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

                                    FORM 10-Q


(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                  For the quarterly period ended June 30, 2006

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

               For the transition period from _______ to ________

                         Commission File Number: 0-20632

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

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

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

         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. [X] Yes [ ] No


         Indicate by check mark whether the  registrant  is a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act (Check one):

Large accelerated filer [ ]    Accelerated filer [ ]   Non-accelerated filer [X]


         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practical date.

                                                         Shares Outstanding
               Class                                      at July 31, 2006
               -----                                     ------------------

  Common Stock, $250.00 par value                              23,661



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<TABLE>
<CAPTION>



                                              FIRST BANKS, INC.

                                              TABLE OF CONTENTS





                                                                                                             Page
                                                                                                             ----

PART I.      FINANCIAL INFORMATION

  ITEM 1.    FINANCIAL STATEMENTS:

<S>                                                                                                            <C>
             CONSOLIDATED BALANCE SHEETS.................................................................     1

             CONSOLIDATED STATEMENTS OF INCOME...........................................................     2

             CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 AND COMPREHENSIVE INCOME................................................................     3

             CONSOLIDATED STATEMENTS OF CASH FLOWS.......................................................     4

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................................     5

  ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATIONS...............................................................    19

  ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................................    40

  ITEM 4.    CONTROLS AND PROCEDURES.....................................................................    41

PART II.     OTHER INFORMATION

  ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................    42

  ITEM 6.    EXHIBITS....................................................................................    43

SIGNATURES...............................................................................................    44

</TABLE>

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<TABLE>
<CAPTION>

                                       PART I - FINANCIAL INFORMATION
                                       ITEM 1 - FINANCIAL STATEMENTS

                                               FIRST BANKS, INC.

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

                                                                                          June 30,       December 31,
                                                                                            2006             2005
                                                                                            ----             ----
                                                                                         (unaudited)

                                                   ASSETS
                                                   ------

Cash and cash equivalents:
<S>                                                                                      <C>                <C>
     Cash and due from banks..........................................................   $  208,012         212,667
     Short-term investments...........................................................       29,205          73,985
                                                                                         ----------       ---------
          Total cash and cash equivalents.............................................      237,217         286,652
                                                                                         ----------       ---------

Investment securities:
     Trading..........................................................................       50,928           3,389
     Available for sale...............................................................    1,111,233       1,311,289
     Held to maturity (fair value of $24,180 and $25,791, respectively)...............       24,898          26,105
                                                                                         ----------       ---------
          Total investment securities.................................................    1,187,059       1,340,783
                                                                                         ----------       ---------

Loans:
     Commercial, financial and agricultural...........................................    1,846,153       1,619,822
     Real estate construction and development.........................................    1,808,995       1,564,255
     Real estate mortgage.............................................................    3,561,815       3,469,788
     Consumer and installment.........................................................       69,654          64,724
     Loans held for sale..............................................................      332,411         315,134
                                                                                         ----------       ---------
          Total loans.................................................................    7,619,028       7,033,723
     Unearned discount................................................................      (18,437)        (12,952)
     Allowance for loan losses........................................................     (147,383)       (135,330)
                                                                                         ----------       ---------
          Net loans...................................................................    7,453,208       6,885,441
                                                                                         ----------       ---------

Bank premises and equipment, net of accumulated depreciation and amortization.........      154,614         144,941
Goodwill..............................................................................      226,811         167,056
Bank-owned life insurance.............................................................      113,612         111,442
Deferred income taxes.................................................................      126,313         128,938
Other assets..........................................................................      116,393         105,080
                                                                                         ----------       ---------
          Total assets................................................................   $9,615,227       9,170,333
                                                                                         ==========       =========

                                                 LIABILITIES
                                                 -----------

Deposits:
     Noninterest-bearing demand.......................................................   $1,296,101       1,299,350
     Interest-bearing demand..........................................................      953,791         981,837
     Savings..........................................................................    2,161,286       2,106,470
     Time deposits of $100 or more....................................................    1,328,387       1,076,908
     Other time deposits..............................................................    2,326,380       2,077,266
                                                                                         ----------       ---------
          Total deposits..............................................................    8,065,945       7,541,831
Other borrowings......................................................................      327,996         539,174
Notes payable.........................................................................       85,000         100,000
Subordinated debentures...............................................................      304,270         215,461
Deferred income taxes.................................................................       28,855          27,104
Accrued expenses and other liabilities................................................       77,965          61,762
Minority interest in subsidiary.......................................................        5,823           6,063
                                                                                         ----------       ---------
          Total liabilities...........................................................    8,895,854       8,491,395
                                                                                         ----------       ---------

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

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

Preferred stock:
<S>                                                                                        <C>                 <C>
     $1.00 par value, 5,000,000 shares authorized, no shares issued and outstanding...           --              --
     Class A convertible, adjustable rate, $20.00 par value, 750,000
       shares authorized, 641,082 shares issued and outstanding.......................       12,822          12,822
     Class B adjustable rate, $1.50 par value, 200,000 shares authorized,
       160,505 shares issued and outstanding..........................................          241             241
Common stock, $250.00 par value, 25,000 shares authorized,
     23,661 shares issued and outstanding.............................................        5,915           5,915
Additional paid-in capital............................................................        5,910           5,910
Retained earnings.....................................................................      724,717         673,956
Accumulated other comprehensive loss..................................................      (30,232)        (19,906)
                                                                                         ----------       ---------
          Total stockholders' equity..................................................      719,373         678,938
                                                                                         ----------       ---------
          Total liabilities and stockholders' equity..................................   $9,615,227       9,170,333
                                                                                         ==========       =========


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


<PAGE>
<TABLE>
<CAPTION>


                                             FIRST BANKS, INC.

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


                                                                          Three Months Ended     Six Months Ended
                                                                               June 30,              June 30,
                                                                         --------------------   -------------------
                                                                           2006        2005       2006       2005
                                                                           ----        ----       ----       ----
Interest income:
<S>                                                                      <C>           <C>       <C>        <C>
     Interest and fees on loans........................................  $ 141,728     99,442    273,062    193,612
     Investment securities.............................................     14,856     17,395     29,633     34,944
     Short-term investments............................................      1,147        351      2,270        860
                                                                         ---------   --------   --------   --------
          Total interest income........................................    157,731    117,188    304,965    229,416
                                                                         ---------   --------   --------   --------
Interest expense:
     Deposits:
       Interest-bearing demand.........................................      1,947        932      3,775      1,820
       Savings.........................................................     12,255      6,331     23,438     12,075
       Time deposits of $100 or more...................................     14,258      6,246     25,814     11,600
       Other time deposits.............................................     23,146     16,156     43,180     30,135
     Other borrowings..................................................      3,246      4,234      7,941      7,534
     Notes payable.....................................................      1,477        103      2,897        241
     Subordinated debentures...........................................      5,722      5,365     11,374     10,111
                                                                         ---------   --------   --------   --------
          Total interest expense.......................................     62,051     39,367    118,419     73,516
                                                                         ---------   --------   --------   --------
          Net interest income..........................................     95,680     77,821    186,546    155,900
Provision for loan losses..............................................      5,000     (8,000)     6,000     (8,000)
                                                                         ---------   --------   --------   --------
          Net interest income after provision for loan losses..........     90,680     85,821    180,546    163,900
                                                                         ---------   --------   --------   --------
Noninterest income:
     Service charges on deposit accounts and customer service fees.....     10,996     10,177     21,228     19,476
     Gain on loans sold and held for sale..............................      6,099      6,844     12,920     11,360
     Net loss on investment securities.................................     (1,216)        --     (3,987)        --
     Bank-owned life insurance investment income.......................        652      1,274      1,767      2,534
     Investment management income......................................      2,296      2,220      4,597      4,246
     Other.............................................................      7,052      5,676     14,851      9,790
                                                                         ---------   --------   --------   --------
          Total noninterest income.....................................     25,879     26,191     51,376     47,406
                                                                         ---------   --------   --------   --------
Noninterest expense:
     Salaries and employee benefits....................................     42,610     34,548     82,104     67,478
     Occupancy, net of rental income...................................      6,425      5,226     12,660     10,465
     Furniture and equipment...........................................      4,116      3,814      8,079      7,838
     Postage, printing and supplies....................................      1,988      1,324      3,414      2,952
     Information technology fees.......................................      9,190      9,395     18,251     17,545
     Legal, examination and professional fees..........................      2,408      2,082      4,505      4,453
     Amortization of intangibles associated with the purchase
       of subsidiaries.................................................      1,680      1,146      3,197      2,355
     Communications....................................................        604        466      1,158        975
     Advertising and business development..............................      2,150      1,748      3,877      3,395
     Charitable contributions..........................................      1,707      1,572      3,324      1,678
     Other.............................................................      8,173      8,840     15,297     14,896
                                                                         ---------   --------   --------   --------
          Total noninterest expense....................................     81,051     70,161    155,866    134,030
                                                                         ---------   --------   --------   --------
          Income before provision for income taxes and minority
             interest in loss of subsidiary............................     35,508     41,851     76,056     77,276
Provision for income taxes.............................................     13,500     15,005     25,203     28,303
                                                                         ---------   --------   --------   --------
          Income before minority interest in loss of subsidiary........     22,008     26,846     50,853     48,973
Minority interest in loss of subsidiary................................        (78)        --       (236)        --
                                                                         ---------   --------   --------   --------
          Net income...................................................     22,086     26,846     51,089     48,973
Preferred stock dividends..............................................        132        132        328        328
                                                                         ---------   --------   --------   --------
          Net income available to common stockholders..................  $  21,954     26,714     50,761     48,645
                                                                         =========   ========   ========   ========

Basic earnings per common share........................................  $  927.86   1,129.05   2,145.35   2,055.92
                                                                         =========   ========   ========   ========

Diluted earnings per common share......................................  $  916.31   1,110.42   2,118.11   2,025.30
                                                                         =========   ========   ========   ========

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


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

</TABLE>

<TABLE>
<CAPTION>

                                              FIRST BANKS, INC.

        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME - (UNAUDITED)
                 Six Months Ended June 30, 2006 and 2005 and Six Months Ended December 31, 2005
                             (dollars expressed in thousands, except per share data)




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

<S>                                                  <C>         <C>      <C>       <C>      <C>         <C>       <C>
Consolidated balances, December 31, 2004...........  $12,822     241      5,915     5,910    577,836     (1,831)   600,893
                                                                                                                   -------
Six months ended June 30, 2005:
   Comprehensive income:(1)
      Net income...................................       --      --         --        --     48,973         --     48,973
      Other comprehensive loss, net of tax:
          Unrealized losses on investment
            securities.............................       --      --         --        --         --     (3,571)    (3,571)
          Derivative instruments:
              Current period transactions..........       --      --         --        --         --     (2,743)    (2,743)
                                                                                                                   -------
   Total comprehensive income......................                                                                 42,659
   Class A preferred stock dividends,
     $0.50 per share...............................       --      --         --        --       (321)        --       (321)
   Class B preferred stock dividends,
     $0.04 per share...............................       --      --         --        --         (7)        --         (7)
                                                     -------     ---      -----     -----    -------    -------    -------

Consolidated balances, June 30, 2005...............   12,822     241      5,915     5,910    626,481     (8,145)   643,224
                                                                                                                   -------
Six months ended December 31, 2005:
   Comprehensive income:
      Net income...................................       --      --         --        --     47,933         --     47,933
      Other comprehensive loss, net of tax:
          Unrealized losses on investment
            securities.............................       --      --         --        --         --    (12,088)   (12,088)
          Reclassification adjustment for
            investment securities losses
            included in net income.................       --      --         --        --         --      1,867      1,867
          Derivative instruments:
              Current period transactions..........       --      --         --        --         --     (1,540)    (1,540)
                                                                                                                   -------
   Total comprehensive income......................                                                                 36,172
   Class A preferred stock dividends,
     $0.70 per share...............................       --      --         --        --       (448)        --       (448)
   Class B preferred stock dividends,
     $0.07 per share...............................       --      --         --        --        (10)        --        (10)
                                                     -------     ---      -----     -----    -------    -------    -------
Consolidated balances, December 31, 2005...........   12,822     241      5,915     5,910    673,956    (19,906)   678,938
                                                                                                                   -------
Six months ended June 30, 2006:
   Comprehensive income:(1)
      Net income...................................       --      --         --        --     51,089         --     51,089
      Other comprehensive loss, net of tax:
          Unrealized losses on investment
            securities.............................       --      --         --        --         --    (11,903)   (11,903)
          Reclassification adjustment for
            investment securities losses
            included in net income.................       --      --         --        --         --      1,739      1,739
          Derivative instruments:
              Current period transactions..........       --      --         --        --         --       (162)      (162)
                                                                                                                   -------
   Total comprehensive income......................                                                                 40,763
   Class A preferred stock dividends,
     $0.50 per share...............................       --      --         --.       --       (321)        --       (321)
   Class B preferred stock dividends,
     $0.04 per share...............................       --      --         --        --         (7)        --         (7)
                                                     -------     ---      -----     -----    -------    -------    -------
Consolidated balances, June 30, 2006...............  $12,822     241      5,915     5,910    724,717    (30,232)   719,373
                                                     =======     ===      =====     =====    =======    =======    =======

<PAGE>

-------------------------
(1) Disclosure of comprehensive income (loss):

                                                                         Three Months Ended      Six Months Ended
                                                                              June 30,               June 30,
                                                                         ------------------    -------------------
                                                                           2006      2005        2006       2005
                                                                           ----      ----        ----       ----
Comprehensive income:
  Net income........................................................     $22,086    26,846      51,089     48,973
  Other comprehensive (loss) income, net of tax:
      Unrealized (losses) gains on investment securities............      (8,343)   10,618     (11,903)    (3,571)
      Reclassification adjustment for investment securities
        losses included in net income...............................         201        --       1,739         --
      Derivative instruments:
          Current period transactions...............................         141       684        (162)    (2,743)
                                                                         -------    ------     -------    -------
Total comprehensive income..........................................     $14,085    38,148      40,763     42,659
                                                                         =======    ======     =======    =======


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


<PAGE>
<TABLE>
<CAPTION>

                                                 FIRST BANKS, INC.

