group,  Inc.,  Albuquerque,  New Mexico
(FCG),  in exchange  for $65.1  million in cash.  FCG is a leasing  company that
specializes in commercial  leasing and operates a multi-state  leasing business.
The acquisition was funded from available cash. At the time of the  transaction,
FCG had $64.6  million in total assets,  consisting  almost solely of commercial
leases, net of unearned income, of $64.5 million.  The premium paid on the lease
portfolio acquired was $1.5 million and is being amortized as a yield adjustment
over  approximately  4 years.  FCG is operating as a direct  subsidiary of First
Banks, Inc.


<PAGE>


 (3)     INVESTMENTS IN DEBT AND EQUITY SECURITIES

         Securities   Available  for  Sale.  The  amortized  cost,   contractual
maturity,  gross  unrealized  gains  and  losses  and fair  value of  investment
securities available for sale at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>

                                                        Maturity                       Total
                                          ---------------------------------------
                                                                            After      amor-          Gross               Weighted
                                          1 Year         1-5       5-10      10        tized       unrealized      Fair    average
                                                                                                 -------------
                                          or less       years      years    years      cost      Gains   Losses    value    yield
                                          -------       -----      -----    -----      ----      -----   ------    -----    -----
                                                                      (dollars expressed in thousands)

 December 31, 1999:
    Carrying value:
<S>                                     <C>            <C>       <C>        <C>        <C>         <C>     <C>    <C>       <C>
       U.S. Treasury..................  $  21,036      29,240        --         --     50,276      58      (45)   50,289    6.10%
       U.S. Government agencies
         and corporations:
          Mortgage-backed.............     12,489       2,274    20,946     98,935    134,644      20   (1,540)  133,124    6.64
          Other.......................    144,185      26,073    13,170     24,256    207,684       4   (3,607)  204,081    6.02
       Foreign debt securities........      2,995          --        --         --      2,995     286       --     3,281    9.42
       Equity investments in other
         financial institutions.......      9,605          --        --         --      9,605   8,492     (434)   17,663    8.53
       Federal Home Loan Bank and
         Federal Reserve Bank stock
         (no stated maturity).........     21,655          --        --         --     21,655      --       --    21,655    6.07
                                        ---------    --------   -------    -------    -------  ------   ------   -------
                Total.................  $ 211,965      57,587    34,116    123,191    426,859   8,860   (5,626)  430,093    6.26
                                        =========    ========   =======    =======    =======  ======   ======   =======  ======

    Market value:
       Debt securities................  $ 177,426      57,448    32,998    119,621
       Equity securities..............     42,600          --        --         --
                                        ---------    --------   -------    -------
                Total.................  $ 220,026      57,448    32,998    119,621
                                        =========    ========   =======    =======

    Weighted average yield............       6.00%       6.44%     6.26%      6.79%
                                        =========    ========   =======    =======


 December 31, 1998:
    Carrying value:
       U.S. Treasury..................  $  54,288      84,990        --         --    139,278   2,312       --   141,590    5.98%
       U.S. Government agencies
         and corporations:
          Mortgage-backed.............     11,642      27,334    32,352    113,912    185,240   1,082     (171)  186,151    6.35
          Other.......................     16,893      78,047    35,524      6,980    137,444   1,060      (15)  138,489    6.07
       Equity investments in other
         financial institutions.......      8,805          --        --         --      8,805  14,061       --    22,866    4.75
       Federal Home Loan Bank and
         Federal Reserve Bank stock
         (no stated maturity).........     20,599          --        --         --     20,599      --       --    20,599    6.36
                                        ---------    --------   -------    -------    -------  ------    -----   -------
                Total.................  $ 112,227     190,371    67,876    120,892    491,366  18,515     (186)  509,695    6.14
                                        =========    ========   =======    =======    =======  ======    =====   =======  ======

    Market value:
       Debt securities................  $  83,324     193,231    68,135    121,540
       Equity securities..............     43,465          --        --         --
                                        ---------    --------   -------    -------
                Total.................  $ 126,789     193,231    68,135    121,540
                                        =========    ========   =======    =======

    Weighted average yield............       5.92%       5.96%     6.36%      6.51%
                                        =========    ========   =======    =======

</TABLE>


<PAGE>


         Securities Held to Maturity.  The amortized cost, contractual maturity,
gross unrealized  gains and losses and fair value of investment  securities held
to maturity at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>

                                                        Maturity                       Total
                                          ---------------------------------------
                                                                            After      amor-          Gross               Weighted
                                          1 Year         1-5       5-10      10        tized       unrealized      Fair    average
                                                                                                 --------------
                                          or less       years      years    years      cost      Gains   Losses    value    yield
                                          -------       -----      -----    -----      ----      -----   ------    -----    -----
                                                                      (dollars expressed in thousands)

 December 31, 1999:
    Carrying value:
       U.S. Government agencies
         and corporations:
<S>                                     <C>            <C>       <C>         <C>        <C>    <C>        <C>      <C>      <C>
          Mortgage-backed.............  $      --          --        --      2,355      2,355      --     (155)    2,200    6.28%
       State and political
          subdivisions................        506      11,196     5,322      1,965     18,989     275     (198)   19,066    5.05
       Other..........................         --         210        --         --        210      --       --       210    6.92
                                        ---------    --------   -------    -------    -------   -----    -----    ------
                Total.................  $     506      11,406     5,322      4,320     21,554     275     (353)   21,476    5.22
                                        =========    ========   =======    =======    =======   =====    =====    ======  ======

    Market value:
       Debt securities................  $     512      11,505     5,125      4,334
                                        =========     =======   =======    =======

    Weighted average yield............       5.09%       4.97%     4.55%      6.62%
                                        =========    ========   =======    =======

 December 31, 1998:
    Carrying value:
       U.S. Government agencies
         and corporations:
          Mortgage-backed.............  $      --         --        --       2,507      2,507      --      (13)    2,494    6.41%
       State and political
          subdivisions................        776       7,323     8,700      2,085     18,884     897       --    19,781    5.38
       Other..........................         75         210        --         --        285       8       --       293    6.68
                                        ---------    --------   -------    -------    -------   -----    -----    ------
                Total.................  $     851       7,533     8,700      4,592     21,676     905      (13)   22,568    5.51
                                        =========    ========   =======    =======    =======   =====    =====    ======  ======

    Market value:
       Debt securities................  $     862       7,777     8,986      4,943
                                        =========    ========   =======     ======

    Weighted average yield............       5.21%       5.43%     4.96%      6.69%
                                        =========     =======    ======     ======
</TABLE>

         Proceeds from sales of trading investment securities were $2.9 million,
$311  million and $215 million for the years ended  December 31, 1999,  1998 and
1997,  respectively.  There were no gross gains  realized on these sales for the
year ended December 31, 1999. Gross gains of $879,000 and $233,000 were realized
on these sales for the years  ended  December  31, 1998 and 1997,  respectively.
Gross losses of $303,000, $234,000 and $122,000 were realized on these sales for
the years ended December 31, 1999, 1998 and 1997, respectively.
         Proceeds from sales of  available-for-sale  investment  securities were
$63.9 million, $136.0 million and $20.9 million for the years ended December 31,
1999,  1998 and 1997,  respectively.  Gross gains of $791,000,  $1.5 million and
$2.3 million  were  realized on these  sales.  There were no losses  realized on
these sales in 1999, 1998 and 1997.
         Proceeds  from calls of  held-to-maturity  investment  securities  were
$20,000  for the year ended  December  31,  1999.  Gross  losses of $1,200  were
realized on these called securities for the year ended December 31, 1999.
         Certain of the  Subsidiary  Banks  maintain  investments in the Federal
Home Loan Bank (FHLB) and/or the Federal Reserve Bank (FRB).  These  investments
are recorded at cost, which represents  redemption value. The investment in FHLB
stock is  maintained  at a  minimum  amount  equal to the  greater  of 1% of the
aggregate  outstanding balance of the applicable Subsidiary Bank's loans secured
by residential  real estate,  or 5% of advances from the FHLB to each Subsidiary
Bank.  First  Bank,  FB&T,  FB  California  and FB Texas are members of the FHLB
system.  The  investment  in FRB stock is  maintained  at a minimum of 6% of the
applicable  Subsidiary Bank's capital stock and capital surplus.  First Bank and
FB Texas are members of the FRB system.
         Investment  securities  with a carrying value of  approximately  $222.3
million and $263.0  million at December  31, 1999 and 1998,  respectively,  were
pledged in connection  with deposits of public and trust funds,  securities sold
under agreements to repurchase and for other purposes as required by law.