                                CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
                                       (dollars expressed in thousands)

                                                                                                Six Months Ended
                                                                                                    June 30,
                                                                                            -----------------------
                                                                                               2006          2005
                                                                                               ----          ----

Cash flows from operating activities:
<S>                                                                                         <C>              <C>
     Net income..........................................................................   $  51,089        48,973
     Adjustments to reconcile net income to net cash provided by operating activities:
       Depreciation and amortization of bank premises and equipment......................       8,975         8,591
       Amortization, net of accretion....................................................       7,018         7,458
       Originations of loans held for sale...............................................    (369,752)     (647,942)
       Proceeds from sales of loans held for sale........................................     444,231       600,315
       Provision for loan losses.........................................................       6,000        (8,000)
       Provision for deferred income taxes...............................................       3,060          (124)
       Decrease in accrued interest receivable...........................................         153         3,721
       Increase in accrued interest payable..............................................         527           769
       Proceeds from sales of trading securities.........................................       4,463            --
       Purchases of trading securities...................................................     (53,580)           --
       Gain on loans sold and held for sale..............................................     (12,920)      (11,360)
       Net loss on investment securities.................................................       3,987            --
       Other operating activities, net...................................................      38,825        14,369
       Minority interest in loss of subsidiary...........................................        (236)           --
                                                                                            ---------      --------
          Net cash provided by operating activities......................................     131,840        16,770
                                                                                            ---------      --------

Cash flows from investing activities:
     Cash paid for acquired entities, net of cash and cash equivalents received..........    (221,092)       (3,311)
     Proceeds from sales of investment securities available for sale.....................     197,027            --
     Maturities of investment securities available for sale..............................     659,466       284,203
     Maturities of investment securities held to maturity................................       2,053         1,130
     Purchases of investment securities available for sale...............................    (515,951)     (219,227)
     Purchases of investment securities held to maturity.................................        (865)         (509)
     Net increase in loans...............................................................    (543,069)      (69,292)
     Recoveries of loans previously charged-off..........................................       8,450        12,059
     Purchases of bank premises and equipment............................................     (10,670)       (6,718)
     Other investing activities, net.....................................................      (1,820)        9,577
                                                                                            ---------      --------
          Net cash (used in) provided by investing activities............................    (426,471)        7,912
                                                                                            ---------      --------

Cash flows from financing activities:
     Decrease in demand and savings deposits.............................................     (53,534)       (6,397)
     Increase in time deposits...........................................................     442,740         7,306
     Decrease in Federal Home Loan Bank advances.........................................     (18,328)       (6,000)
     Decrease in securities sold under agreements to repurchase..........................    (197,985)      (42,259)
     Repayments of notes payable.........................................................     (15,000)      (15,000)
     Proceeds from issuance of subordinated debentures...................................      87,631            --
     Payment of preferred stock dividends................................................        (328)         (328)
                                                                                            ---------      --------
          Net cash provided by (used in) financing activities............................     245,196       (62,678)
                                                                                            ---------      --------
          Net decrease in cash and cash equivalents......................................     (49,435)      (37,996)
Cash and cash equivalents, beginning of period...........................................     286,652       267,110
                                                                                            ---------      --------
Cash and cash equivalents, end of period.................................................   $ 237,217       229,114
                                                                                            =========      ========

Supplemental disclosures of cash flow information:
     Cash paid during the period for:
       Interest on liabilities...........................................................   $ 117,892        72,747
       Income taxes......................................................................      11,290        32,193
                                                                                            =========      ========
     Noncash investing and financing activities:
       Securitization and transfer of loans to investment securities.....................   $ 138,944            --
       Loans transferred to other real estate............................................       3,452         1,247
                                                                                            =========      ========

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

</TABLE>


<PAGE>


                                FIRST BANKS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      BASIS OF PRESENTATION

         The  consolidated   financial  statements  of  First  Banks,  Inc.  and
subsidiaries  (First Banks or the Company) are  unaudited  and should be read in
conjunction with the  consolidated  financial  statements  contained in the 2005
Annual Report on Form 10-K.  The  consolidated  financial  statements  have been
prepared in accordance with U.S.  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
U.S. generally accepted accounting principles.  Actual results could differ from
those estimates.  In the opinion of management,  all adjustments,  consisting of
normal recurring  accruals  considered  necessary for a fair presentation of the
results of  operations  for the  interim  periods  presented  herein,  have been
included. Operating results for the three and six months ended June 30, 2006 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending December 31, 2006.

         The  consolidated  financial  statements  include  the  accounts of the
parent company and its  subsidiaries,  giving effect to the minority interest in
one subsidiary, as more fully described below, and in Note 6 to the Consolidated
Financial  Statements.  All significant  intercompany  accounts and transactions
have been eliminated.  Certain  reclassifications of 2005 amounts have been made
to conform to the 2006 presentation.

         First Banks operates  through its wholly owned  subsidiary bank holding
company,  The San  Francisco  Company  (SFC),  headquartered  in San  Francisco,
California, and SFC's wholly owned subsidiary bank, First Bank, headquartered in
St. Louis, Missouri.  First Bank operates through its branch banking offices and
subsidiaries: First Bank Business Capital, Inc. (formerly FB Commercial Finance,
Inc.);  Missouri Valley Partners,  Inc. (MVP); Adrian N. Baker & Company (Adrian
Baker);  Universal Premium  Acceptance  Corporation  (UPAC) and its wholly owned
subsidiary,  UPAC of California,  Inc.; and Small Business Loan Source LLC (SBLS
LLC). All of the  subsidiaries  are wholly owned,  except for SBLS LLC, which is
51.0% owned by First Bank and 49.0% owned by First Capital America,  Inc. (FCA),
as further discussed in Note 6 to the Consolidated Financial Statements.


(2)      ACQUISITIONS AND INTEGRATION COSTS

         Completed Acquisitions

         On  January  3,  2006,   First  Banks  acquired  the  majority  of  the
outstanding   common  stock  of  First  National  Bank  of  Sachse  (FNBS),  and
subsequently  acquired the remaining outstanding common stock of FNBS in January
2006,  for $20.8  million in cash,  in  aggregate.  FNBS was  headquartered  and
operated one banking office in Sachse,  Texas,  located in the northeast  Dallas
metropolitan  area.  The  acquisition  served to  expand  First  Banks'  banking
franchise in Texas.  The  transaction  was funded through  internally  generated
funds. At the time of the acquisition,  FNBS had assets of $76.2 million, loans,
net of  unearned  discount,  of $49.3  million,  deposits  of $66.2  million and
stockholders'  equity of $9.9  million.  The  assets  acquired  and  liabilities
assumed were recorded at their estimated fair value on the acquisition date. The
fair value  adjustments  represent  current estimates and are subject to further
adjustments as the valuation data is finalized.  Preliminary goodwill,  which is
not deductible for tax purposes,  was approximately  $8.8 million,  and the core
deposit  intangibles,  which are not  deductible  for tax purposes and are being
amortized over five years utilizing the straight-line method, were approximately
$3.6 million. FNBS was merged with and into First Bank on January 24, 2006.

         On January 20, 2006, First Bank completed its acquisition of the branch
office of Dallas National Bank in Richardson,  Texas (Richardson Branch). At the
time of the  acquisition,  the  Richardson  Branch had  assets of $1.1  million,
including loans,  net of unearned  discount,  of $144,000,  and deposits of $1.1
million.
<PAGE>
         On March 31, 2006, First Bank completed its acquisition of Adrian Baker
for $7.0 million in cash and certain payments  contingent on the future earnings
of Adrian Baker for each of the years in the  three-year  period  following  the
closing date of the transaction.  Adrian Baker is an insurance brokerage company
based in  Clayton,  Missouri  that  provides a  comprehensive  range of employee
benefit and commercial and personal  insurance  services on a nationwide  basis.
The  acquisition  served to diversify  First Banks' products and services in the
highly-specialized  financial  services  industry.  The  transaction  was funded
through internally generated funds. At the time of the acquisition, Adrian Baker
had assets of $3.0  million and  stockholders'  equity of  $810,000.  The assets
acquired and liabilities  assumed were recorded at their estimated fair value on
the acquisition date.  Goodwill,  which is not deductible for tax purposes,  was
approximately  $3.9  million.  The  customer  list and  related  intangibles  of
approximately $3.7 million, which are not deductible for tax purposes, are being
amortized  over 15  years  utilizing  the  straight-line  method.  Adrian  Baker
operates as a wholly owned subsidiary of First Bank.

         On April 28, 2006,  First Banks completed its acquisition of Pittsfield
Community Bancorp, Inc. and its wholly owned banking subsidiary,  Community Bank
of Pittsfield (collectively, Community Bank) for $5.1 million in cash. Community
Bank was headquartered in Pittsfield, Illinois and operated two banking offices,
one in Pittsfield,  Illinois,  and one in Mount Sterling,  Illinois. On June 16,
2006,  First Bank completed its sale of the Mount Sterling  office to Beardstown
Savings, s.b. The acquisition served to expand First Banks' banking franchise in
Pittsfield,  Illinois.  The transaction was funded through internally  generated
funds.  At the time of the  acquisition,  after giving effect to the sale of the
Mount Sterling office, Community Bank had assets of $17.6 million, loans, net of
unearned discount, of $11.1 million, deposits of $12.3 million and stockholder's
equity of $3.9  million.  The  assets  acquired  and  liabilities  assumed  were
recorded at their estimated fair value on the acquisition date. Goodwill,  which
is not deductible for tax purposes,  was  approximately  $783,000,  and the core
deposit  intangibles,  which are not  deductible  for tax purposes and are being
amortized over five years utilizing the straight-line method, were approximately
$517,000. Community Bank was merged with and into First Bank.

         On May 1, 2006,  First Banks  acquired the majority of the  outstanding
common  stock  of First  Independent  National  Bank  (FINB),  and  subsequently
acquired the remaining  outstanding  common stock in May 2006, for $19.2 million
in cash, in aggregate.  FINB was headquartered in Plano,  Texas and operated two
banking offices in Plano, Texas, located in Collin County. In addition, FINB was
in the process of opening a de novo branch banking office located in the Preston
Forest Shopping Center in Dallas County.  The acquisition served to expand First
Banks' banking franchise in Texas. The transaction was funded through internally
generated  funds and the issuance of subordinated  debentures  associated with a
private placement of $40.0 million of trust preferred securities through a newly
formed  affiliated  statutory  trust,  as  further  discussed  in Note 11 to the
Consolidated  Financial  Statements.  At the time of the  acquisition,  FINB had
assets of $68.2  million,  loans,  net of unearned  discount,  of $59.6 million,
deposits of $55.5 million and stockholders'  equity of $7.3 million.  The assets
acquired and liabilities  assumed were recorded at their estimated fair value on
the acquisition date.  Goodwill,  which is not deductible for tax purposes,  was
approximately  $9.3  million,  and the core deposit  intangibles,  which are not
deductible for tax purposes and are being  amortized  over five years  utilizing
the straight-line  method, were approximately $2.5 million. FINB was merged with
and into First Bank on May 16, 2006.

         On May 31, 2006,  First Bank  completed  its  acquisition  of KIF, Inc.
(KIF), an Iowa corporation, and its wholly owned subsidiaries,  UPAC, a Missouri
corporation,  and UPAC of California,  Inc., a California corporation, for $52.7
million in cash. In conjunction  with the acquisition of KIF, First Banks repaid
in full the outstanding  subordinated  notes of KIF and the  outstanding  senior
notes of UPAC, which were $2.2 million and $123.7 million,  respectively, at the
time  of  the  acquisition.   UPAC  is  an  insurance  premium  finance  company
headquartered  in the Kansas  City suburb of Lenexa,  Kansas and  operates in 49
states.  The acquisition  served to diversify First Banks' products and services
in the  highly-specialized  financial  services  industry.  The  transaction was
funded through internally generated funds and a $52.0 million short-term Federal
Home Loan Bank advance. At the time of the acquisition, KIF had assets of $152.8
million,  loans, net of unearned  discount,  of $149.2 million and stockholders'
equity of $18.3  million.  The assets  acquired  and  liabilities  assumed  were
recorded at their estimated fair value on the  acquisition  date. The fair value
adjustments  represent current estimates and are subject to further  adjustments
as  the  valuation  data  is  finalized.  Preliminary  goodwill,  which  is  not
deductible for tax purposes,  was  approximately  $37.1 million.  KIF was merged
with and into UPAC on June 30,  2006.  UPAC of  California,  Inc.  operates as a
wholly owned  subsidiary of UPAC, which operates as a wholly owned subsidiary of
First Bank.
<PAGE>

         Pending Acquisitions

         On May  10,  2006,  First  Banks  executed  an  Agreement  and  Plan of
Reorganization providing for the acquisition of San Diego Community Bank (SDCB),
located in San Diego, California,  for approximately $25.5 million in cash. SDCB
operates three banking offices in the San Diego community, with its headquarters
in Chula Vista,  which is  approximately  ten miles south of downtown San Diego,
and two other banking  offices in Kearny Mesa and Otay Mesa. The  transaction is
expected to be  completed  during the third  quarter of 2006.  At June 30, 2006,
SDCB had assets of $94.4  million,  loans,  net of unearned  discount,  of $76.3
million, deposits of $75.0 million and stockholders' equity of $12.8 million.

         On June  14,  2006,  First  Banks  executed  an  Agreement  and Plan of
Reorganization  providing  for the  acquisition  of TeamCo,  Inc. and its wholly
owned  banking  subsidiary,   Oak  Lawn  Bank  (collectively,   Oak  Lawn),  for
approximately  $13.9 million in cash. Oak Lawn operates its  headquarters in Oak
Lawn, Illinois, which is approximately 15 miles southwest of the Chicago Loop in
Chicago Southland,  and a second banking office in Orland Park, Illinois,  which
is approximately 39 miles southwest of downtown Chicago. The transaction,  which
is subject to regulatory approvals, is expected to be completed during the third
quarter of 2006. At June 30, 2006, Oak Lawn had assets of $72.1 million,  loans,
net of  unearned  discount,  of $43.7  million,  deposits  of $62.8  million and
stockholders' equity of $6.5 million.

         Subsequent to June 30, 2006,  First Banks  entered into two  agreements
related to acquisition  transactions,  as more fully described in Note 13 to the
Consolidated Financial Statements.

         Acquisition and Integration Costs

         First Banks accrues certain costs  associated with its  acquisitions as
of the respective consummation dates. The accrued costs relate to adjustments to
the staffing levels of the acquired  entities or to the anticipated  termination
of information  technology or item processing contracts of the acquired entities
prior to their stated  contractual  expiration dates. The most significant costs
that First  Banks  incurs  relate to salary  continuation  agreements,  or other
similar agreements,  of executive  management and certain other employees of the
acquired  entities  that were in place  prior to the  acquisition  dates.  These
agreements  provide for payments over periods  generally  ranging from two to 15
years and are  triggered  as a result of the change in  control of the  acquired
entity.   Other  severance   benefits  for  employees  that  are  terminated  in
conjunction  with the  integration  of the acquired  entities  into First Banks'
existing  operations are normally paid to the  recipients  within 90 days of the
respective  consummation date and are expensed in the consolidated statements of
income as incurred.  The accrued severance balance of $627,000, as summarized in
the  following  table,  is comprised  of  contractual  obligations  under salary
continuation  agreements to seven  individuals with remaining terms ranging from
approximately  one to 10 years.  As the  obligation to make payments under these
agreements is accrued at the  consummation  date,  such payments do not have any
impact on the  consolidated  statements  of  income.  First  Banks  also  incurs
integration  costs  associated  with  acquisitions  that  are  expensed  in  the
consolidated  statements of income. These costs relate principally to additional
costs incurred in conjunction with the information technology conversions of the
respective  entities.  A summary of the cumulative  acquisition  and integration
costs attributable to the Company's  acquisitions,  which were accrued as of the
consummation  dates  of the  respective  acquisition,  is  listed  below.  These
acquisition and integration costs are reflected in accrued and other liabilities
in the consolidated balance sheets.
<TABLE>
<CAPTION>

                                                                                    Information
                                                                     Severance    Technology Fees     Total
                                                                     ---------    ---------------     -----
                                                                         (dollars expressed in thousands)

<S>                                                                    <C>               <C>            <C>
         Balance at December 31, 2005.............................    $  542             134            676
         Six Months Ended June 30, 2006:
           Amounts accrued at acquisition date....................     1,702             963          2,665
           Payments...............................................    (1,617)         (1,097)        (2,714)
                                                                      ------          ------         ------
         Balance at June 30, 2006.................................    $  627              --            627
                                                                      ======          ======         ======
</TABLE>
<PAGE>


(3)      INTANGIBLE  ASSETS ASSOCIATED  WITH  THE  PURCHASE  OF SUBSIDIARIES AND
         BRANCH OFFICES

         Intangible  assets  associated  with the purchase of  subsidiaries  and
branch offices, net of amortization, were comprised of the following at June 30,
2006 and December 31, 2005:

<TABLE>
<CAPTION>
                                                               June 30, 2006           December 31, 2005
                                                          -----------------------   -----------------------
                                                            Gross                     Gross
                                                          Carrying    Accumulated   Carrying    Accumulated
                                                           Amount    Amortization    Amount    Amortization
                                                           ------    ------------    ------    ------------
                                                                   (dollars expressed in thousands)

         Amortized intangible assets:
<S>                                                       <C>          <C>            <C>        <C>
              Core deposit intangibles.................   $ 43,175     (14,774)       36,555     (11,710)
              Customer list and related intangibles....      3,745         (62)           --          --
              Goodwill associated with
                 purchases of branch offices...........      2,210      (1,217)        2,210      (1,146)
                                                          --------     -------       -------     -------
                   Total...............................   $ 49,130     (16,053)       38,765     (12,856)
                                                          ========     =======       =======     =======

         Unamortized intangible assets:
              Goodwill associated with the
                 purchase of subsidiaries..............   $225,818                   165,992
                                                          ========                   =======
</TABLE>

         Amortization   of   intangibles   associated   with  the   purchase  of
subsidiaries  and branch offices was $1.7 million and $3.2 million for the three
and six months  ended June 30,  2006,  respectively,  and $1.1  million and $2.4
million  for  the  comparable  periods  in  2005.  Amortization  of  intangibles
associated  with the purchase of  subsidiaries,  including  amortization of core
deposit  intangibles,   customer  list  and  related  intangibles  and  goodwill
associated  with branch office  purchases,  has been  estimated in the following
table,  and does not take into  consideration  any pending or  potential  future
acquisitions or branch office purchases.
<TABLE>
<CAPTION>

                                                                       (dollars expressed in thousands)
         Year ending December 31:
<S>                                                                                 <C>
              2006 remaining......................................................  $  3,461
              2007................................................................     6,923
              2008................................................................     6,923
              2009................................................................     5,019
              2010................................................................     4,559
              2011................................................................     3,067
              Thereafter..........................................................     3,125
                                                                                    --------
                  Total...........................................................  $ 33,077
                                                                                    ========
<PAGE>

         Changes in the carrying amount of goodwill for the three and six months
ended June 30, 2006 and 2005 were as follows:
</TABLE>

<TABLE>
<CAPTION>

                                                                 Three Months Ended         Six Months Ended
                                                                      June 30,                  June 30,
                                                               ----------------------    ----------------------
                                                                 2006          2005         2006         2005
                                                                 ----          ----         ----         ----
                                                                       (dollars expressed in thousands)

<S>                                                            <C>           <C>           <C>         <C>
         Balance, beginning of period........................  $ 181,955     152,529       167,056     156,849
         Goodwill acquired during period.....................     44,910       2,217        59,806       2,217
         Acquisition-related adjustments (1).................        (18)        (46)           20      (4,331)
         Amortization - purchases of branch offices..........        (36)        (36)          (71)        (71)
                                                               ---------     -------       -------     -------
         Balance, end of period..............................  $ 226,811     154,664       226,811     154,664
                                                               =========     =======       =======     =======
         ------------------
         (1) Acquisition-related adjustments of $4.3 million recorded in the first quarter of 2005 pertain to the
             acquisition  of  CIB  Bank.  Acquisition-related adjustments included additional purchase accounting
             adjustments  necessary  to  appropriately  adjust  preliminary  goodwill recorded at the time of the
             acquisition, which was based upon current estimates available at that time, to reflect  the  receipt
             of additional valuation data.

</TABLE>

(4)      SERVICING RIGHTS

         Mortgage  Banking  Activities.  At June 30, 2006 and December 31, 2005,
First Banks serviced  mortgage  loans for others  amounting to $1.10 billion and
$1.01  billion,  respectively.  Changes in  mortgage  servicing  rights,  net of
amortization,  for the three and six months ended June 30, 2006 and 2005 were as
follows:
<TABLE>
<CAPTION>


                                                                 Three Months Ended         Six Months Ended
                                                                      June 30,                  June 30,
                                                               ----------------------    ----------------------
                                                                 2006          2005         2006         2005
                                                                 ----          ----         ----         ----
                                                                       (dollars expressed in thousands)

<S>                                                            <C>             <C>           <C>        <C>
         Balance, beginning of period........................  $ 7,034        9,181         6,623      10,242
         Servicing rights acquired...........................       --          435            --         435
         Originated mortgage servicing rights (1)(2).........    1,270          188         2,728         401
         Amortization........................................   (1,067)      (1,302)       (2,114)     (2,576)
                                                               -------       ------        ------      ------
         Balance, end of period..............................  $ 7,237        8,502         7,237       8,502
                                                               =======       ======        ======      ======
         -------------------
         (1)  In March 2006, First Banks capitalized  mortgage servicing  rights  of $1.2 million associated with
              the securitization of $77.1 million of certain  residential  mortgage  loans  held in the Company's
              loan portfolio, resulting  in  the  recognition of $1.2 million in loan servicing income related to
              the future servicing of the underlying loans.
         (2)  In April 2006, First Banks capitalized mortgage servicing rights of  $927,000  associated with  the
              securitization of $61.8 million of certain residential  mortgage  loans  held in the Company's loan
              portfolio, resulting in the recognition of $927,000 in loan  servicing income related to the future
              servicing of the underlying loans.


         First Banks did not incur any impairment of mortgage  servicing  rights
during the three and six months ended June 30, 2006 and 2005.
</TABLE>


<PAGE>


         Amortization  of  mortgage  servicing  rights at June 30, 2006 has been
estimated in the following table:
<TABLE>
<CAPTION>

                                                                       (dollars expressed in thousands)

         Year ending December 31:
<S>                                                                                 <C>
              2006 remaining......................................................  $ 1,632
              2007................................................................    2,279
              2008................................................................    1,214
              2009................................................................      721
              2010................................................................      511
              2011................................................................      384
              Thereafter..........................................................      496
                                                                                    -------
                  Total...........................................................  $ 7,237
                                                                                    =======
</TABLE>

         Other  Servicing  Activities.  At June 30, 2006 and  December 31, 2005,
First Banks serviced United States Small Business Administration (SBA) loans for
others amounting to $145.3 million and $163.4 million, respectively.  Changes in
SBA servicing rights, net of amortization and impairment,  for the three and six
months ended June 30, 2006 and 2005 were as follows:
<TABLE>
<CAPTION>

                                                                  Three Months Ended          Six Months Ended
                                                                       June 30,                   June 30,
                                                                ----------------------     ----------------------
                                                                  2006          2005          2006        2005
                                                                  ----          ----          ----        ----
                                                                       (dollars expressed in thousands)

<S>                                                             <C>            <C>            <C>        <C>
         Balance, beginning of period........................   $ 8,942        12,595         9,489      13,013
         Originated SBA servicing rights.....................       146           348           318         539
         Amortization........................................      (417)         (592)         (858)     (1,201)
         Impairment..........................................      (462)           --          (740)         --
                                                                -------        ------         -----      ------
         Balance, end of period..............................   $ 8,209        12,351         8,209      12,351
                                                                =======        ======         =====      ======
</TABLE>

         First Banks  recognized  impairment  of $462,000  and  $740,000 for the
three and six months ended June 30, 2006, respectively, primarily resulting from
certain  loans  placed on  nonaccrual  status and  payoffs  received  on certain
existing loans. First Banks did not incur any impairment of SBA servicing rights
during the three and six months ended June 30, 2005.