<PAGE>

(4)      LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES

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

                                                                                    1999        1998        1997
                                                                                    ----        ----        ----
                                                                                  (dollars expressed in thousands)

<S>                                                                              <C>           <C>          <C>
               Balance, January 1.............................................   $ 60,970      50,509       46,781
               Acquired allowances for possible loan losses...................      3,008       3,200           30
                                                                                 --------    --------    ---------
                                                                                   63,978      53,709       46,811
                                                                                 --------    --------    ---------
               Loans charged-off..............................................    (17,721)    (10,183)     (16,832)
               Recoveries of loans previously charged-off.....................      9,281       8,444        9,230
                                                                                 --------    --------    ---------
               Net loans charged-off..........................................     (8,440)     (1,739)      (7,602)
                                                                                 --------    --------    ---------
               Provision charged to operations................................     13,073       9,000       11,300
                                                                                 --------    --------    ---------
               Balance, December 31...........................................   $ 68,611      60,970       50,509
                                                                                 ========    ========    =========
</TABLE>

         At December 31, 1999 and 1998,  First Banks had $36.7 million and $38.3
million,  respectively,  of loans on nonaccrual  status.  Interest on nonaccrual
loans, which would have been recorded under the original terms of the loans, was
$5.8  million,  $4.5 million and $4.7  million for the years ended  December 31,
1999, 1998 and 1997, respectively.  Of these amounts, $2.7 million, $1.9 million
and $2.0 million was actually recorded as interest income on such loans in 1999,
1998 and 1997, respectively.
         At December 31, 1999 and 1998,  First Banks had $39.7 million and $43.5
million of impaired loans, including $36.7 million and $38.3 million of loans on
nonaccrual status,  respectively.  At December 31, 1999 and 1998, impaired loans
also include $3.0 million and $5.2 million of restructured  loans. There were no
specific  reserves at December 31, 1999 and 1998 relating to impaired loans. The
allowance  for  possible  loan losses  includes  $8.2  million and $8.3  million
related to impaired  loans at  December  31,  1999 and 1998,  respectively.  The
average recorded  investment in impaired loans was $53.7 million,  $35.7 million
and  $28.3  million  for the  years  ended  December  31,  1999,  1998 and 1997,
respectively. The amount of interest income recognized using a cash basis method
of accounting  during the time these loans were impaired was $2.8 million,  $2.3
million and $2.4 million in 1999, 1998 and 1997, respectively.
         First Banks' primary market areas are the states of Missouri, Illinois,
Texas and California.  At December 31, 1999 and 1998,  approximately 90% and 89%
of the total loan portfolio and 88% and 91% of the commercial and financial loan
portfolio, respectively, were to borrowers within these regions.
         Real   estate   lending   constituted   the  only   other   significant
concentration of credit risk. Real estate loans comprised  approximately  67% of
the loan  portfolio  at  December  31,  1999  and  1998,  of which  33% and 38%,
respectively,  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, 1999 and
1998, 97% and 96% of the loan  portfolio was secured.  Collateral is required in
accordance   with  the  normal   credit   evaluation   process  based  upon  the
creditworthiness  of the  customer  and the  credit  risk  associated  with  the
particular transaction.

(5)      MORTGAGE BANKING ACTIVITIES

         At December 31, 1999 and 1998,  First Banks  serviced  loans for others
amounting  to $957 million and $923  million,  respectively.  Borrowers'  escrow
balances held by First Banks on such loans were $1.0 million and $1.2 million at
December 31, 1999 and 1998, respectively.
         Changes in mortgage  servicing  rights,  net of  amortization,  for the
years ended December 31 were as follows:
<TABLE>
<CAPTION>

                                                                                           1999         1998
                                                                                           ----         ----
                                                                                   (dollars expressed in thousands)

<S>                                                                                     <C>            <C>
              Balance, January 1...................................................     $  9,825       9,046
              Originated mortgage servicing rights.................................        1,670       2,195
              Purchases of mortgage servicing rights...............................           --         893
              Amortization.........................................................       (2,830)     (2,309)
                                                                                        --------    --------
              Balance, December 31.................................................     $  8,665       9,825
                                                                                        ========    ========

</TABLE>

<PAGE>


 (6)     BANK PREMISES AND EQUIPMENT

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

                                                                                           1999        1998
                                                                                           ----        ----
                                                                                  (dollars expressed in thousands)

<S>                                                                                  <C>              <C>
              Land................................................................     $ 17,582        15,703
              Buildings and improvements...........................................      52,491        49,082
              Furniture, fixtures and equipment....................................      55,344        42,161
              Leasehold improvements...............................................      11,635         8,657
              Construction in progress.............................................       2,896         3,466
                                                                                       --------       -------
                  Total............................................................     139,948       119,069
              Less accumulated depreciation and amortization.......................      64,301        55,221
                                                                                       --------       -------
                  Bank premises and equipment, net.................................    $ 75,647        63,848
                                                                                       ========       =======
</TABLE>

         Depreciation  expense for the years ended  December 31, 1999,  1998 and
1997 totaled $7.6 million, $5.3 million and $5.7 million, respectively.
         First Banks leases land,  office properties and some items of equipment
under  operating  leases.  Certain of the leases  contain  renewal  options  and
escalation clauses.  Total rent expense was $7.4 million,  $5.3 million and $5.0
million for the years ended  December  31,  1999,  1998 and 1997,  respectively.
Future  minimum lease  payments  under  noncancellable  operating  leases extend
through 2084 as follows:
<TABLE>
<CAPTION>

                                                                                  (dollars expressed in thousands)

              Year ending December 31:
<S>               <C>                                                                   <C>
                  2000..................................................................   $ 6,242
                  2001...................................................................    4,892
                  2002...................................................................    3,766
                  2003...................................................................    3,460
                  2004...................................................................    2,442
                  Thereafter.............................................................   18,939
                                                                                           -------
                      Total future minimum lease payments................................  $39,741
                                                                                           =======
</TABLE>

         First Banks leases to unrelated  parties a portion of its owned banking
facilities.  Total rental income was $2.6 million, $2.5 million and $2.3 million
for the years ended December 31, 1999, 1998 and 1997, respectively.

(7)      SHORT-TERM BORROWINGS

         Short-term borrowings were comprised of the following at December 31:
<TABLE>
<CAPTION>

                                                                                           1999        1998
                                                                                           ----        ----
                                                                                  (dollars expressed in thousands)

<S>                                                                                    <C>            <C>
              Securities sold under agreements to repurchase.......................    $  73,010      70,787
              FHLB borrowings......................................................          544      50,544
                                                                                       ---------    --------
                  Short-term borrowings............................................    $  73,554     121,331
                                                                                       =========    ========
</TABLE>

         The average  balance of  short-term  borrowings  was $87.4  million and
$61.2 million,  respectively,  and the maximum  month-end  balance of short-term
borrowings was $176.4 million and $113.0  million,  respectively,  for the years
ended  December  31,  1999  and  1998.  The  average  rates  paid on  short-term
borrowings  during the years ended December 31, 1999,  1998 and 1997 were 4.83%,
4.84% and 3.28%,  respectively.  With the exception of the securities underlying
the FHLB  borrowings,  which are under the control of the FHLB,  the  securities
underlying the short-term borrowings are under First Banks' control.


<PAGE>


(8)      NOTE PAYABLE

         First Banks has a $100.0 million  revolving line of credit with a group
of unaffiliated banks (Credit Agreement). The Credit Agreement, dated August 25,
1999,  replaced a similar  revolving  credit  agreement  dated  August 26, 1998.
Interest  under the Credit  Agreement is payable on a monthly  basis at the lead
bank's  corporate base rate or, at the option of First Banks,  is payable at the
Eurodollar Rate plus a margin based upon the outstanding  loans and First Banks'
profitability.  The interest rate for borrowings  under the Credit Agreement was
7.60% at December 31, 1999, or the applicable  Eurodollar  Rate plus a margin of
1.00%. Amounts may be borrowed under the Credit Agreement until August 24, 2000,
at which time the principal and accrued interest is due and payable.
         Loans under the Credit Agreement are secured by all of the stock of the
Subsidiary  Banks,  which is owned by First Banks.  Under the Credit  Agreement,
there were  outstanding  borrowings of $64.0 million at December 31, 1999. There
were outstanding borrowings of $50.0 million under the previous credit agreement
at December 31, 1998.
         The Credit  Agreement  requires  maintenance of certain minimum capital
ratios for each of the Subsidiary  Banks. In addition,  it prohibits the payment
of dividends on First Banks' common stock. At December 31, 1999 and 1998,  First
Banks and the  Subsidiary  Banks were in compliance  with all  restrictions  and
requirements of the respective credit agreements.
         The average balance and maximum  month-end  balance of the note payable
for the years ended December 31 were as follows:
<TABLE>
<CAPTION>

                                                                                        1999          1998
                                                                                        ----          ----
                                                                                 (dollars expressed in thousands)

<S>                                                                                  <C>             <C>
         Average balance...........................................................  $ 56,376        50,718
         Maximum month-end balance.................................................    75,000        55,096
                                                                                     ========        ======
</TABLE>

         The  average  rates paid on the note  payable  during  the years  ended
December 31, 1999, 1998 and 1997 were 6.44%, 6.85% and 7.69%, respectively.