         Amortization  of SBA  servicing  rights  at  June  30,  2006  has  been
estimated in the following table:
<TABLE>
<CAPTION>

                                                                       (dollars expressed in thousands)

         Year ending December 31:
<S>           <C>                                                                   <C>
              2006 remaining......................................................  $   763
              2007................................................................    1,332
              2008................................................................    1,115
              2009................................................................      932
              2010................................................................      777
              2011................................................................      646
              Thereafter..........................................................    2,644
                                                                                    -------
                  Total...........................................................  $ 8,209
                                                                                    =======
</TABLE>





<PAGE>



(5)      EARNINGS PER COMMON SHARE

         The following is a reconciliation of the basic and diluted earnings per
share (EPS)  computations  for the three and six months  ended June 30, 2006 and
2005:
<TABLE>
<CAPTION>


                                                                                                   Per Share
                                                                       Income         Shares         Amount
                                                                       ------         ------         ------
                                                              (dollars in thousands, except share and per share data)

     Three months ended June 30, 2006:
<S>                                                                    <C>             <C>         <C>
         Basic EPS - income available to common stockholders.........  $21,954         23,661      $   927.86
         Effect of dilutive securities:
           Class A convertible preferred stock.......................      128            438          (11.55)
                                                                       -------        -------      ----------
         Diluted EPS - income available to common stockholders.......  $22,082         24,099      $   916.31
                                                                       =======        =======      ==========

     Three months ended June 30, 2005:
         Basic EPS - income available to common stockholders.........  $26,714         23,661      $ 1,129.05
         Effect of dilutive securities:
           Class A convertible preferred stock.......................      128            512          (18.63)
                                                                       -------        -------      ----------
         Diluted EPS - income available to common stockholders.......  $26,842         24,173      $ 1,110.42
                                                                       =======        =======      ==========

     Six months ended June 30, 2006:
         Basic EPS - income available to common stockholders.........  $50,761         23,661      $ 2,145.35
         Effect of dilutive securities:
           Class A convertible preferred stock.......................      321            456          (27.24)
                                                                       -------        -------      ----------
         Diluted EPS - income available to common stockholders.......  $51,082         24,117      $ 2,118.11
                                                                       =======        =======      ==========

     Six months ended June 30, 2005:
         Basic EPS - income available to common stockholders.........  $48,645         23,661      $ 2,055.92
         Effect of dilutive securities:
           Class A convertible preferred stock.......................      321            516          (30.62)
                                                                       -------        -------      ----------
         Diluted EPS - income available to common stockholders.......  $48,966         24,177      $ 2,025.30
                                                                       =======        =======      ==========
</TABLE>


(6)      TRANSACTIONS WITH RELATED PARTIES

         First Services,  L.P., a limited partnership  indirectly owned by First
Banks'  Chairman  and  members of his  immediate  family,  provides  information
technology,  item processing and various related  services to First Banks,  Inc.
and its subsidiaries.  Fees paid under agreements with First Services, L.P. were
$7.3 million and $15.0 million for the three and six months ended June 30, 2006,
respectively,  and $7.9 million and $14.7 million for the comparable  periods in
2005.  First Services,  L.P. leases  information  technology and other equipment
from First Bank.  During the three  months  ended June 30, 2006 and 2005,  First
Services, L.P. paid First Bank $1.0 million and $1.1 million,  respectively, and
during the six months ended June 30, 2006 and 2005,  First  Services,  L.P. paid
First Bank $2.2 million in rental fees for the use of that equipment.

         First Brokerage America, L.L.C., a limited liability company indirectly
owned by First Banks'  Chairman and members of his  immediate  family,  received
approximately  $809,000 and $1.4 million for the three and six months ended June
30, 2006, respectively, and $544,000 and $1.2 million for the comparable periods
in  2005,  in  commissions  paid  by  unaffiliated  third-party  companies.  The
commissions  received  were  primarily in  connection  with sales of  annuities,
securities and other insurance products to customers of First Bank.
<PAGE>

         First Title  Guaranty LLC D/B/A First Banc Insurors  (First  Title),  a
limited liability company  established and administered by First Banks' Chairman
and members of his immediate family, received approximately $42,000 and $117,000
for the three and six months ended June 30, 2006, respectively,  and $96,000 and
$183,000  for the  comparable  periods  in 2005,  in  commissions  for  policies
purchased  by  First  Banks  or  customers  of  First  Bank  from   unaffiliated
third-party  insurers.  The insurance  premiums on which these  commissions were
earned were competitively bid, and First Banks deems the commissions First Title
earned from  unaffiliated  third-party  companies to be comparable to those that
would have been earned by an unaffiliated third-party agent.

         First Bank leases certain of its in-store  branch offices and ATM sites
from Dierbergs Markets,  Inc., a grocery store chain headquartered in St. Louis,
Missouri that is owned and operated by the brother of First Banks'  Chairman and
members of his immediate family. Total rent expense incurred by First Bank under
the lease  obligation  contracts was $105,000 and $191,000 for the three and six
months  ended June 30,  2006,  respectively,  and $91,000 and  $169,000  for the
comparable periods in 2005.

         First  Bank  has had in the  past,  and may  have in the  future,  loan
transactions   in  the  ordinary  course  of  business  with  its  directors  or
affiliates.  These  loan  transactions  have been on the same  terms,  including
interest rates and  collateral,  as those  prevailing at the time for comparable
transactions with unaffiliated  persons and did not involve more than the normal
risk  of  collectibility  or  present  other  unfavorable  features.   Loans  to
directors,  their  affiliates and executive  officers of First Banks,  Inc. were
approximately  $55.9 million and $37.9 million at June 30, 2006 and December 31,
2005,  respectively.  First Bank does not extend  credit to its  officers  or to
officers of First Banks,  Inc., except extensions of credit secured by mortgages
on personal  residences,  loans to purchase  automobiles,  personal  credit card
accounts and deposit account overdraft  protection under a plan whereby a credit
limit has been  established  in  accordance  with First Bank's  standard  credit
criteria.

         In June 2005,  FCA, a  corporation  owned by First Banks'  Chairman and
members of his  immediate  family,  became a 49.0% owner of SBLS LLC in exchange
for $7.4 million in cash pursuant to a written option agreement with First Bank.

         In June 2005,  SBLS LLC executed a  Multi-Party  Agreement by and among
SBLS LLC, First Bank, Colson Services Corp.,  fiscal transfer agent for the SBA,
and the SBA,  in addition to a Loan and  Security  Agreement  by and among First
Bank and the SBA  (collectively,  the  Agreement)  that provides a $50.0 million
warehouse line of credit for loan funding purposes.  The Agreement  provided for
an initial  maturity date of June 30, 2008,  which was extended on June 15, 2006
by First Bank to June 30, 2009.  Interest is payable monthly, in arrears, on the
outstanding  balances  at a rate  equal  to First  Bank's  prime  lending  rate.
Advances  under the Agreement  are secured by the  assignment of the majority of
the assets of SBLS LLC. The balance of advances  outstanding  under this line of
credit was $33.8  million and $31.4  million at June 30, 2006 and  December  31,
2005,  respectively.  Interest  expense recorded under the Agreement by SBLS LLC
for the three and six months ended June 30, 2006 was $652,000 and $1.2 million.

         In August  2005,  First Bank  entered  into a contract  with World Wide
Technology,  Inc.  (WWT),  a wholly owned  subsidiary  of World Wide  Technology
Holding Co.,  Inc.  (WWTHC).  WWTHC is an electronic  procurement  and logistics
company in the  information  technology  industry  headquartered  in St.  Louis,
Missouri.  The  contract  provided  for WWT to  provide  information  technology
services  associated  with the  upgrade  of  personal  computers  for First Bank
employees  in  an  ongoing  effort  to  further  standardize  the  technological
infrastructure  throughout the First Bank branch banking  network.  Mr. David L.
Steward,  a director of First Banks and a member of the Audit Committee of First
Banks,  serves as the  Chairman  of the Board of  Directors  of WWTHC.  Prior to
entering into this  contract,  the Audit  Committee of First Banks  reviewed and
approved the  utilization of WWT for information  technology  services with fees
not to exceed $500,000 for this phase of the project. As of June 30, 2006, First
Bank had made payments of $478,000 under the contract.
<PAGE>

         On May 31, 2006,  Adrian Baker,  a newly  acquired  subsidiary of First
Bank,  purchased  the personal and  commercial  insurance  book of business from
First Title. The revenue  associated with the personal and commercial  insurance
book  of  business  was  estimated  at  approximately  $300,000,  subject  to an
adjustment based upon the receipt of an evaluation of the book of business by an
independent  third party.  First Bank has engaged an independent  third party to
perform a business  valuation of the personal and  commercial  insurance book of
business of First  Title.  Upon  completion  of the  business  valuation  by the
independent  third  party,  Adrian  Baker and First  Title  expect to adjust the
estimated  $300,000 recorded on May 31, 2006 to the valuation amount as provided
by the independent third party.

         During  the  three and six  months  ended  June 30,  2006,  First  Bank
contributed $2.5 million and $3.0 million to the Dierberg Operating  Foundation,
Inc.,  a  charitable  foundation  created by and for the benefit of First Banks'
Chairman  and  members  of  his  immediate  family.  There  were  no  charitable
contributions made to this organization during the comparable periods in 2005.


(7)      REGULATORY CAPITAL

         First  Banks and First Bank 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 First Bank 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 First Bank 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 June 30,  2006,  First  Banks  and  First  Bank  were each well
capitalized. As of June 30, 2006, the most recent notification from First Banks'
primary  regulator  categorized  First Banks and First Bank as well  capitalized
under the regulatory  framework for prompt corrective  action. To be categorized
as well  capitalized,  First Banks and First Bank must  maintain  minimum  total
risk-based,  Tier I  risk-based  and Tier I leverage  ratios as set forth in the
following table.

         At June 30, 2006 and December  31, 2005,  First Banks' and First Bank's
required and actual capital ratios were as follows:
<TABLE>
<CAPTION>

                                                                   Actual               For          To Be Well
                                                         -------------------------    Capital     Capitalized Under
                                                          June 30,    December 31,    Adequacy    Prompt Corrective
                                                            2006          2005        Purposes    Action Provisions
                                                            ----          ----        --------    -----------------

Total capital (to risk-weighted assets):
<S>                                                        <C>           <C>            <C>             <C>
         First Banks...................................    10.38%        10.14%         8.0%            10.0%
         First Bank....................................    10.25         10.66          8.0             10.0

Tier 1 capital (to risk-weighted assets):
         First Banks...................................     8.59          8.88          4.0              6.0
         First Bank....................................     9.00          9.41          4.0              6.0

Tier 1 capital (to average assets):
         First Banks...................................     8.12          8.13          3.0              5.0
         First Bank....................................     8.52          8.61          3.0              5.0
</TABLE>
<PAGE>

         In March,  2005,  the Board of Governors of the Federal  Reserve System
(Federal  Reserve) adopted a final rule,  Risk-Based  Capital  Standards:  Trust
Preferred  Securities  and the  Definition  of  Capital,  which  allows  for the
continued limited inclusion of trust preferred securities in Tier 1 capital. The
Federal  Reserve's final rule limits  restricted core capital elements to 25% of
the  sum of  all  core  capital  elements,  including  restricted  core  capital
elements, net of goodwill less any associated deferred tax liability. Amounts of
restricted  core  capital  elements in excess of these  limits may  generally be
included in Tier 2 capital. Specifically,  amounts of qualifying trust preferred
securities and cumulative  perpetual  preferred stock in excess of the 25% limit
may be  included  in  Tier  2  capital,  but  will  be  limited,  together  with
subordinated debt and limited-life preferred stock, to 50% of Tier 1 capital. In
addition,  the final  rule  provides  that in the last  five  years  before  the
maturity of the  underlying  subordinated  note, the  outstanding  amount of the
associated trust preferred  securities is to be excluded from Tier 1 capital and
included in Tier 2 capital,  subject to  one-fifth  amortization  per year.  The
final rule provides for a five-year  transition  period,  ending March 31, 2009,
for the  application  of the  quantitative  limits.  Until March 31,  2009,  the
aggregate  amount  of  qualifying   cumulative  perpetual  preferred  stock  and
qualifying trust preferred  securities that may be included in Tier 1 capital is
limited to 25% of the sum of the  following  core capital  elements:  qualifying
common stockholders' equity,  qualifying  noncumulative and cumulative perpetual
preferred  stock,  qualifying  minority  interest  in  the  equity  accounts  of
consolidated subsidiaries and qualifying trust preferred securities. First Banks
has evaluated the impact of the final rule on the Company's  financial condition
and results of  operations,  and determined  the  implementation  of the Federal
Reserve's  final rules that will be  effective  in March 2009 would reduce First
Banks' Tier 1 capital (to  risk-weighted  assets) and Tier 1 capital (to average
assets) to 7.72% and 7.30%, respectively, as of June 30, 2006.


(8)      BUSINESS SEGMENT RESULTS

         First Banks'  business  segment is First Bank. The reportable  business
segment is consistent with the management  structure of First Banks,  First Bank
and the internal reporting system that monitors performance. First Bank provides
similar products and services in its defined geographic areas through its branch
network.  The products and services  offered include a broad range of commercial
and personal deposit products,  including demand, savings, money market and time
deposit  accounts.  In addition,  First Bank markets combined basic services for
various  customer  groups,   including   packaged  accounts  for  more  affluent
customers,  and sweep accounts,  lock-box deposits and cash management  products
for  commercial  customers.  First Bank also offers both consumer and commercial
loans.  Consumer  lending  includes  residential  real  estate,  home equity and
installment  lending.  Commercial  lending  includes  commercial,  financial and
agricultural loans, real estate  construction and development loans,  commercial
real  estate  loans,  asset-based  loans and trade  financing.  Other  financial
services   include   mortgage   banking,   debit  cards,   brokerage   services,
credit-related insurance,  employee benefits,  commercial and personal insurance
services,  internet banking, automated teller machines,  telephone banking, safe
deposit boxes and trust,  private  banking and  institutional  money  management
services.  The revenues  generated  by First Bank 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 eastern Missouri, Illinois, including Chicago, southern
and  northern  California,  and Houston  and Dallas,  Texas.  The  products  and
services are offered to  customers  primarily  within  First  Banks'  respective
geographic areas.



<PAGE>


         The business  segment results are consistent with First Banks' internal
reporting system and, in all material  respects,  with U.S.  generally  accepted
accounting  principles and practices  predominant in the banking  industry.  The
business segment results are summarized as follows:
<TABLE>
<CAPTION>

                                                                     Corporate, Other
                                                                     and Intercompany
                                             First Bank            Reclassifications (1)        Consolidated Totals
                                      ------------------------    ------------------------    -----------------------
                                       June 30,   December 31,     June 30,   December 31,     June 30,  December 31,
                                         2006         2005           2006         2005           2006        2005
                                         ----         ----           ----         ----           ----        ----
                                                             (dollars expressed in thousands)

Balance sheet information:

<S>                                   <C>           <C>              <C>         <C>          <C>          <C>
Investment securities...............  $1,161,143    1,324,219        25,916      16,564       1,187,059    1,340,783
Loans, net of unearned discount.....   7,600,591    7,020,771            --          --       7,600,591    7,020,771
Goodwill............................     226,811      167,056            --          --         226,811      167,056
Total assets........................   9,584,833    9,148,931        30,394      21,402       9,615,227    9,170,333
Deposits............................   8,157,836    7,601,162       (91,891)    (59,331)      8,065,945    7,541,831
Notes payable.......................          --           --        85,000     100,000          85,000      100,000
Subordinated debentures.............          --           --       304,270     215,461         304,270      215,461
Stockholders' equity................   1,002,010      931,192      (282,637)   (252,254)        719,373      678,938
                                      ==========    =========      ========    ========       =========    =========

                                                                     Corporate, Other
                                                                     and Intercompany
                                             First Bank            Reclassifications (1)        Consolidated Totals
                                      ------------------------    ------------------------    -----------------------
                                         Three Months Ended          Three Months Ended          Three Months Ended
                                              June 30,                    June 30,                    June 30,
                                      ------------------------    ------------------------    -----------------------
                                         2006          2005          2006         2005           2006         2005
                                         ----          ----          ----         ----           ----         ----
                                                             (dollars expressed in thousands)
Income statement information:

Interest income.....................   $ 157,503      117,008           228         180         157,731      117,188
Interest expense....................      54,979       33,917         7,072       5,450          62,051       39,367
                                       ---------     --------       -------     -------        --------     --------
   Net interest income..............     102,524       83,091        (6,844)     (5,270)         95,680       77,821
Provision for loan losses...........       5,000       (8,000)           --          --           5,000       (8,000)
                                       ---------     --------       -------     -------        --------     --------
   Net interest income after
      provision for loan losses.....      97,524       91,091        (6,844)     (5,270)         90,680       85,821
                                       ---------     --------       -------     -------        --------     --------
Noninterest income..................      26,015       26,376          (136)       (185)         25,879       26,191
Noninterest expense.................      80,446       69,567           605         594          81,051       70,161
                                       ---------     --------       -------     -------        --------     --------
   Income before provision for
      income taxes and minority
      interest in loss of
      subsidiary....................      43,093       47,900        (7,585)     (6,049)         35,508       41,851
Provision for income taxes..........      16,152       17,114        (2,652)     (2,109)         13,500       15,005
                                       ---------     --------       -------     -------        --------     --------
   Income before minority interest
      in loss of subsidiary.........      26,941       30,786        (4,933)     (3,940)         22,008       26,846
Minority interest in loss
      of subsidiary.................         (78)          --            --          --             (78)          --
                                       ---------     --------       -------     -------        --------     --------
   Net income.......................   $  27,019       30,786        (4,933)     (3,940)         22,086       26,846
                                       =========     ========       =======     =======        ========     ========
<PAGE>

                                                                     Corporate, Other
                                                                     and Intercompany
                                             First Bank            Reclassifications (1)        Consolidated Totals
                                      ------------------------    ------------------------    -----------------------
                                          Six Months Ended           Six Months Ended            Six Months Ended
                                              June 30,                   June 30,                     June 30,
                                      ------------------------    ------------------------    -----------------------
                                         2006          2005          2006         2005           2006         2005
                                         ----          ----          ----         ----           ----         ----
                                                             (dollars expressed in thousands)
Income statement information:

Interest income.....................   $ 304,527      229,070           438         346         304,965      229,416
Interest expense....................     104,363       63,196        14,056      10,320         118,419       73,516
                                       ---------     --------      --------     -------        --------     --------
   Net interest income..............     200,164      165,874       (13,618)     (9,974)        186,546      155,900
Provision for loan losses...........       6,000       (8,000)           --          --           6,000       (8,000)
                                       ---------     --------      --------     -------        --------     --------
   Net interest income after
      provision for loan losses.....     194,164      173,874       (13,618)     (9,974)        180,546      163,900
                                       ---------     --------      --------     -------        --------     --------
Noninterest income..................      51,756       47,842          (380)       (436)         51,376       47,406
Noninterest expense.................     153,615      131,745         2,251       2,285         155,866      134,030
                                       ---------     --------      --------     -------        --------     --------
   Income before provision for
      income taxes and minority
      interest in loss of
      subsidiary....................      92,305       89,971       (16,249)    (12,695)         76,056       77,276
Provision for income taxes..........      30,890       32,734        (5,687)     (4,431)         25,203       28,303
                                       ---------     --------      --------     -------        --------     --------
   Income before minority interest
      in loss of subsidiary.........      61,415       57,237       (10,562)     (8,264)         50,853       48,973
Minority interest in loss of                (236)          --            --          --            (236)          --
      subsidiary....................   ---------     --------      --------     -------        --------     --------

   Net income.......................   $  61,651       57,237       (10,562)     (8,264)         51,089       48,973
                                       =========     ========      ========     =======        ========     ========
------------------
(1) Corporate and other includes $3.7 million and $3.5 million of interest expense on subordinated debentures, after
    applicable income tax benefits of  $2.0 million and $1.9 million, for  the three  months ended June 30, 2006 and
    2005, respectively. For the six months ended June 30, 2006 and 2005,  corporate and  other includes $7.4 million
    and  $6.6 million of  interest  expense  on  subordinated  debentures, after  applicable  income tax benefits of
    $4.0 million and $3.5 million, respectively.

</TABLE>

<PAGE>



(9)      OTHER BORROWINGS

         Other  borrowings  were comprised of the following at June 30, 2006 and
December 31, 2005:
<TABLE>
<CAPTION>


                                                                               June 30,          December 31,
                                                                                 2006                2005
                                                                           ---------------     ---------------
                                                                             (dollars expressed in thousands)

         Securities sold under agreements to repurchase:
<S>                                                                           <C>                  <C>
              Daily........................................................   $ 201,889            199,874
              Term.........................................................     100,000            300,000
         FHLB advances (1).................................................      26,107             39,300
                                                                              ---------           --------
                  Total....................................................   $ 327,996            539,174
                                                                              =========           ========
         ------------------
         (1)  On March 17, 2006 and May 10, 2006, First Bank  prepaid $20.5 million and $14.8 million, respectively,
              of FHLB advances that were assumed in conjunction with previous acquisitions. First Bank did not incur
              any losses associated with the prepayment of  the  FHLB  advances. These  prepayments  were  partially
              offset by a short-term advance of $25.0 million borrowed by First Bank in June 2006.
</TABLE>


         The maturity  dates,  par amounts,  interest  rate spreads and interest
rate floor strike prices on First Bank's term  repurchase  agreements as of June
30, 2006 and December 31, 2005 were as follows:

<TABLE>
<CAPTION>

                                                        Par           Interest Rate       Interest Rate Floor
                      Maturity Date                    Amount           Spread (1)         Strike Price (1)
                      -------------                    ------           ----------         ----------------
                                                 (dollars expressed
                                                    in thousands)

         June 30, 2006:
<S>                                                  <C>                     <C>             <C>
             January 12, 2007 (2)..............      $ 100,000       LIBOR + 0.0050%         3.00% / Floor
                                                     =========

         December 31, 2005:
             January 12, 2007..................      $ 150,000       LIBOR + 0.0050%         3.00% / Floor
             June 14, 2007 (3).................         50,000       LIBOR - 0.3300%         3.00% / Floor
             June 14, 2007 (3).................         50,000       LIBOR - 0.3400%         3.00% / Floor
             August 1, 2007 (4)................         50,000       LIBOR + 0.0800%         3.00% / Floor
                                                     ---------
                                                     $ 300,000
                                                     =========
         ------------------
         (1)  The interest rate paid on the term repurchase agreement is based  on  the three-month London Interbank
              Offering Rate (LIBOR) reset in arrears plus the spread amount shown  above  minus  a  floating  amount
              equal to the differential between the three-month LIBOR reset in arrears  and  the  strike price shown
              above, if the three-month LIBOR  reset  in  arrears  falls  below the strike price associated with the
              interest rate floor agreements.
         (2)  First Bank terminated $50.0 million of this term repurchase agreement on April 28, 2006, resulting  in
              an $83,000 prepayment penalty and the recognition of a $310,000  loss on the sale of  $50.0 million of
              available-for-sale  investment  securities  associated  with  the  termination  of the term repurchase
              agreement.
         (3)  First Bank  terminated  these  term  repurchase agreements on February 14, 2006, and recognized a $1.6
              million loss on the sale of $100.0  million  of  available-for-sale  investment  securities associated
              with the termination of the term repurchase agreements.
         (4)  First  Bank  terminated  this  term  repurchase agreement on March 28, 2006, resulting in a prepayment
              penalty of $223,000, and the recognition of a $746,000 loss on the sale of $50.0 million of available-
              for-sale investment securities associated with the termination of the term repurchase agreement.