(9)      GUARANTEED PREFERRED BENEFICIAL INTERESTS IN FIRST BANKS' AND FBA'S
         SUBORDINATED DEBENTURES

         On February 4, 1997,  First  Preferred  Capital Trust  (FPCT),  a newly
formed Delaware  business trust  subsidiary of First Banks,  issued 3.45 million
shares  of  9.25%   cumulative   trust  preferred   securities  (FPCT  Preferred
Securities)  at $25 per share in an  underwritten  public  offering,  and issued
106,702 shares of common securities to First Banks at $25 per share. First Banks
owns all of FPCT's common  securities.  The gross  proceeds of the offering were
used by FPCT to purchase $88.9 million of 9.25%  Subordinated  Debentures (First
Banks Subordinated Debentures) from First Banks, maturing on March 31, 2027. The
maturity  date may be  shortened  to a date not  earlier  than March 31, 2002 or
extended to a date not later than March 31, 2046 if certain  conditions are met.
The  First  Banks  Subordinated  Debentures  are the  sole  asset  of  FPCT.  In
connection with the issuance of the FPCT Preferred Securities,  First Banks made
certain guarantees and commitments that, in the aggregate, constitute a full and
unconditional guarantee by First Banks of the obligations of FPCT under the FPCT
Preferred Securities. First Banks' proceeds from the issuance of the First Banks
Subordinated Debentures to FPCT, net of underwriting fees and offering expenses,
were $83.1 million.  Distributions payable on the FPCT Preferred Securities were
$8.0  million,  $8.0 million and $7.3  million for the years ended  December 31,
1999, 1998 and 1997,  respectively,  and are included in noninterest  expense in
the consolidated financial statements.
         On July 21, 1998,  First America  Capital Trust (FACT),  a newly formed
Delaware  business trust  subsidiary of FBA, issued 1.84 million shares of 8.50%
cumulative  trust preferred  securities  (FACT Preferred  Securities) at $25 per
share in an  underwritten  public  offering,  and issued 56,908 shares of common
securities to FBA at $25 per share.  FBA owns all of FACT's  common  securities.
The gross  proceeds of the offering were used by FACT to purchase  $47.4 million
of  8.50%  Subordinated  Debentures  (FBA  Subordinated  Debentures)  from  FBA,
maturing on June 30,  2028.  The  maturity  date may be  shortened to a date not
earlier than June 30, 2003 or extended to a date not later than June 30, 2037 if
certain  conditions are met. The FBA Subordinated  Debentures are the sole asset
of FACT. In connection with the issuance of the FACT Preferred  Securities,  FBA
made certain  guarantees and  commitments  that, in the aggregate,  constitute a
full and  unconditional  guarantee by FBA of the  obligations  of FACT under the
FACT  Preferred  Securities.  FBA's  proceeds  from  the  issuance  of  the  FBA
Subordinated Debentures to FACT, net of underwriting fees and offering expenses,
were $44.0 million.  Distributions payable on the FACT Preferred Securities were
$4.0  million and $1.8  million for the years ended  December 31, 1999 and 1998,
respectively,  and are  included  in  noninterest  expense  in the  consolidated
financial statements.


<PAGE>


(10)     INCOME TAXES

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

                                                                                    Years ended December 31,
                                                                                   --------------------------
                                                                                   1999        1998      1997
                                                                                   ----        ----      ----
                                                                                 (dollars expressed in thousands)

              Current income tax expense:
<S>                                                                               <C>         <C>       <C>
                  Federal....................................................     $19,731     16,801    15,062
                  State......................................................       2,247      1,292       169
                                                                                  -------     ------    ------
                                                                                   21,978     18,093    15,231
                                                                                  -------     ------    ------
              Deferred income tax expense:
                  Federal....................................................       5,056      1,895     2,608
                  State......................................................          14        273        24
                                                                                  -------     ------    ------
                                                                                    5,070      2,168     2,632
                                                                                  -------     ------    ------
              Reduction in valuation allowance...............................        (735)      (568)   (1,780)
                                                                                  -------     ------    ------
                      Total..................................................     $26,313     19,693    16,083
                                                                                  =======     ======    ======
</TABLE>


         The  effective  rates of  federal  income  taxes  for the  years  ended
December 31 differ from statutory rates of taxation as follows:
<TABLE>
<CAPTION>

                                                                             Years ended December 31,
                                                            ----------------------------------------------------------
                                                                   1999                1998                1997
                                                            -----------------     --------------     -----------------
                                                                       Percent             Percent             Percent
                                                                         of                  of                  of
                                                                       pretax              pretax              pretax
                                                            Amount     income     Amount   income     Amount   income
                                                            ------     ------     ------   ------     ------   ------
                                                                         (dollars expressed in thousands)

         Income before provision for income taxes and
<S>                                                        <C>          <C>      <C>        <C>     <C>         <C>
           minority interest in income of subsidiary....   $ 72,151              $54,474            $ 50,380
                                                           ========              =======            ========

         Provision for income taxes calculated
           at federal statutory income tax rates........   $ 25,253     35.0%    $19,066    35.0%   $ 17,633     35.0%
         Effects of differences in tax reporting:
           Tax-exempt interest income, net of
               tax preference adjustment................       (439)    (0.6)       (461)   (0.9)       (507)    (1.0)
           State income taxes...........................      1,470      2.0       1,018     1.9         126      0.3
           Amortization of intangibles associated
               with the purchase of subsidiaries........      1,261      1.8         864     1.6         754      1.5
           Change in deferred valuation allowance.......       (735)    (1.0)       (568)   (1.0)     (1,780)    (3.5)
           Other, net...................................       (497)    (0.7)       (226)   (0.4)       (143)    (0.4)
                                                           --------    -----     -------   -----    --------     ----
                 Provision for income taxes.............   $ 26,313     36.5%    $19,693    36.2%   $ 16,083     31.9%
                                                           ========    =====     =======   =====    ========     ====

</TABLE>


<PAGE>
         The tax effects of temporary  differences that give rise to significant
portions of the  deferred tax assets and  deferred  tax  liabilities,  including
amounts  attributable  to entities  acquired in  purchase  transactions,  are as
follows:
<TABLE>
<CAPTION>

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

              Deferred tax assets:
<S>                                                                                   <C>           <C>
                  Allowance for possible loan losses..............................    $ 27,071      22,596
                  Net operating loss carryforwards................................      30,792      31,311
                  Alternative minimum tax credits.................................       2,841       2,612
                  Disallowed losses on investment securities......................       2,443       2,266
                  Other real estate...............................................          15       1,228
                  Other...........................................................       3,556       4,014
                                                                                      --------    --------
                      Gross deferred tax assets...................................      66,718      64,027
                  Valuation allowance.............................................     (14,746)    (17,179)
                                                                                      --------    --------
                      Deferred tax assets, net of valuation allowance.............      51,972      46,848
                                                                                      --------    --------
              Deferred tax liabilities:
                  Depreciation on bank premises and equipment.....................       3,332       2,707
                  Net fair value adjustment for securities available for sale.....       1,132       6,414
                  FHLB stock dividends............................................       1,094       1,114
                  State taxes.....................................................         591         518
                  Other...........................................................         433         167
                                                                                      --------    --------
                      Deferred tax liabilities....................................       6,582      10,920
                                                                                      --------    --------
                      Net deferred tax assets.....................................    $ 45,390      35,928
                                                                                      ========    ========
</TABLE>
         The realization of First Banks' net deferred tax assets is based on the
availability of carrybacks to prior taxable  periods,  the expectation of future
taxable income and the  utilization of tax planning  strategies.  Based on these
factors,  management  believes  it is more likely than not that First Banks will
realize the recognized  net deferred tax asset of $45.4 million.  The net change
in the valuation  allowance,  related to deferred tax assets,  was a decrease of
$2.4 million for the year ended December 31, 1999.  The decrease  consisted of a
reduction  of $600,000  related to the  recognition  of deferred  tax assets for
certain loans and other real estate, and utilization of NOL carryforwards.
         Changes to the deferred  tax asset  valuation  allowance  for the years
ended December 31 were as follows:
<TABLE>
<CAPTION>
                                                                                       1999       1998       1997
                                                                                       ----       ----       ----
                                                                                    (dollars expressed in thousands)

<S>                                                                                  <C>          <C>        <C>
              Balance, beginning of year.........................................    $ 17,179     17,747     19,527
              Current year deferred provision....................................        (735)      (568)    (1,780)
              Reduction attributable to utilization of deferred tax assets:
                 Adjustment to capital surplus...................................        (811)        --         --
                 Adjustment to intangibles associated with
                    the purchase of subsidiaries.................................        (887)        --         --
                                                                                     --------    -------    -------
              Balance, end of year...............................................    $ 14,746     17,179     17,747
                                                                                     ========    =======    =======
</TABLE>
         The  valuation  allowance  for deferred tax assets at December 31, 1998
included  $887,000  that was  recognized  in 1999 and  credited  to  intangibles
associated  with the  purchase of  subsidiaries.  The  valuation  allowance  for
deferred tax assets at December 31, 1999 and 1998 includes $1.3 million and $2.0
million,  respectively,  which when recognized,  will be credited to intangibles
associated  with the  purchase  of  subsidiaries.  In  addition,  the  valuation
allowance  for deferred tax assets at December 31, 1999 and 1998  includes  $5.0
million and $6.0 million, respectively,  which when recognized, will be credited
to capital surplus under the terms of the quasi-reorganizations  implemented for
FBA and FCB as of December 31, 1994 and 1996, respectively.
         At  December  31,  1999 and  1998,  the  accumulation  of prior  years'
earnings  representing  tax bad  debt  deductions  of First  Bank and FB&T  were
approximately  $30.8  million.  If these tax bad debt  reserves were charged for
losses  other than bad debt  losses,  First Bank and FB&T would be  required  to
recognize  taxable  income in the amount of the charge.  It is not  contemplated
that such  tax-restricted  retained earnings will be used in a manner that would
create federal income tax liabilities.
         At December 31, 1999 and 1998, for federal income taxes purposes, First
Banks had net operating loss (NOL)  carryforwards of approximately $67.5 million
and $59.0 million, respectively, exclusive of the NOL carryforwards available to
FBA as further described below.


<PAGE>


         The NOL carryforwards for First Banks expire as follows:
<TABLE>
<CAPTION>

                                                                        (dollars expressed in thousands)

                       Year ending December 31:
<S>                        <C>                                                     <C>
                           2003.................................................   $   6,781
                           2004.................................................       3,015
                           2005.................................................      14,802
                           2006.................................................         458
                           2007.................................................      12,287
                           2008 - 2018..........................................      30,123
                                                                                   ---------
                               Total............................................   $  67,466
                                                                                   =========
</TABLE>

         At December 31, 1999 and 1998, for federal income tax purposes, FBA had
NOL   carryforwards   of   approximately   $20.5  million  and  $30.5   million,
respectively.  With the completion of the  acquisitions of FBA and FCB and their
subsequent merger, the NOL carryforwards generated prior to the transactions 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.  The NOL
carryforwards at December 31, 1999 expire as follows:
<TABLE>
<CAPTION>

                                                                       (dollars expressed in thousands)

                       Year ending December 31:
<S>                        <C>                                                      <C>
                           2000...................................................  $    103
                           2001...................................................     1,667
                           2002...................................................     5,884
                           2003...................................................     1,362
                           2004...................................................       856
                           2005 - 2018............................................    10,640
                                                                                    --------
                                                                                    $ 20,512
                                                                                    ========
</TABLE>

(11)     EARNINGS PER SHARE

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

                                                                               Income         Shares        Per share
                                                                             (numerator)   (denominator)     amount
                                                                             -----------   -------------     ------
                                                                         (dollars in thousands, except for per share data)

     Year ended December 31, 1999:
<S>                                                                          <C>               <C>          <C>
         Basic EPS - income available to common stockholders.............    $  43,392         23,661       $ 1,833.91
                                                                                                            ==========
         Effect of dilutive securities:
           Class A convertible preferred stock...........................          769          1,212
                                                                             ---------        -------
         Diluted EPS - income available to common stockholders...........    $  44,161         24,873       $ 1,775.47
                                                                             =========        =======       ==========

     Year ended December 31, 1998:
         Basic EPS - income available to common stockholders.............    $  32,724         23,661       $ 1,383.04
                                                                                                            ==========
         Effect of dilutive securities:
           Class A convertible preferred stock...........................          769          1,389
                                                                             ---------        -------
         Diluted EPS - income available to common stockholders...........    $  33,493         25,050       $ 1,337.09
                                                                             =========        =======       ==========

     Year ended December 31, 1997:
         Basic EPS - income available to common stockholders.............    $  27,960         23,661       $ 1,181.69
                                                                                                            ==========
         Effect of dilutive securities:
           Class A convertible preferred stock...........................          769          1,645
           Subsidiary bank stock options.................................          (25)            --
                                                                             ---------        -------
         Diluted EPS - income available to common stockholders...........    $  28,704         25,306       $ 1,134.28
                                                                             =========        =======       ==========

</TABLE>


<PAGE>


(12)     INTEREST RATE RISK MANAGEMENT / DERIVATIVE FINANCIAL INSTRUMENTS
         WITH OFF-BALANCE- SHEET RISK

         First Banks utilizes off-balance-sheet derivative financial instruments
to assist in the  management  of  interest  rate  sensitivity  and 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 risk exposure of First Banks.
         Derivative  financial  instruments  held by First Banks for purposes of
managing interest rate risk are summarized as follows:
<TABLE>
<CAPTION>

                                                                                  December 31,
                                                               ---------------------------------------------------
                                                                         1999                        1998
                                                               ----------------------       ----------------------
                                                               Notional        Credit       Notional       Credit
                                                                amount        exposure       amount       exposure
                                                                ------        --------       ------       --------
                                                                         (dollars expressed in thousands)

         Interest rate swap agreements - pay
<S>                                                           <C>            <C>            <C>           <C>
           adjustable rate, receive adjustable rate........   $  500,000          --             --           --
         Interest rate swap agreements - pay
           adjustable rate, receive fixed rate.............      455,000       3,349        280,000        3,526
         Interest rate floor agreements....................       35,000          13         70,000           29
         Interest rate cap agreements......................       10,000          26         10,000          132
         Forward commitments to sell
           mortgage-backed securities......................       33,000          --         95,000          237
                                                              ==========     =======      =========       ======
</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 and the other terms of the  derivatives are determined
by reference to the notional amounts and the other terms of the derivatives. The
credit  exposure  represents the accounting  loss First Banks would incur in the
event the counterparties  failed completely to perform according to the terms of
the derivative financial instruments and the collateral was of no value.
         Previously,  First Banks  utilized  interest  rate swap  agreements  to
extend the repricing characteristics of certain interest-bearing  liabilities to
more closely correspond with its assets,  with the objective of stabilizing cash
flow, and  accordingly,  net interest  income,  over time. These swap agreements
were terminated in July 1995, November 1996 and July 1997 due to a change in the
composition of First Banks' balance sheet.  The change in the composition of the
balance sheet was primarily driven by the significant  decline in interest rates
experienced  during 1995, which caused an increase in the principal  prepayments
of residential  mortgage loans. The net interest  expense  associated with these
agreements,  consisting  primarily of amortization of deferred losses,  was $5.7
million,  $3.7 million and $6.4  million for the years ended  December 31, 1999,
1998 and 1997,  respectively.  The deferred losses on terminated swap agreements
were amortized over the remaining lives of the agreements, unless the underlying
liabilities  were  repaid,  in which case the deferred  losses were  immediately
charged to operations.  There were no remaining  unamortized  deferred losses on
the terminated swap agreements at December 31, 1999. The unamortized  balance of
these  losses was $5.7  million and $9.4  million at December 31, 1998 and 1997,
respectively, and was included in other assets.
         During 1998, First Banks entered into $280.0 million notional amount of
interest rate swap  agreements.  The swap  agreements  effectively  lengthen the
repricing  characteristics of certain interest-earning assets to correspond more
closely with its funding source with the objective of stabilizing cash flow, and
accordingly,  net interest  income,  over time. The swap agreements  provide for
First  Banks to  receive a fixed rate of  interest  and pay an  adjustable  rate
equivalent to the 90-day London  Interbank  Offering Rate (LIBOR).  The terms of
the swap agreements provide for First Banks to pay quarterly and receive payment
semiannually. The amount receivable by First Banks under the swap agreements was
$4.1 million and $4.2 million at December 31, 1999 and 1998,  respectively,  and
the amount  payable by First Banks under the swap  agreements  was  $770,000 and
$640,000 at December 31, 1999 and 1998, respectively.
         During May 1999,  First  Banks  entered  into $500.0  million  notional
amount of interest rate swap  agreements  with the objective of stabilizing  the
net  interest  margin  during the  six-month  period  surrounding  the Year 2000
century date change. The swap agreements  provided for First Banks to receive an
adjustable  rate of interest  equivalent to the daily  weighted  average  30-day
LIBOR and pay an adjustable  rate of interest  equivalent to the daily  weighted
average prime lending rate minus 2.665%. The terms of the swap agreements, which
had an effective  date of October 1, 1999 and a maturity date of March 31, 2000,
provided  for First Banks to pay and receive  interest  on a monthly  basis.  In
January  2000,  First  Banks  determined  these swap  agreements  were no longer
necessary  based upon the results of the Year 2000  century  date change and, as
such, First Banks terminated these agreements resulting in a cost of $150,000.


<PAGE>


         During September 1999, First Banks entered into $175.0 million notional
amount of interest rate swap  agreements to  effectively  lengthen the repricing
characteristics  of certain  interest-earning  assets to correspond more closely
with its  funding  source  with the  objective  of  stabilizing  cash flow,  and
accordingly,  net interest  income,  over time. The swap agreements  provide for
First  Banks to  receive a fixed rate of  interest  and pay an  adjustable  rate
equivalent to the weighted  average prime lending rate minus 2.70%. The terms of
the swap  agreements  provide for First  Banks to pay and receive  interest on a
quarterly basis. The amount  receivable by First Banks under the swap agreements
was  $119,000 at December  31, 1999 and the amount  payable by First Banks under
the swap agreements was $141,000 at December 31, 1999.
         The maturity dates, notional amounts, interest rates paid and received,
and fair values of interest rate swap agreements  outstanding as of December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>

                                                               Notional    Interest rate Interest rate  Fair value
                           Maturity date                        amount         paid        received     gain (loss)
                           -------------                        ------         ----        --------     -----------
                                                                        (dollars expressed in thousands)

         December 31, 1999:
<S>                <C> <C>                                   <C>               <C>           <C>       <C>
             March 31, 2000...............................   $  350,000        5.84%         6.45%     $     87
             March 31, 2000...............................       75,000        5.84          6.45            19
             March 31, 2000...............................       50,000        5.84          6.45            12
             March 31, 2000...............................       25,000        5.84          6.45             6
             September 27, 2001...........................       75,000        5.80          6.14          (685)
             September 27, 2001...........................       45,000        5.80          6.14          (411)
             September 27, 2001...........................       40,000        5.80          6.14          (365)
             September 27, 2001...........................       15,000        5.80          6.14          (137)
             June 11, 2002................................       15,000        6.12          6.00          (291)
             September 16, 2002...........................      175,000        6.12          5.36        (6,574)
             September 16, 2002...........................       20,000        6.12          5.36          (751)
             September 18, 2002...........................       40,000        6.14          5.33        (1,543)
             September 18, 2002...........................       30,000        6.14          5.33        (1,157)
                                                             ----------                                --------
                                                             $  955,000        5.91          6.08      $(11,790)
                                                             ==========      ======         =====      ========

         December 31, 1998:
             June 11, 2002................................   $   15,000        5.24%         6.00%     $    363
             September 16, 2002...........................      175,000        5.22          5.36           761
             September 16, 2002...........................       20,000        5.22          5.36            87
             September 18, 2002...........................       40,000        5.23          5.33           123
             September 18, 2002...........................       30,000        5.23          5.33            92
                                                             ----------                                --------
                                                             $  280,000        5.23          5.48      $  1,426
                                                             ==========      ======         =====      ========
</TABLE>

         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, 1999 and 1998,  the  unamortized  costs of these
agreements were $32,000 and $159,000,  respectively,  and were included in other
assets.
         Derivative  financial  instruments  issued by First  Banks  consist  of
commitments to originate  fixed-rate loans.  Commitments to originate fixed-rate
loans  consist   primarily  of  residential   real  estate  loans.   These  loan
commitments, net of estimated underwriting fallout, and loans held for sale were
$31.5  million and $103.1  million at December 31, 1999 and 1998,  respectively.
These net loan  commitments  and loans  held for sale are  hedged  with  forward
contracts to sell mortgage-backed  securities of $33.0 million and $95.0 million
at December  31,  1999 and 1998,  respectively.  Gains and losses  from  forward
contracts are deferred and included in the cost basis of loans held for sale. At
December 31, 1999, the net unamortized gains were $838,000, in comparison to net
unamortized  losses of $237,000 at December 31, 1998. Such gains and losses were
applied to the carrying value of the loans held for sale as part of the lower of
cost or market valuation.