         Subsequent to June 30, 2006, First Banks entered into a term repurchase
agreement,  as more fully  described  in Note 13 to the  Consolidated  Financial
Statements.
</TABLE>

<PAGE>

(10)     NOTES PAYABLE
<TABLE>
<CAPTION>

         Notes  payable  were  comprised  of the  following at June 30, 2006 and
December 31, 2005:


                                                                               June 30,          December 31,
                                                                                 2006                2005
                                                                           ---------------     ---------------
                                                                             (dollars expressed in thousands)

<S>                                                                            <C>                 <C>
         Term loan.........................................................    $85,000             100,000
                                                                               =======            ========
</TABLE>

         First  Banks'  $122.5  million  Amended  and  Restated  Secured  Credit
Agreement,  dated  August  11,  2005,  with a group  of  unaffiliated  financial
institutions (Credit Agreement) is secured by First Banks' ownership interest in
the capital stock of its subsidiaries.  Letters of credit issued to unaffiliated
third  parties on behalf of First Banks under the $7.5 million  letter of credit
facility  portion of the Credit Agreement were $900,000 and $2.9 million at June
30, 2006 and December 31, 2005,  respectively,  and had not been drawn on by the
counterparties.  First  Banks did not have any  outstanding  advances  under the
$15.0 million  revolving credit facility portion of the Credit Agreement at June
30, 2006 and December 31, 2005. The outstanding  principal balance of the $100.0
million  term loan  facility  portion of the Credit  Agreement is payable in ten
equal quarterly  installments of $5.0 million, at a minimum,  which commenced on
March 31,  2006,  with the  remainder  of the term loan  facility  balance to be
repaid in full, including any unpaid interest, upon maturity on August 10, 2008.
As of June 30,  2006,  First  Banks had made  payments  of $15.0  million on the
outstanding principal balance of the term loan facility.

         The Credit  Agreement  required  maintenance of certain minimum capital
ratios for First  Banks and First Bank,  certain  maximum  nonperforming  assets
ratios for First Bank and a minimum  return on assets ratio for First Banks.  In
addition,  it contained  additional  covenants,  including a  limitation  on the
amount  of  dividends  on  First  Banks'  common  stock  that  may  be  paid  to
stockholders.   First  Banks  and  First  Bank  were  in  compliance   with  all
restrictions  and  requirements  of the Credit  Agreement  at June 30,  2006 and
December 31, 2005.

         Subsequent  to June 30, 2006,  First Banks entered into an amendment to
its Credit  Agreement,  as more fully  described in Note 13 to the  Consolidated
Financial Statements.


(11)     SUBORDINATED DEBENTURES

         During the six months ended June 30, 2006,  First Banks,  through three
newly formed  statutory  trusts:  (a) First Bank Statutory Trust IV, or FBST IV;
(b) First Bank Statutory  Trust V, or FBST V; and (c) First Bank Statutory Trust
VI, or FBST VI (collectively,  the Trusts), issued variable rate trust preferred
securities in private placements.  First Banks owns all of the common securities
of the Trusts.  The gross  proceeds of the offerings  were used by the Trusts to
purchase   variable  rate   subordinated   debentures  from  First  Banks.   The
subordinated debentures are the sole asset of the Trusts. In connection with the
issuance of the trust 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 the  Trusts  under  the trust
preferred securities.  First Banks' distributions on the subordinated debentures
issued to FBST IV, FBST V and FBST VI,  which are payable  quarterly  in arrears
beginning on June 15, 2006,  June 15, 2006,  and October 7, 2006,  respectively,
were $933,000 in aggregate for the three and six months ended June 30, 2006.

<PAGE>

         A  summary  of the  subordinated  debentures  issued  to the  Trusts in
conjunction with the trust preferred securities offerings, is as follows:
<TABLE>
<CAPTION>

                                                                       Proceeds, Net       Spread Over
                         Date          Maturity            Call         of Offering        Three-Month
          Trust         Issued           Date              Date          Expenses            LIBOR
          -----         ------           ----              ----          --------            -----

                                                                    (dollars expressed
                                                                      in thousands)

<S>                  <C>            <C>               <C>                <C>             <C>
         FBST IV     March 1, 2006  March 15, 2036    March 15, 2011     $ 41,238        LIBOR + 142.0 bp
         FBST V     April 28, 2006  April 28, 2036     June 15, 2011       20,619        LIBOR + 145.0 bp
         FBST VI     June 16, 2006   June 16, 2036     July 7, 2011        25,774        LIBOR + 165.0 bp
</TABLE>


(12)     CONTINGENT LIABILITIES

         In October  2000,  First Banks  entered  into two  continuing  guaranty
contracts.  For value  received,  and for the purpose of inducing a pension fund
and its  trustees  and a welfare  fund and its  trustees  (the Funds) to conduct
business with MVP, First Bank's institutional  investment management subsidiary,
First Banks irrevocably and  unconditionally  guaranteed payment of and promised
to pay to each of the Funds any  amounts  up to the sum of $5.0  million  to the
extent  MVP is liable to the  Funds  for a breach of the  Investment  Management
Agreements   (including   the   Investment   Policy   Statement  and  Investment
Guidelines),  by and  between  MVP and the Funds  and/or  any  violation  of the
Employee  Retirement  Income  Security Act by MVP  resulting in liability to the
Funds.  The  guaranties are continuing  guaranties of all  obligations  that may
arise  for  transactions  occurring  prior  to  termination  of  the  Investment
Management  Agreements  and are  coexistent  with  the  term  of the  Investment
Management  Agreements.  The Investment  Management Agreements have no specified
term but may be terminated  at any time upon written  notice by the Trustees or,
at First Banks' option, upon thirty days written notice to the Trustees.  In the
event of termination of the Investment Management  Agreements,  such termination
shall have no effect on the liability of First Banks with respect to obligations
incurred before such  termination.  The obligations of First Banks are joint and
several  with those of MVP.  First Banks does not have any  recourse  provisions
that would  enable it to recover  from third  parties any amounts paid under the
contracts  nor does  First  Banks  hold any  assets  as  collateral  that,  upon
occurrence  of a required  payment  under the  contract,  could be liquidated to
recover all or a portion of the  amount(s)  paid.  At June 30, 2006 and December
31,  2005,  First  Banks  had not  recorded  a  liability  for  the  obligations
associated with these guaranty contracts as the likelihood that First Banks will
be required to make payments under the contracts is remote.

         In August 2004, SBLS LLC acquired  substantially  all of the assets and
assumed certain  liabilities of Small Business Loan Source, Inc. The Amended and
Restated Asset Purchase  Agreement  (Asset  Purchase  Agreement)  governing this
transaction  provides for certain  payments to the seller  contingent  on future
valuations of specifically  identified  assets,  including  servicing assets and
retained  interests  in  securitizations.  SBLS LLC was not required to make any
payments to the seller as of September  30,  2005,  the first  measurement  date
under  the  terms of the  Asset  Purchase  Agreement.  As of June  30,  2006 and
December 31, 2005,  SBLS LLC had not  recorded a liability  for the  obligations
associated with these contingent payments,  as the likelihood that SBLS LLC will
be required to make future  payments under the Asset  Purchase  Agreement is not
ascertainable at the present time.

<PAGE>

(13)     SUBSEQUENT EVENTS

         On July 10, 2006,  First Bank  entered  into a Purchase and  Assumption
Agreement  providing for First Bank to acquire MidAmerica  National Bank's three
banking  offices  located in Peoria  and  Bloomington,  Illinois  (collectively,
MidAmerica Offices). The transaction,  which is subject to regulatory approvals,
is expected to be completed during the fourth quarter of 2006. At June 30, 2006,
the MidAmerica Offices had, on a combined basis, assets of approximately  $155.3
million,  loans, net of unearned discount,  of approximately  $152.6 million and
deposits of approximately $50.5 million.

         On July 14, 2006,  First Banks entered into a $100.0 million  four-year
term repurchase agreement under a master repurchase agreement.  Interest will be
paid  quarterly,  beginning  October 18,  2006,  and will be  equivalent  to the
three-month  LIBOR plus 0.5475%  minus a floating  rate,  subject to a 0% floor,
equal to two times the differential between the three-month LIBOR and the strike
price of 5.00%,  if the  three-month  LIBOR is less than 5.00%.  The  underlying
securities  associated  with the term repurchase  agreement are U.S.  Government
agency  collateralized  mortgage  obligation  securities  and are  held by other
financial  institutions under safekeeping  agreements.  In accordance with First
Banks' interest rate risk management program,  the term repurchase agreement was
entered into with the objective of stabilizing net interest income over time and
further protecting net interest margin against changes in interest rates.

         On August 7,  2006,  First  Bank  entered  into a Branch  Purchase  and
Assumption  Agreement  providing for First Bank to acquire First Bank of Beverly
Hills'  banking  office  located in Beverly  Hills,  California  (Beverly  Drive
Office). The transaction,  which is subject to regulatory approvals, is expected
to be completed during the fourth quarter of 2006. At June 30, 2006, the Beverly
Drive Office had assets of approximately  $270,000 and deposits of approximately
$156.5 million.

         On August 10, 2006, First Banks entered into an Amendment to its Credit
Agreement with a group of unaffiliated  financial  institutions  (Amended Credit
Agreement) in the amount of $96.0 million.  The Amended Credit  Agreement amends
the  existing  Credit  Agreement  as  further   described  in  Note  10  to  the
Consolidated  Financial Statements.  The primary changes to the structure of the
financing arrangement relate to a reduction of certain components of the secured
credit  facilities,  a reduction in the overall pricing structure of the secured
credit  facilities,  and the renewal of the existing revolving credit and letter
of credit  facilities.  The Amended  Credit  Agreement  provides a $10.0 million
senior secured  revolving  credit  facility  (Revolving  Credit) that matures on
August  9,  2007 and a $1.0  million  senior  secured  standby  letter of credit
facility (LC Facility)  that matures on August 9, 2007, in addition to the $85.0
million  existing  senior secured term loan facility (Term Loan) that matures on
August 10, 2008.  The Amended  Credit  Agreement  also  provides  First Banks an
option to  increase  the  Revolving  Credit,  which is limited  to two  increase
requests  from August 10, 2006 until its  maturity  date,  by an amount of up to
$40.0 million  provided  such  increase  will not cause the Revolving  Credit to
exceed $50.0  million.  Interest is payable on the  outstanding  principal  loan
balances  under the  Revolving  Credit at a  floating  rate  equal to either the
lender's prime rate or, at First Banks' option,  LIBOR plus a margin  determined
by the  outstanding  loan balances and First Banks' net income for the preceding
four calendar  quarters.  If the loan balances  outstanding  under the Revolving
Credit are accruing at the prime rate, interest is payable quarterly in arrears.
If the loan  balances  outstanding  under the  Revolving  Credit are accruing at
LIBOR,  interest is payable based on the one, two, three or six-month  LIBOR, as
selected by First Banks.  First Banks is also subject to a quarterly  commitment
fee on the unused portion of the Revolving Credit. First Banks has not drawn any
advances  on the  Revolving  Credit.  Interest  is  payable  on the  outstanding
principal  loan balances of the Term Loan at a floating rate equal to LIBOR plus
a margin determined by the outstanding loan balances and First Banks' net income
for the preceding four calendar quarters.  The outstanding  principal balance of
the Term  Loan is  payable  in  quarterly  installments  of $5.0  million,  at a
minimum,  with the  remainder  of the Term  Loan  balance  to be repaid in full,
including any unpaid interest, upon its maturity date.

         The Amended Credit  Agreement  requires  maintenance of certain minimum
capital  ratios for First Banks and First Bank,  certain  maximum  nonperforming
assets  ratios  for First  Bank and a minimum  return on assets  ratio for First
Banks. In addition, it contains additional covenants,  including a limitation on
the  amount  of  dividends  on First  Banks'  common  stock  that may be paid to
stockholders.  The Amended Credit Agreement is secured by First Banks' ownership
interest in the capital stock of SFC and First Bank.



<PAGE>


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS


         The  discussion  set forth in  Management's  Discussion and Analysis of
Financial Condition and Results of Operations  contains certain  forward-looking
statements  with respect to our financial  condition,  results of operations and
business.  Generally,  forward-looking  statements may be identified through the
use of words  such as:  "believe,"  "expect,"  "anticipate,"  "intend,"  "plan,"
"estimate," or words of similar meaning or future or conditional  terms such as:
"will," "would," "should," "could," "may," "likely,"  "probably," or "possibly."
Examples  of  forward-looking  statements  include,  but  are  not  limited  to,
estimates  or  projections  with  respect  to our  future  financial  condition,
expected or  anticipated  revenues with respect to our results of operations and
our business. These forward-looking  statements are subject to certain risks and
uncertainties,  not all of which can be predicted or  anticipated.  Factors that
may cause our actual results to differ materially from those contemplated by the
forward-looking   statements   herein  include  market  conditions  as  well  as
conditions  affecting  the  banking  industry  generally  and  factors  having a
specific  impact on us,  including but not limited to:  fluctuations in interest
rates and in the economy,  including the threat of future terrorist  activities,
existing  and  potential  wars and/or  military  actions  related  thereto,  and
domestic responses to terrorism or threats of terrorism;  the impact of laws and
regulations  applicable  to us and  changes  therein;  the impact of  accounting
pronouncements  applicable to us and changes therein;  competitive conditions in
the  markets in which we conduct  our  operations,  including  competition  from
banking and non-banking  companies with substantially greater resources than us,
some of which may offer and develop products and services not offered by us; our
ability to control  the  composition  of our loan  portfolio  without  adversely
affecting interest income; the credit risk associated with consumers who may not
repay loans;  the geographic  dispersion of our offices;  the impact our hedging
activities may have on our operating results;  the highly regulated  environment
in which we operate;  and our ability to respond to changes in technology.  With
regard to our efforts to grow  through  acquisitions,  factors that could affect
the accuracy or  completeness of  forward-looking  statements  contained  herein
include the competition of larger acquirers with greater resources; fluctuations
in the prices at which acquisition targets may be available for sale; the impact
of making  acquisitions  without  using our common  stock;  and  possible  asset
quality issues,  unknown  liabilities or integration  issues with the businesses
that we have  acquired.  We do not  have a duty to and  will  not  update  these
forward-looking statements. Readers of this Quarterly Report on Form 10-Q should
therefore  consider these risks and uncertainties in evaluating  forward-looking
statements and should not place undo reliance on these statements.