<PAGE>


(13)     CREDIT COMMITMENTS

         First Banks is a 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 instruments involve, to varying degrees,
elements  of  credit  risk  and  interest  rate  risk in  excess  of the  amount
recognized in the consolidated balance sheets. The interest rate risk associated
with these credit commitments  relates primarily to the commitments to originate
residential  fixed-rate  loans.  As  more  fully  discussed  in  Note  12 to the
accompanying  consolidated  financial statements,  the interest rate risk of the
commitments to originate fixed-rate loans has been hedged with forward contracts
to sell  mortgage-backed  securities.  The credit risk  amounts are equal to the
contractual amounts,  assuming the amounts are fully advanced and the collateral
or other security is of no value.  First Banks uses the same credit  policies in
granting commitments and conditional obligations as it does for on-balance-sheet
items.
         Commitments to extend credit at December 31 were as follows:

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                              ------------
                                                                                            1999         1998
                                                                                            ----         ----
                                                                                   (dollars expressed in thousands)

<S>                                                                                    <C>           <C>
              Commitments to extend credit..........................................   $ 1,310,249   1,189,950
              Commercial and standby letters of credit..............................        64,455      62,096
                                                                                       -----------   ---------
                                                                                       $ 1,374,704   1,252,046
                                                                                       ===========   =========
</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 many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent  future  cash  requirements.   Each  customer's   creditworthiness  is
evaluated on a case-by-case basis. The amount of collateral obtained,  if deemed
necessary upon extension of credit,  is based on management's  credit evaluation
of the counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant, equipment, income-producing commercial properties or
single family  residential  properties.  Collateral is generally required except
for consumer credit card commitments.
         Commercial and standby  letters of credit are  conditional  commitments
issued to guarantee the performance of a customer to a third party.  The letters
of  credit  are  primarily  issued  to  support  public  and  private  borrowing
arrangements,   including   commercial   paper,   bond   financing  and  similar
transactions.  The  credit  risk  involved  in  issuing  letters  of  credit  is
essentially the same as that involved in extending loan facilities to customers.
Upon issuance of the  commitments,  First Banks generally holds real property as
collateral   supporting  those   commitments  for  which  collateral  is  deemed
necessary.

(14) FAIR VALUE OF FINANCIAL INSTRUMENTS

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



<PAGE>


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

                                                                        1999                          1998
                                                              -------------------------     ------------------------
                                                              Carrying        Estimated     Carrying       Estimated
                                                                value        fair value       value       fair value
                                                                -----        ----------       -----       ----------

         Financial assets:
<S>                                                          <C>               <C>           <C>             <C>
             Cash and cash equivalents....................   $  170,894        170,894       214,762         214,762
             Investment securities:
               Trading....................................           --             --         3,425           3,425
               Available for sale.........................      430,093        430,093       509,695         509,695
               Held to maturity...........................       21,554         21,476        21,676          22,568
             Net loans....................................    3,927,713      3,908,065     3,519,135       3,532,393
             Accrued interest receivable..................       33,491         33,491        28,465          28,465
                                                             ==========     ==========    ==========      ==========

         Financial liabilities:
             Deposits:
               Demand:
                  Non-interest-bearing....................   $  606,064        606,064       561,383         561,383
                  Interest-bearing........................      415,113        415,113       377,435         377,435
                  Savings and money market................    1,198,314      1,198,314     1,198,567       1,198,567
                  Time deposits...........................    2,032,323      2,032,323     1,802,600       1,813,305
             Short-term borrowings........................       73,554         73,554       121,331         121,331
             Note payable.................................       64,000         64,000        50,048          50,048
             Accrued interest payable.....................       11,607         11,607         5,817           5,817
             Guaranteed preferred beneficial interests
               in subordinated debentures.................      127,611        127,391       127,443         137,722
                                                             ==========     ==========    ==========      ==========

         Off-balance-sheet:
             Interest rate swap, cap and floor agreements.   $    3,388        (11,790)        3,687           1,426
             Forward contracts to sell mortgage-backed
               securities.................................           --            793            --             506
             Credit commitments.........................             --             --            --              --
                                                             ==========     ==========    ==========      ==========
</TABLE>

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

Financial Assets:

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

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

         Net  loans:  The  fair  value of most  loans  held  for  portfolio  was
estimated  utilizing  discounted cash flow  calculations  that applied  interest
rates  currently  being offered for similar loans to borrowers with similar risk
profiles.  The fair value of loans held for sale,  which is the amounts reported
in the  consolidated  balance  sheets,  is based on quoted  market  prices where
available.  If quoted market prices are not  available,  the fair value is based
upon quoted market prices of comparable instruments. The carrying value of 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.  The fair  value  disclosed  for  certificates  of  deposit  was
estimated  utilizing a discounted cash flow  calculation  that applied  interest
rates  currently  being  offered  on  similar  certificates  to  a  schedule  of
aggregated monthly maturities of time deposits.
<PAGE>

         FPCT and FACT Preferred  Securities:  The fair value is based on quoted
market prices.

         Short-term  borrowings,  note payable and accrued interest payable: The
carrying value reported in the  consolidated  balance sheets  approximates  fair
value.

Off-Balance-Sheet:

         Interest  rate swap,  cap and floor  agreements:  The fair value of the
interest  rate swap,  cap and floor  agreements  is estimated by  comparison  to
market rates quoted on new agreements with similar terms and creditworthiness.

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

(15) EMPLOYEE BENEFITS

         First Banks'  profit-sharing  plan is a  self-administered  savings and
incentive  plan  covering   substantially   all   employees.   Under  the  plan,
employer-matching contributions are determined annually by First Banks' Board of
Directors.  Employee  contributions  are limited to 15% of the employee's annual
compensation, not to exceed $10,000 for 1999. Total employer contributions under
the plan were  $863,000,  $648,000 and $506,000 for the years ended December 31,
1999, 1998 and 1997, respectively.  The plan assets are held and managed under a
trust agreement with First Bank's trust department.

(16) PREFERRED STOCK

         First Banks had two classes of preferred stock  outstanding  during the
years ended  December 31, 1999 and 1998,  and three  classes of preferred  stock
outstanding during the year ended December 31, 1997.
         On September 15, 1992,  First Banks issued and sold 2.2 million  shares
of Class C 9.0% cumulative,  increasing rate, redeemable, preferred stock (Class
C  Preferred  Stock).  On  December 1, 1997,  First  Banks  redeemed  all of the
remaining  outstanding Class C Preferred Stock for $47.1 million.  The effect of
the redemption was a reduction of First Banks' total  stockholders'  equity, and
consequently  regulatory capital, by the amount of the redemption.  However, the
structure of the FPCT Preferred Securities and the FACT Preferred Securities, as
described in Note 9 to the  consolidated  financial  statements,  satisfies  the
regulatory  requirements to be included in First Banks' capital base in a manner
similar to the Class C Preferred Stock. Dividends on the Class C Preferred Stock
were 9% through November 30, 1997.
         The holders of the Class A and Class B preferred stock have full voting
rights.  Dividends  on the Class A and Class B  preferred  stock are  adjustable
quarterly  based  on the  highest  of the  Treasury  Bill  Rate or the Ten  Year
Constant  Maturity  Rate  for the  two-week  period  immediately  preceding  the
beginning  of the  quarter.  This rate shall not be less than 6.0% nor more than
12.0% on the Class A preferred  stock,  or less than 7.0% nor more than 15.0% on
the Class B preferred stock.
         The Class A preferred stock is convertible  into shares of common stock
at a rate  based on the  ratio of the par  value of the  preferred  stock to the
current  market  value of the  common  stock at the  date of  conversion,  to be
determined by independent appraisal at the time of conversion. Shares of Class A
preferred  stock  may be  redeemed  by First  Banks at any time at 105.0% of par
value.  The  Class B  preferred  stock may not be  redeemed  or  converted.  The
redemption of any issue of preferred  stock  requires the prior  approval of the
Federal Reserve Board.
         The  annual  dividend  rates on each class of  preferred  stock for the
years ended December 31 were as follows:
<TABLE>
<CAPTION>

                                                                              1999    1998     1997
                                                                              ----    ----     ----

<S>                                                                            <C>     <C>      <C>
                      Class A preferred stock..............................    6.0     6.0      6.0
                      Class B preferred stock..............................    7.0     7.0      7.0
                      Class C preferred stock..............................    --      --       9.0

</TABLE>

<PAGE>


(17)     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  1999,  1998  and  1997,  Tidal  Insurance  Limited  (Tidal),  a
corporation owned indirectly by First Banks' Chairman and his children, received
approximately  $316,000,  $280,000  and  $214,000,  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 subsequently  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  ceded  to an
unaffiliated third-party insurer.
         During 1999, 1998 and 1997,  First  Securities  America,  Inc. (FSA), a
trust  established  and  administered  by and for the  benefit  of First  Banks'
Chairman and members of his immediate family,  received approximately  $194,000,
$265,000 and $206,000,  respectively,  in commissions and insurance premiums for
policies  purchased  by First Banks or customers  of the  Subsidiary  Banks from
unaffiliated,  third-party  insurors  to which First Banc  Insurors  placed such
policies.  The insurance premiums on which the  aforementioned  commissions were
earned were  competitively bid, and First Banks deems the commissions FSA earned
from  unaffiliated  third-party  companies to be  comparable to those that would
have been earned by an unaffiliated third-party agent.
         First Brokerage America,  L.L.C., a limited liability corporation which
is  indirectly  owned by First  Banks'  Chairman  and  members of his  immediate
family,  received  approximately $2.3 million, $1.8 million and $707,000 for the
years ended December 31, 1999, 1998 and 1997, respectively,  in commissions paid
by unaffiliated  third-party companies.  The commissions received were primarily
in connection  with the sales of annuities and  securities  and other  insurance
products to individuals, including customers of the Subsidiary Banks.
         First Services,  L.P., a limited partnership  indirectly owned by First
Banks'  Chairman  and  his  children,  provides  data  processing  services  and
operational  support for First Banks,  Inc. and its Subsidiary  Banks. Fees paid
under agreements with First Services L.P. were $16.4 million,  $12.2 million and
$6.4 million for the years ended December 31, 1999, 1998 and 1997, respectively.
During 1999, 1998 and 1997, First Services,  L.P. paid First Banks $1.2 million,
$799,000  and $1.1  million,  respectively,  in rental  fees for the use of data
processing  and other  equipment  owned by First  Banks.  The fees paid by First
Banks for data processing  services are at least as favorable as could have been
obtained from unaffiliated third parties.

(18) CAPITAL STOCK OF FIRST BANKS AMERICA, INC.

         First Banks owned  2,500,000  shares of FBA's Class B common  stock and
2,210,581 shares of FBA's common stock at December 31, 1999, representing 83.37%
of FBA's  outstanding  voting stock. In comparison,  First Banks owned 2,500,000
shares of FBA's Class B common stock and 1,895,733  shares of FBA's common stock
at December 31, 1998, representing 76.84% of FBA's outstanding voting stock. The
increase  for 1999 is  attributable  to First Banks'  purchase,  on February 17,
1999, of 314,848  shares of FBA common stock  pursuant to a tender  offer.  This
tender offer increased First Banks' ownership interest in FBA to 82.34% of FBA's
outstanding  voting stock. FBA's common stock is publicly traded on the New York
Stock Exchange.
         On February 2, 1998,  FBA and FCB were  merged.  Under the terms of the
Agreement  and Plan of Merger  (Agreement),  FCB was merged into FBA,  and First
Commercial  Bank was merged into FB California.  The FCB  shareholders  received
0.8888  shares of FBA common stock for each share of FCB common stock they held.
In total, FCB shareholders  received  approximately 751,728 shares of FBA common
stock, of which 462,176 shares were issued to First Banks.  The transaction also
provided  for First  Banks to  receive  804,000  shares of FBA  common  stock in
exchange for $10.0 million  advanced to FBA under a promissory note payable.  In
addition,  FCB's  convertible  debentures of $6.5  million,  which were owned by
First Banks,  were  exchanged for a comparable  debenture in FBA. Such debenture
was  subsequently  converted into 629,557 shares of FBA common stock,  effective
December  4, 1998.  The merger of FBA and FCB did not have a material  impact on
the financial condition or results of operations of First Banks.



<PAGE>


(19)     REGULATORY CAPITAL

         First Banks and the Subsidiary Banks are subject to various  regulatory
capital  requirements  administered  by the federal and state banking  agencies.
Failure to meet minimum capital  requirements can initiate certain mandatory and
possibly  additional  discretionary  actions by regulators  that, if undertaken,
could have a direct material effect on First Banks' financial statements.  Under
capital adequacy  guidelines and the regulatory  framework for prompt corrective
action,  First  Banks  and the  Subsidiary  Banks  must  meet  specific  capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance-sheet  items as calculated  under regulatory  accounting  practices.
Capital amounts and classifications are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy  require  First  Banks and the  Subsidiary  Banks to  maintain  minimum
amounts and ratios of total and Tier I capital  (as defined in the  regulations)
to  risk-weighted  assets,  and of Tier I capital to average assets.  Management
believes,  as of December 31, 1999,  First Banks and the  Subsidiary  Banks were
each well capitalized.
         As of December 31, 1999, the most recent notification from First Banks'
primary  regulator  categorized  First  Banks and the  Subsidiary  Banks as well
capitalized under the regulatory  framework for prompt corrective  action. To be
categorized  as well  capitalized,  First  Banks and the  Subsidiary  Banks must
maintain minimum total risk-based,  Tier I risk-based and Tier I leverage ratios
as set forth in the table below.
         At December 31, 1999 and 1998,  First Banks' and the Subsidiary  Banks'
required and actual capital ratios were as follows:
<TABLE>
<CAPTION>

                                                                                                         To be well
                                                                                                      capitalized under
                                                               Actual              For capital        prompt corrective
                                                          -----------------
                                                          1999         1998     adequacy purposes     action provisions
                                                          ----         ----     -----------------     -----------------

         Total capital (to risk-weighted assets):
<S>                                                       <C>          <C>             <C>                  <C>
              First Banks.............................    10.05%       10.28%          8.0%                 10.0%
              First Bank..............................    10.60        10.01           8.0                  10.0
              FB&T....................................    10.96        10.39           8.0                  10.0
              FB California...........................    10.81        10.63           8.0                  10.0
              FB Texas................................    12.42        11.37           8.0                  10.0
              Redwood Bank (1)........................    11.17          --            8.0                  10.0

         Tier 1 capital (to risk-weighted assets):
              First Banks.............................     8.00         9.03           4.0                   6.0%
              First Bank..............................     9.35         8.75           4.0                   6.0
              FB&T....................................     9.70         9.13           4.0                   6.0
              FB California...........................     9.56         9.37           4.0                   6.0
              FB Texas................................    11.17        10.11           4.0                   6.0
              Redwood Bank (1)........................    10.15          --            4.0                   6.0

         Tier 1 capital (to average assets):
              First Banks.............................     7.14         7.77           3.0                   5.0%
              First Bank..............................     8.10         7.46           3.0                   5.0
              FB&T....................................     8.57         7.60           3.0                   5.0
              FB California...........................     9.95         8.34           3.0                   5.0
              FB Texas................................    10.39         9.15           3.0                   5.0
              Redwood Bank (1)........................     8.48          --            3.0                   5.0
</TABLE>
-------------------------
(1)  Redwood Bank was acquired by FBA on March 4, 1999.


<PAGE>


(20)     DISTRIBUTION OF EARNINGS OF THE SUBSIDIARY BANKS

         The  Subsidiary  Banks are  restricted  by  various  state and  federal
regulations, as well as by the terms of the Credit Agreement described in Note 8
to the  accompanying  consolidated  financial  statements,  as to the  amount of
dividends  which are available for payment to First Banks,  Inc.  Under the most
restrictive  of these  requirements,  the future  payment of dividends  from the
Subsidiary Banks is limited to approximately $62.4 million at December 31, 1999,
unless prior permission of the regulatory  authorities  and/or the lending banks
is obtained.

 (21)    BUSINESS SEGMENT RESULTS

         First Banks' business  segments are First Bank, FB California,  Redwood
Bank, FB Texas and FB&T. The reportable  business  segments are consistent  with
the management  structure of First Banks,  the Subsidiary Banks and the internal
reporting system that monitors performance.
         Through the  respective  branch  networks,  First Bank, FB  California,
Redwood  Bank, FB Texas and FB&T provide  similar  products and services in four
defined  geographic  areas.  The products and services  offered  include a broad
range of commercial and personal  banking  services,  including  certificates of
deposit,  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 and financial,  commercial and
residential real estate,  real estate  construction and development and consumer
loans.  Other financial  services  include  mortgage  banking,  debit and credit
cards, brokerage services,  credit-related insurance, automatic teller machines,
telephone account access, safe deposit boxes, trust and private banking services
and cash management  services.  The revenues  generated by each business segment
consist  primarily of interest  income,  generated  from the loan and investment
security  portfolios,  and service charges and fees,  generated from the deposit
products and services. The geographic areas include Missouri and Illinois (First
Bank),  southern  California  (FB&T),  northern  California  (FB  California and
Redwood Bank) and Houston,  Dallas,  Irving and McKinney  Texas (FB Texas).  The
products and services are offered to customers primarily within their respective
geographic areas, with the exception of loan participations executed between the
Subsidiary Banks.
         The  business  segment  results  are  summarized  as  follows  and  are
consistent  with First  Banks'  internal  reporting  system and, in all material
respects,   with  generally   accepted   accounting   principles  and  practices
predominant in the banking and mortgage banking industries.  Such principles and
practices are  summarized in Note 1 to the  consolidated  financial  statements.
First Banks has no foreign operations.