                                     General

         We are a registered  bank holding  company  incorporated in Missouri in
1978 and  headquartered  in St. Louis,  Missouri.  We operate through our wholly
owned  subsidiary  bank holding  company,  The San  Francisco  Company,  or SFC,
headquartered  in San  Francisco,  California,  and its wholly owned  subsidiary
bank,  First Bank,  headquartered  in St. Louis,  Missouri.  First Bank operates
through its branch banking offices and its subsidiaries, as listed below:

         >>    First  Bank  Business  Capital,   Inc.  (formerly  FB  Commercial
               Finance,  Inc.);
         >>    Missouri Valley  Partners,  Inc., or MVP;
         >>    Adrian N. Baker & Company,  or Adrian Baker;
         >>    Universal Premium  Acceptance Corporation and UPAC of California,
               Inc., collectively UPAC; and
         >>    Small Business Loan Source LLC, or SBLS LLC.

         First Bank's  subsidiaries  are wholly owned except for SBLS LLC, which
is 51% owned by First Bank and 49% owned by First Capital  America,  Inc.  First
Bank  currently  operates 181 branch banking  offices in  California,  Illinois,
Missouri and Texas. At June 30, 2006, we had assets of $9.62 billion, loans, net
of  unearned  discount,  of  $7.60  billion,   deposits  of  $8.07  billion  and
stockholders' equity of $719.4 million.
<PAGE>

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

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


                               Financial Condition

         Total assets were $9.62  billion at June 30, 2006,  reflecting a $444.9
million  increase from $9.17  billion at December 31, 2005.  The increase in our
total assets primarily  results from internal  growth,  acquisitions of banks in
our target  markets,  and  acquisitions  of two entities in new business  lines.
Funds  available from deposit growth and excess  short-term  investments,  which
include  federal  funds  sold  and  interest-bearing  deposits,  as  well as the
maturities of available-for-sale  investment  securities,  were utilized to fund
internal  loan  growth and to  reinvest  in  higher-yielding  available-for-sale
investment securities.  We issued additional subordinated debentures, as further
described below,  which provided a portion of the funds that we utilized for our
bank  acquisitions  in 2006.  The increase in assets  reflects a $579.8  million
increase in our loans,  net of unearned  discount,  to $7.60 billion at June 30,
2006,  from $7.02 billion at December 31, 2005. This increase is attributable to
internal  growth of our loan portfolio and the  acquisition of $269.5 million of
loans  associated with our acquisitions  completed in 2006,  partially offset by
the securitization of $138.9 million of certain residential  mortgage loans held
in our loan portfolio that were transferred to our investment portfolio, and the
sale of certain  nonperforming  loans.  The  overall  increase in our assets was
partially  offset by a decline of $153.7  million in our  investment  securities
portfolio to $1.19 billion at June 30, 2006,  from $1.34 billion at December 31,
2005. The decrease in our investment  securities  portfolio  primarily reflects:
maturities  of  investment  securities  of $661.5  million and  reinvestment  of
proceeds from  maturities  and excess funds in  investment  securities of $516.8
million; the sale of  available-for-sale  investment  securities associated with
the termination of $200.0 million of term repurchase agreements in the first and
second  quarters  of 2006 to better  position  our  overall  interest  rate risk
profile,  as more fully described below;  partially offset by the securitization
of $77.1 million and $61.8 million of certain residential mortgage loans held in
our loan portfolio in March 2006 and April 2006, respectively, which resulted in
a  change  in  our  overall  asset  mix  from  residential   mortgage  loans  to
available-for-sale  investment  securities,  as further described under "--Loans
and Allowance for Loan Losses." In addition,  our trading  securities  portfolio
increased  $47.5 million to $50.9 million at June 30, 2006, from $3.4 million at
December 31, 2005.  Goodwill  increased  $59.8 million to $226.8 million at June
30, 2006 and reflects our  acquisitions  of First  National  Bank of Sachse,  or
FNBS, First Independent  National Bank, or FINB,  Pittsfield  Community Bancorp,
Inc., or Community  Bank,  Adrian Baker,  UPAC, and the  acquisition of a branch
office of Dallas  National  Bank,  or  Richardson  Branch,  as summarized in the
following table and further  discussed in Note 2 to our  Consolidated  Financial
Statements.  As shown in the following table, our acquisitions  completed in the
first six  months of 2006  provided  assets of  $318.9  million,  loans,  net of
unearned  discount,  of $269.3  million,  and  deposits  of $135.1  million,  in
aggregate.




<PAGE>

<TABLE>
<CAPTION>

                                                  Loans,                                                    Number
                                                  Net of                                                      of
            Entity /                    Total    Unearned   Investment              Purchase   Preliminary  Banking
         Closing Date                  Assets    Discount   Securities     Deposits   Price     Goodwill   Locations
         ------------                  ------    --------   ----------     --------   -----     --------   ---------
                                                         (dollars expressed in thousands)
   First National Bank of Sachse
   Sachse, Texas
<S>                                  <C>           <C>        <C>           <C>       <C>         <C>           <C>
   January 3, 2006                   $  76,200     49,300     14,300        66,200    20,800      8,800         1

   Dallas National Bank
   Richardson, Texas
   Branch Office (1)
   January 20, 2006                      1,100        100         --         1,100       700         --         1

   Adrian N. Baker & Company
   Clayton, Missouri
   March 31, 2006                        3,000         --         --            --     7,000      3,900        --

   Pittsfield Community Bancorp, Inc.
   Pittsfield, Illinois (2)
   April 28, 2006                       17,600     11,100      3,300        12,300     5,100        800        --

   First Independent National Bank
   Plano, Texas
   May 1, 2006                          68,200     59,600        800        55,500    19,200      9,300         3

   Universal Premium Acceptance
   Corporation
   Lenexa, Kansas (3)
   May 31, 2006                        152,800    149,200         --            --    52,700     37,100        --
                                     ---------   --------    -------      --------  --------    -------        --
                                     $ 318,900    269,300     18,400       135,100   105,500     59,900         5
                                     =========   ========    =======      ========  ========    =======        ==

    ------------------
    (1) The Richardson Branch was acquired by First Bank through a purchase of  certain assets and assumption of certain
        liabilities of the branch office.  Total  assets  consisted  primarily  of cash received upon assumption of  the
        deposit liabilities and loans.
    (2) Community Bank operated two banking offices, one in Pittsfield, Illinois and one in Mount Sterling, Illinois. On
        June 16, 2006, First Bank sold the Mount Sterling, Illinois  banking office to  Beardstown Savings, s.b.  At the
        time of the sale, the Mount Sterling banking office had assets of $2.7 million, loans, net of unearned discount,
        of $2.4 million, and deposits of $3.7 million. First Bank consolidated its existing banking office in Pittsfield
        with and into the acquired Pittsfield banking office.
    (3) In conjunction with the acquisition of UPAC, First Bank repaid in  full the outstanding senior notes of UPAC and
        the outstanding subordinated notes of KIF, Inc., UPAC's parent company, including accumulated accrued and unpaid
        interest, totaling $125.9 million in aggregate.
</TABLE>

         In 2005, we also  experienced  growth through  acquisitions  and branch
purchases  that  primarily  increased our branch office  network in the Chicago,
Illinois  and  Los  Angeles,   California   market  areas.   Specifically,   our
acquisitions of First Bank of the Americas,  s.s.b., or FBA,  International Bank
of  California,  or IBOC,  and  Northway  State  Bank,  or NSB,  in April  2005,
September 2005 and October 2005, respectively, and our purchase of the Roodhouse
branch  office of Bank & Trust  Company in September  2005,  provided  assets of
$280.3 million,  loans, net of unearned discount, of $209.6 million and deposits
of $238.1 million, in aggregate.

         Total  deposits  increased  $524.1 million to $8.07 billion at June 30,
2006,  from $7.54  billion at December  31,  2005,  reflecting  internal  growth
through enhanced product and service offerings and marketing campaigns,  as well
as $135.1  million of deposits  acquired  through  acquisitions  of banks in our
target  market  areas.  During the six months ended June 30, 2006,  our time and
savings deposits  increased $500.6 million and $54.8 million,  respectively,  in
contrast to our interest-bearing demand and noninterest-bearing demand accounts,
which declined $28.0 million and $3.2 million,  respectively.  The growth in our
deposits for the six months ended June 30, 2006 reflects our  continued  deposit
marketing focus and efforts to further develop  multiple  account  relationships
with our customers,  coupled with higher deposit rates paid on certain products.
The overall  growth was partially  offset by an  anticipated  level of attrition
associated with our recent  acquisitions  and continued  aggressive  competition
within our market areas.
<PAGE>

         Other borrowings decreased $211.2 million to $328.0 million at June 30,
2006,  from $539.2  million at December 31, 2005.  We  primarily  attribute  the
decrease to the termination of $200.0 million of term  repurchase  agreements to
better position our overall interest rate risk profile,  and a $13.2 million net
reduction in the  outstanding  balance of our Federal  Home Loan Bank,  or FHLB,
advances. On February 14, 2006, March 28, 2006 and April 28, 2006, we terminated
$100.0 million,  $50.0 million and $50.0 million of term repurchase  agreements,
respectively,  as  further  described  in Note 9 to our  Consolidated  Financial
Statements.  The decrease in our FHLB  advances  reflects  prepayments  of $20.5
million of advances in March 2006 and $14.8 million of advances in May 2006 that
were assumed with certain of our bank acquisitions, as further described in Note
9 to our  Consolidated  Financial  Statements,  partially offset by a short-term
advance of $25.0 million that we borrowed from the FHLB in June 2006.

         Our notes payable  decreased $15.0 million to $85.0 million at June 30,
2006 as a result of scheduled quarterly principal  installment  payments of $5.0
million,  which commenced on March 31, 2006, as well as an additional prepayment
of $5.0 million on our $100.0 million term loan facility,  as further  described
in Note 10 to our Consolidated Financial Statements.

         Our subordinated  debentures  increased $88.8 million to $304.3 million
at June 30, 2006, from $215.5 million at December 31, 2005, primarily due to the
issuance  of $87.6  million of  subordinated  debentures  in private  placements
through three newly formed statutory  trusts.  On March 1, 2006, we issued $41.2
million of variable rate  subordinated  debentures to First Bank Statutory Trust
IV, or FBST IV; on April 28,  2006,  we issued  $20.6  million of variable  rate
subordinated  debentures to First Bank Statutory Trust V, or FBST V, and on June
16, 2006, we issued $25.8 million of variable  rate  subordinated  debentures to
First Bank  Statutory  Trust VI, or FBST VI, as further  described in Note 11 to
our Consolidated  Financial Statements.  The proceeds from the issuance of these
subordinated  debentures will be used to fund future acquisitions as well as for
general corporate purposes. The increase in our subordinated debentures was also
attributable to the continued amortization of debt issuance costs and changes in
the fair value of our interest  rate swap  agreements  designated  as fair value
hedges,  following the  termination of our single  remaining fair value interest
rate swap agreement,  in February 2006, that hedged certain of our  subordinated
debentures, as further discussed under "--Interest Rate Risk Management."

         Stockholders'  equity was $719.4 million and $678.9 million at June 30,
2006 and  December  31,  2005,  respectively,  reflecting  an  increase of $40.4
million.  We attribute  the increase to net income of $51.1  million,  partially
offset by dividends paid on our Class A and Class B preferred  stock and a $10.3
million decrease in accumulated other comprehensive  income,  comprised of $10.2
million   associated  with  changes  in  unrealized  gains  and  losses  on  our
available-for-sale  investment securities portfolio and $162,000 associated with
changes in the fair value of our derivative financial instruments.