<PAGE>

<TABLE>
<CAPTION>




                                                     First Bank                   FB California                FB Texas
                                            ---------------------------      ----------------------     ---------------------
                                             1999       1998       1997       1999    1998     1997     1999     1998    1997
                                             ----       ----       ----       ----    ----     ----     ----     ----    ----
                                                                        (dollars expressed in thousands)

Balance sheet information:

<S>                                     <C>           <C>       <C>         <C>       <C>     <C>      <C>      <C>     <C>
Investment securities.................  $  241,624    264,364   401,450     20,743    53,449  83,165   30,439   59,914  65,016
Loans, net of unearned discount.......   2,527,649  2,490,556 2,185,494    379,632   314,977 255,114  213,731  201,426 176,341
Total assets..........................   3,028,046  3,024,600 2,843,577    431,838   410,110 370,917  278,988  300,984 267,152
Deposits..............................   2,689,671  2,659,030 2,559,968    367,563   363,422 325,562  244,248  264,425 231,175
Stockholders' equity..................     263,466    243,673   228,422     47,990    42,825  40,176   30,338   30,249  29,761
                                        ==========  =========  ========    =======   ======= =======  ======= ======== =======


Income statement information:

Interest income.......................  $  221,195    219,609   210,710     33,928    32,517  22,416   21,990   21,721  20,099
Interest expense......................     105,231    111,656   110,799     12,285    13,328   8,729    8,705    8,907   8,379
                                        ----------   --------  --------    -------   ------- -------  ------- -------- -------
     Net interest income..............     115,964    107,953    99,911     21,643    19,189  13,687   13,285   12,814  11,720
Provision for possible loan losses....       8,890      7,250     7,300        110       565     500       90      335   1,500
                                        ----------   --------  --------    -------   ------- -------  ------- -------- -------
     Net interest income
       after provision
       for possible loan losses.......     107,074    100,703    92,611     21,533    18,624  13,187   13,195   12,479  10,220
                                        ----------   --------  --------    -------   ------- -------  ------- -------- -------
Noninterest income....................      32,260     29,582    21,149      3,881     2,732   1,847    1,950    1,790   1,901
Noninterest expense...................      77,786     79,748    66,570     15,109    15,548  10,356    9,050    8,749   6,960
                                        ----------  ---------  --------    -------   ------- -------  ------- -------- -------
     Income (loss) before provision
       (benefit) for income taxes
       and minority interest in
       income ofsubsidiary............      61,548     50,537    47,190     10,305     5,808   4,678    6,095    5,520   5,161
Provision (benefit) for income taxes..      20,811     17,238    15,504      3,972     2,736   2,027    2,090    1,888   1,815
                                        ----------  ---------  --------    -------   ------- -------  ------- -------- -------
     Income (loss) before
       minority interest in income
       of subsidiary..................      40,737     33,299    31,686      6,333     3,072   2,651    4,005    3,632   3,346
Minority interest in income
       of subsidiary..................          --        --         --         --        --      --       --       --      --
                                        ----------   --------  --------    -------   ------- -------  ------- -------- -------
     Net income.......................  $   40,737     33,299    31,686      6,333     3,072   2,651    4,005    3,632   3,346
                                        ==========   ========  ========    =======   ======= =======  ======= ======== =======
</TABLE>
-----------------
(1)  Includes  $12.1  million,  $9.8  million  and $7.3  million  of  guaranteed
     preferred debenture expense for the years ended December 31, 1999, 1998 and
     1997, respectively. See Note 9 to the consolidated financial statements.
(2)  Redwood Bank was acquired by FBA on March 4, 1999.


<PAGE>


<TABLE>
<CAPTION>





                                                                        Corporate, other and
                    Redwood Bank (2)         First Bank & Trust    intercompany reclassifications      Consolidated Totals
                ----------------------     ----------------------  ------------------------------    -----------------------
                1999     1998     1997     1999     1998     1997      1999      1998     1997       1999     1998      1997
                ----     ----     ----     ----     ----     ----      ----      ----     ----       ----     ----      ----
                                             (dollars expressed in thousands)



<S>            <C>        <C>     <C>    <C>     <C>      <C>        <C>       <C>       <C>        <C>       <C>       <C>
               37,539      --       --   103,636 134,203  224,618    17,666    22,866    21,281     451,647   534,796   795,530
              138,902      --       --   736,828 573,562  385,251      (418)     (416)       --   3,996,324 3,580,105 3,002,200
              199,988      --       --   944,013 793,217  672,410   (15,126)   25,899    10,958   4,867,747 4,554,810 4,165,014
              173,703      --       --   804,976 701,406  598,560   (28,347)  (48,298)  (30,670)  4,251,814 3,939,985 3,684,595
               24,275      --       --   102,014  75,165   54,438  (173,178) (128,549) (121,260)    294,905   263,363   231,537
              =======   =====   ======   ======= =======  =======  ========  ========  ========   ========= ========= =========





               12,724      --       --    63,765  54,424   42,645      (520)     (411)     (769)    353,082   327,860   295,101
                4,846      --       --    25,708  26,085   20,404     1,926     2,203       520     158,701   162,179   148,831
              -------   -----   ------   ------- -------  -------  --------  --------  --------   ---------  --------  --------
                7,878      --       --    38,057  28,339   22,241    (2,446)   (2,614)   (1,289)    194,381   165,681   146,270
                  193      --       --     3,790     850    2,000        --        --        --      13,073     9,000    11,300
              -------   -----   ------   ------- -------  -------  --------  --------  --------   ---------  --------  --------

                7,685      --       --    34,267  27,489   20,241    (2,446)   (2,614)   (1,289)    181,308   156,681   134,970
              -------   -----   ------   ------- -------  -------  --------  --------  --------   --------- ---------  --------

                  318      --       --     4,625   3,800    3,269    (1,384)   (1,407)   (2,469)     41,650    36,497    25,697
                4,860      --       --    25,973  22,808   15,720    18,029(1) 11,851(1) 10,681(1)  150,807   138,704   110,287
              -------   -----   ------   ------- -------  -------  --------  --------  --------   ---------  --------  --------





                3,143      --       --    12,919   8,481    7,790   (21,859)  (15,872)  (14,439)     72,151    54,474     50,380
                1,501      --       --     4,790   3,539    1,111    (6,851)   (5,708)   (4,374)     26,313    19,693     16,083
              -------   -----   ------   ------- -------   ------  --------  --------  --------   ---------  --------   --------


                1,642      --       --     8,129   4,942    6,679   (15,008)  (10,164)  (10,065)     45,838    34,781     34,297
                   --      --       --        --      --       --     1,660     1,271     1,270       1,660     1,271      1,270
               ------   -----   ------   ------- -------   ------  --------  --------  --------    --------  --------   --------
                1,642      --       --     8,129   4,942    6,679   (16,668)  (11,435)  (11,335)     44,178    33,510     33,027
              =======   =====   ======   ======= =======   ======  ========  ========  ========    ========  ========   ========
</TABLE>

<PAGE>





(22) PARENT COMPANY ONLY FINANCIAL INFORMATION

         Following  are  condensed  balance  sheets of First  Banks,  Inc. as of
December 31, 1999 and 1998, and condensed statements of income and statements of
cash flows for the years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>

                            CONDENSED BALANCE SHEETS

                                                                                           December 31,
                                                                                           ------------
                                                                                        1999         1998
                                                                                        ----         ----
                                                                                 (dollars expressed in thousands)
                                   Assets
                                   ------

<S>                                                                                  <C>              <C>
     Cash deposited in subsidiary banks...........................................   $    4,347       4,775
     Investment securities........................................................       13,848      19,317
     Investment in subsidiaries...................................................      429,255     375,018
     Other assets.................................................................       12,278      12,205
                                                                                     ----------   ---------
           Total assets...........................................................   $  459,728     411,315
                                                                                     ==========   =========

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

     Note payable................................................................    $   64,000      50,048
     Subordinated debentures payable to FPCT.....................................        88,918      88,918
     Accrued expenses and other liabilities......................................        11,905       8,986
                                                                                     ----------   ---------
           Total liabilities.....................................................       164,823     147,952
     Stockholders' equity........................................................       294,905     263,363
                                                                                     ----------   ---------
           Total liabilities and stockholders' equity............................    $  459,728     411,315
                                                                                     ==========   =========

</TABLE>


                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                    Years ended December 31,
                                                                                  --------------------------
                                                                                  1999        1998        1997
                                                                                  ----        ----        ----
                                                                                (dollars expressed in thousands)

     Income:
<S>                                                                           <C>            <C>         <C>
       Dividends from subsidiaries........................................    $  25,250      23,000      17,221
       Management fees from subsidiaries..................................       12,977      10,154       9,010
       Other..............................................................        1,313       2,796       3,094
                                                                              ---------      ------     -------
           Total income...................................................       39,540      35,950      29,325
                                                                              ---------      ------     -------
     Expense:
       Interest...........................................................        3,628       3,411       8,815
       Salaries and employee benefits.....................................        8,999       7,307       7,072
       Legal, examination and professional fees...........................        7,006       1,988       1,765
       Other..............................................................       12,947      12,639       5,221
                                                                              ---------      ------     -------
           Total expense..................................................       32,580      25,345      22,873
                                                                              ---------      ------     -------
           Income before benefit for income taxes and
              equity in undistributed earnings of subsidiaries............        6,960      10,605       6,452
     Benefit for income taxes.............................................       (5,649)     (3,999)     (2,831)
                                                                              ---------      ------     -------
           Income before equity in undistributed earnings of subsidiaries.       12,609      14,604       9,283
     Equity in undistributed earnings of subsidiaries.....................       31,569      18,906      23,744
                                                                              ---------      ------     -------
           Net income.....................................................    $  44,178      33,510      33,027
                                                                              =========      ======     =======
</TABLE>



<PAGE>


                       CONDENSED STATEMENTS OF CASH FLOWS

  <TABLE>
<CAPTION>
                                                                                Years ended December 31,
                                                                             ------------------------------
                                                                              1999          1998           1997
                                                                              ----          ----           ----
                                                                               (dollars expressed in thousands)

     Cash flows from operating activities:
<S>                                                                       <C>              <C>            <C>
       Net income......................................................   $  44,178        33,510         33,027
       Adjustments to reconcile net income to net cash provided by
         operating activities:
           Net income of subsidiaries..................................     (56,676)      (42,107)       (41,015)
           Dividends from subsidiaries.................................      25,250        23,000         17,221
           Other, net..................................................       1,900         4,963         (2,773)
                                                                          ---------      --------        -------
              Net cash provided by operating activities................      14,652        19,366          6,460
                                                                          ---------      --------        -------

     Cash flows from investing activities:
       (Increase) decrease in investment securities....................        (100)        3,000         (3,000)
       Investment in common securities of FPCT.........................          --            --         (2,668)
       Acquisitions of subsidiaries....................................     (31,500)      (31,586)            --
       Capital contributions to subsidiaries...........................      (3,000)           --           (190)
       Return of subsidiary capital....................................      10,000            --          2,000
       Decrease (increase) in advances to subsidiaries.................          --        14,900           (121)
       Other, net......................................................      (3,646)       (3,350)        (6,659)
                                                                          ---------      --------        -------
              Net cash used in investing activities....................     (28,246)      (17,036)       (10,638)
                                                                          ---------      --------        -------

     Cash flows from financing activities:
       Increase (decrease) in note payable.............................      13,952        (5,096)       (21,186)
       Increase in FPCT subordinated debentures........................          --            --         88,918
       Payment of preferred stock dividends............................        (786)         (786)        (5,066)
       Purchase and retirement of Class C Preferred Stock..............          --            --        (54,048)
                                                                          ---------      --------        -------
              Net cash provided by (used in) financing activities......      13,166        (5,882)         8,618
                                                                          ---------      --------        -------
              Net (decrease) increase in cash and cash equivalents.....        (428)       (3,552)         4,440
     Cash and cash equivalents, beginning of year......................       4,775         8,327          3,887
                                                                          ---------      --------        -------
     Cash and cash equivalents, end of year............................   $   4,347         4,775          8,327
                                                                          =========      ========        =======

     Noncash investing activities:
       Reduction of deferred tax valuation reserve.....................   $     811            --             --
                                                                          =========      ========        =======
</TABLE>

(23)     CONTINGENT LIABILITIES

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

(24)     SUBSEQUENT EVENTS

         On February 29, 2000, FBA completed its  acquisition of Lippo Bank, San
Francisco,  California,  in  exchange  for $17.2  million  in cash.  Lippo  Bank
operates  three banking  locations in San  Francisco,  San Jose and Los Angeles,
California.  The  acquisition was funded from available cash. At the time of the
transaction,  Lippo Bank had $85.3  million in total  assets,  $40.9  million in
loans,  net of unearned  discount,  $37.4 million in investment  securities  and
$76.4 million in total  deposits.  This  transaction was accounted for using the
purchase method of accounting. The excess of the cost over the fair value of the
net assets acquired was  approximately  $4.0 million and is being amortized over
15 years. Lippo Bank will be merged into FB California.
         On February 29, 2000,  First Banks completed its acquisition of certain
assets and  liabilities of First Capital Group,  Inc.,  Albuquerque,  New Mexico
(FCG),  in exchange  for $65.1  million in cash.  FCG is a leasing  company that
specializes in commercial  leasing and operates a multi-state  leasing business.
The acquisition was funded from available cash. At the time of the  transaction,
FCG had $64.6  million in total assets,  consisting  almost solely of commercial
leases, net of unearned income, of $64.5 million.  The premium paid on the lease
portfolio acquired was $1.5 million and is being amortized as a yield adjustment
over  approximately  4 years.  FCG is operating as a direct  subsidiary of First
Banks, Inc.



<PAGE>


<TABLE>
<CAPTION>



                         DIRECTORS AND SENIOR MANAGEMENT



First Banks, Inc.

<S>     <C>                             <C>
         James F. Dierberg              Chairman of the Board and Chief Executive Officer
         Allen H. Blake                 Director, President and Chief Operating Officer
         Donald J. Gunn                 Director, Attorney-At-Law, Gunn and Gunn, Creve Coeur, Missouri
         Michael F. Hickey              Executive Vice President and Chief Information Officer
         George J. Markos               Director, President, Profit Management Systems, Richardson, Texas
         Frank H. Sanfilippo            Executive Vice President and Chief Financial Officer
         John A. Schreiber              Executive Vice President
         Mark T. Turkcan                Executive Vice President, Consumer Lending and Mortgage Banking
         Lisa K. Vansickle              Vice President and Controller
         Donald W. Williams             Executive Vice President and Chief Credit Officer


First Banks America, Inc.

         James F. Dierberg              Chairman of the Board, President and Chief Executive Officer
         Allen H. Blake                 Director, Executive Vice President, Chief Operating Officer and Secretary
         Charles A. Crocco, Jr.         Director, Counsel to the law firm of Jackson & Nash, LLP, New York, New York
         Albert M. Lavezzo              Director,  President and Chief  Operating  Officer of the law firm of Favaro, Lavezzo, Gill,
                                        Caretti & Heppell, Vallejo, California
         Terrance M. McCarthy           Executive Vice President
         Frank H. Sanfilippo            Executive Vice President and Chief Financial Officer
         Ellen D. Schepman              Director, Retail Marketing Officer, First Banks, Inc., St. Louis, Missouri
         Edward T. Story, Jr.           Director, President and Chief Executive Officer of SOCO International, plc, Comfort, Texas
         David F. Weaver                Executive Vice President
         Donald W. Williams             Director,  Executive Vice President and Chief Credi  Officer,  First Banks, Inc., St. Louis,
                                        Missouri


First Bank

         John A. Schreiber              Chairman of the Board, President and Chief Executive Officer
         Douglas R. Distler             Director, Senior Vice President and Regional President
         Michael F. Hickey              Director, Executive Vice President, Chief Information Officer
         Frank H. Sanfilippo            Director, Executive Vice President, Chief Financial Officer, Secretary and Treasurer
         Donald W. Williams             Director and Executive Vice President
         Mark T. Turkcan                Director and Executive Vice President


First Bank & Trust

         Fred D. Jensen                 Chairman of the Board, President and Chief Executive Officer
         Karkutla "Bala" Balkrishna     Director, Senior Vice President-Commercial Banking
         Norman O. Broyer               Director, Senior Vice President and Chief Credit Officer
         Tom LaCroix                    Director, Senior Vice President-Commercial Banking
         Timothy M. Marme               Director, Central Coast Regional President
         Kathryn L. Perrine             Director, Senior Vice President and Chief Financial Officer
         Alan G. Rye                    Director, Senior Vice President-Commercial Real Estate
         Donald W. Williams             Director

</TABLE>


<PAGE>





                   DIRECTORS AND SENIOR MANAGEMENT (CONTINUED)
<TABLE>
<CAPTION>


First Bank of California

<S>     <C>                             <C>
         Terrance M. McCarthy           Chairman of the Board, President and Chief Executive Officer
         James E. Culleton              Director and Secretary
         Peter A. Goetze                Vice President, Retail Banking
         Albert M. Lavezzo              Director
         Kathryn L. Perrine             Vice President and Chief Financial Officer
         Gary M. Sanders                Director and Executive Vice President
         Fred K. Sibley                 Director
         Donald W. Williams             Director


First Bank Texas N.A.

         David F. Weaver                Chairman of the Board, President and Chief Executive Officer
         Alan J. Cott                   Director and Senior Vice President, Commercial Lending - Houston
         Christopher A. Hopkins         Director and Senior Vice President, Commercial Lending - Dallas
         Joseph Milcoun, Jr.            Director and Senior Vice President, Retail Banking
         Monica J. Rinehart             Director, Controller and Secretary
         Donald W. Williams             Director


Redwood Bank

         Donald W. Williams             Chairman of the Board
         Susan J. Chase                 Director and Chief Financial Officer
         David T. Currie                Director and Chief Credit Officer
         Patrick S. Day                 Director
         Terrance M. McCarthy           Director, President and Chief Executive Officer
         Robert A. McKerroll            Director
         Kerry C. Smith                 Director

</TABLE>

<PAGE>


                              INVESTOR INFORMATION

                             Stock Quotation Symbol
                         NASDAQ National Market System:

                          First Preferred Capital Trust

                                      FBNKO

<TABLE>
<CAPTION>

                                                               Market price (1)        Dividend
                                                               ----------------        --------
                  1999                                       High           Low        declared
                  ----                                       ----           ---        --------

<S>                                                     <C>                 <C>      <C>
                  First Quarter......................   $    27.25          25.13    $   .578125
                  Second Quarter.....................        27.00          25.25        .578125
                  Third Quarter......................        26.63          24.94        .578125
                  Fourth Quarter.....................        26.00          23.88        .578125
                                                                                     -----------
                                                                                     $  2.312500


                                                               Market price (1)        Dividend
                                                             ------------------        --------
                  1998                                       High            Low       declared
                  ----                                       ----            ---       --------
                  First Quarter......................   $    27.88          26.75    $   .578125
                  Second Quarter.....................        27.25          26.00        .578125
                  Third Quarter......................        27.75          25.25        .578125
                  Fourth Quarter.....................        26.75          25.50        .578125
                                                                                     -----------
                                                                                     $  2.312500
</TABLE>
-------------------
(1)  Per NASDAQ National Market System.

         Distributions  are payable  quarterly  in arrears on March 31, June 30,
September 30 and December 31.




         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.
<TABLE>
<CAPTION>

<S>               <C>                                           <C>
                  Frank H. Sanfilippo                           State Street Bank and Trust Company
                  Executive Vice President and                  Corporate Trust Department
                    Chief Financial Officer                     P. O. Box 778
                  First Banks, Inc.                             Boston, Massachusetts 02102-0778
                  11901 Olive Boulevard                         Telephone (800) 531-0368
                  Creve Coeur, Missouri 63141                   www.statestreet.com
                  Telephone (314) 995-8700
</TABLE>