                              Results of Operations

Net Income

         Net income was $22.1  million and $26.8  million  for the three  months
ended June 30, 2006 and 2005,  respectively.  For the six months  ended June 30,
2006 and 2005,  net income was $51.1  million and $49.0  million,  respectively,
reflecting an increase of 4.3%. Our return on average assets was 0.94% and 1.10%
for the three and six months  ended June 30,  2006,  respectively,  compared  to
1.25%  and 1.14% for the  comparable  periods  in 2005.  Our  return on  average
stockholders'  equity was  12.35% and 14.58% for the three and six months  ended
June 30, 2006,  respectively,  compared to 17.43% and 16.06% for the  comparable
periods in 2005.  Net income for the three months  ended June 30, 2006  reflects
increased net interest income and net interest margin, and relatively consistent
noninterest  income,  partially  offset by an increase in our provision for loan
losses and higher noninterest  expense. Net income for the six months ended June
30, 2006  reflects  earnings  driven by increased  net  interest  income and net
interest  margin,  and  increased  noninterest  income,  partially  offset by an
increase in our provision  for loan losses and higher  noninterest  expense.  We
recorded  provisions  for loan losses of $5.0  million and $6.0  million for the
three and six  months  ended June 30,  2006,  respectively.  For the  comparable
periods  in 2005,  we  recorded  a negative  provision  for loan  losses of $8.0
million to reduce the allowance for loan losses to a level commensurate with the
decreasing  credit risk that existed in the loan portfolio during those periods.
The overall  increase in our provision for loan losses in 2006  contributed to a
reduction in our  earnings for the three and six months ended June 30, 2006,  as
further discussed under "--Provision for Loan Losses."
<PAGE>

         The  increase in earnings in 2006  reflects our  continuing  efforts to
strengthen  net interest  income and net interest  margin while  continuing  our
focus on reducing the overall level of our nonperforming  assets.  For the three
and six months ended June 30, 2006, our earnings reflect  increases of 22.9% and
19.7% in net  interest  income,  and  increases  of 47 basis points and 40 basis
points in our net  interest  margin,  respectively,  compared to the  comparable
periods in 2005.  The increase in net  interest  income for the six months ended
June 30,  2006 was driven by an 8.6%  increase  in our  interest-earning  assets
attributable  to internal  loan growth  coupled  with higher  interest  rates on
loans,  higher-yielding investment securities, and our acquisitions completed in
2005 and 2006. The overall increase was partially  offset by increased  interest
expense  stemming from higher interest rates paid on an increasing  deposit base
driven  by  internal  growth,   marketing  campaigns,  and  our  2005  and  2006
acquisitions.  Higher interest rates paid on other borrowings, our term loan and
our subordinated debentures also contributed to an increase in interest expense.
In addition,  our net  interest  income was  adversely  affected by a decline in
earnings  on our  interest  rate  swap  agreements  that  were  entered  into in
conjunction  with our interest  rate risk  management  program,  which  declined
primarily  as a result  of an  increase  in  prevailing  interest  rates and the
maturity and termination of certain  interest rate swap  agreements,  as further
discussed  under  "--Interest  Rate Risk  Management."  While our earnings  have
benefited  from the increasing  interest rate  environment,  overall  conditions
within our markets  and the impact of the  decline in  earnings on our  interest
rate swap  agreements  continue to exert pressure on our net interest income and
net interest margin.

         Our ongoing  efforts to improve our overall  asset  quality  levels are
reflected  by a 20.9%  decrease  in our  nonperforming  assets for the first six
months of 2006,  which  decreased  to $78.5  million at June 30, 2006 from $99.2
million at December 31,  2005.  However,  nonperforming  assets at June 30, 2006
increased 11.5% from $70.4 million at March 31, 2006.  Nonperforming  loans were
$73.0 million at June 30, 2006,  compared to $67.1 million at March 31, 2006 and
$97.2 million at December 31, 2005, and  represented  0.96%,  0.94% and 1.38% of
loans, net of unearned  discount,  respectively.  Loans past due 90 days or more
and still accruing interest were $5.7 million,  $2.2 million and $5.6 million at
June 30, 2006,  March 31, 2006 and December  31, 2005,  respectively.  The $20.7
million  reduction in the level of  nonperforming  assets  during the six months
ended  June 30,  2006  primarily  resulted  from the  sale of  certain  acquired
nonperforming  loans,  loan  payoffs  and/or  external  refinancing  of  various
credits.  The $8.1 million increase in the level of nonperforming  assets during
the second  quarter of 2006  primarily  resulted  from the placement of a single
credit  relationship on nonaccrual  status.  We recorded net loan charge-offs of
$1.2 million for the three months ended June 30, 2006 and net loan recoveries of
$2.1  million  for the six months  ended June 30,  2006.  We  recorded  net loan
recoveries of $3.6 million for the three months ended June 30, 2005 and net loan
charge-offs  of $3.0 million for the six months ended June 30, 2005. We continue
to closely  monitor our loan portfolio and consider these factors in our overall
assessment  of the  adequacy  of the  allowance  for  loan  losses,  as  further
discussed  under  "--Provision  for Loan Losses" and "--Loans and  Allowance for
Loan Losses."

         Noninterest  income was $25.9  million and $51.4  million for the three
and six months ended June 30, 2006, respectively,  compared to $26.2 million and
$47.4 million for the  comparable  periods in 2005.  Noninterest  income for the
second quarter of 2006 was relatively  constant and reflected  increased service
charges on deposit  accounts and customer service fees related to higher deposit
balances as well as increased  commission fee income of $1.8 million  associated
with our newly acquired insurance  brokerage agency,  Adrian Baker, on March 31,
2006.  These  increases in noninterest  income were partially  offset by reduced
gains on loans  sold and held for sale,  and $1.2  million of losses on sales of
available-for-sale investment securities associated with the termination of term
repurchase agreements,  and mark-to-market adjustments on our trading securities
portfolio.  The increase in noninterest  income for the first six months of 2006
reflects  increases in service charges on deposit  accounts and customer service
fees related to higher  deposit  balances,  and gains on loans sold and held for
sale,  including a $1.7 million gain on the sale of certain  nonperforming loans
in March 2006,  as further  discussed  under  "--Loans  and  Allowance  for Loan
Losses."  Noninterest  income for 2006 also  includes a $1.5 million gain on the
sale of a parcel of other real estate;  $2.1 million of increased loan servicing
income associated with the  capitalization of mortgage  servicing rights related
to the securitization of certain  residential  mortgage loans in March and April
2006; partially offset by $2.7 million of losses on sales of  available-for-sale
investment  securities associated with the termination of $200.0 million of term
repurchase  agreements,  as  further  described  in  Note 9 to our  Consolidated
Financial Statements; and a $1.3 million net loss related to changes in the fair
value of securities held in our trading portfolio.
<PAGE>

         Noninterest  expense was $81.1 million and $155.9 million for the three
and six months ended June 30, 2006, respectively,  compared to $70.2 million and
$134.0  million for the comparable  periods in 2005.  Our  efficiency  ratio was
66.68%  and  65.51%  for  the  three  and  six  months   ended  June  30,  2006,
respectively,  compared to 67.45% and 65.93% for the comparable periods in 2005.
The  acquisition  of UPAC, our insurance  premium  finance  company,  and Adrian
Baker, our insurance  brokerage agency, in addition to our acquisitions of banks
completed in 2005 and 2006,  resulted in  significant  expansion of our employee
base and branch  office  network,  and  contributed  to the  increase in overall
expense  levels,   specifically  salaries  and  employee  benefits  expense  and
occupancy  and  furniture  and  equipment  expense.  The expansion of our branch
office  network  through  acquisitions,  branch  purchases  and de  novo  branch
openings  resulted  in the  addition  of  ten  branch  offices  in  2005  and an
additional  five  branch  offices  in  2006.  Our  employee  base  increased  to
approximately  2,560  employees  at June  30,  2006,  from  approximately  2,230
employees at June 30, 2005. Salaries and employee benefits expense for the three
and six months ended June 30, 2006,  increased  $8.1 million and $14.6  million,
respectively, compared to the same periods in 2005. The increase in salaries and
employee  benefits  expense also resulted from continued  costs  associated with
employing and retaining qualified personnel, including increased costs driven by
enhanced  incentive  compensation  programs and other employee  benefits  plans.
Occupancy and furniture and equipment  expenditures for the three and six months
ended June 30,  2006  increased  $1.5  million and $2.4  million,  respectively,
compared to the same periods in 2005.  Our system  conversions  associated  with
recent acquisitions and the expansion of technological  equipment,  networks and
communication  channels,  contributed  to  the  overall  levels  of  information
technology fees. In addition,  charitable  contributions  expense increased $1.6
million  for the first six months of 2006,  compared to the same period in 2005.
We continue to closely monitor  noninterest  expense levels following our recent
acquisitions  and have  implemented  certain  expense  reduction  measures in an
effort to improve our efficiency ratio in future periods.


Net Interest Income

         Net interest  income  (expressed on a  tax-equivalent  basis)  reflects
continued  growth,  increasing to $96.1 million and $187.3 million for the three
and six months ended June 30, 2006, respectively,  compared to $78.1 million and
$156.6  million for the  comparable  periods in 2005.  Our net  interest  margin
increased  47 basis  points and 40 basis points to 4.41% and 4.36% for the three
and six months ended June 30, 2006,  respectively,  from 3.94% and 3.96% for the
comparable  periods  in 2005.  Net  interest  income is the  difference  between
interest earned on our  interest-earning  assets,  such as loans and securities,
and  interest  paid on our  interest-bearing  liabilities,  such as deposits and
borrowings.  Net  interest  income is affected by the level and  composition  of
assets,  liabilities and  stockholders'  equity, as well as the general level of
interest   rates  and  changes  in  interest   rates.   Interest   income  on  a
tax-equivalent  basis  includes the  additional  amount of interest  income that
would have been earned if our investment in certain tax-exempt  interest-earning
assets had been made in assets subject to federal,  state and local income taxes
yielding  the same  after-tax  income.  Net  interest  margin is  determined  by
dividing   net   interest   income  on  a   tax-equivalent   basis  by   average
interest-earning  assets. The interest rate spread is the difference between the
average equivalent yield earned on interest-earning  assets and the average rate
paid on interest-bearing liabilities.

         We  primarily  credit the  increase  in our net  interest  income to an
increase in interest-earning assets provided by internal growth and our 2005 and
2006  acquisitions  as well as higher  interest rates on increased loan volumes.
The increase was  partially  offset by reduced  interest  income on a decreasing
portfolio of investment  securities,  increased interest expense associated with
higher  interest rates paid on an increasing  deposit base,  increased  interest
rates  paid on our other  borrowings,  including  our term loan,  and  increased
interest  rates  paid  on  recently  issued  subordinated  debentures.   Average
interest-earning  assets  increased to $8.73  billion and $8.67  billion for the
three and six months ended June 30, 2006,  respectively,  from $7.95 billion and
$7.98  billion for the  comparable  periods in 2005.  The  increase is primarily
attributable  to internal  growth and  interest-earning  assets  provided by our
acquisitions  completed  in 2005 and during the first six months of 2006,  which
provided assets of $280.3 million and $318.9 million in aggregate, respectively.
Net  interest  income was  adversely  impacted  by a decline in  earnings on our
interest rate swap  agreements  that were entered into in  conjunction  with our
interest rate risk management program.  The impact of these derivative financial
instruments  reduced net  interest  income by $990,000  and $2.3 million for the
three and six months ended June 30, 2006, respectively, in contrast to providing
increased net interest  income of $297,000 and $3.9 million for the same periods
in 2005,  reflecting  a  decline  in our  earnings  on our  interest  rate  swap
agreements  of $1.3  million and $6.3 million for the three and six months ended
June 30 2006,  respectively,  as further  discussed under  "--Interest Rate Risk
Management."  Despite the rising interest rate environment,  overall competitive
conditions  within  our  market  areas,  and  the  impact  of the  maturity  and
termination of certain  interest rate swap  agreements,  as discussed  above and
under "--Interest Rate Risk  Management,"  continue to exert pressure on our net
interest income and net interest margin.
<PAGE>

         Average loans, net of unearned  discount,  were $7.35 billion and $7.25
billion  for the three and six months  ended  June 30,  2006,  respectively,  in
comparison to $6.23 billion and $6.21 billion for the same periods in 2005.  The
yield on our loan  portfolio  increased to 7.74% and 7.60% for the three and six
months ended June 30, 2006,  respectively,  in comparison to 6.41% and 6.30% for
the same periods in 2005.  Although our loan  portfolio  yields  increased  with
rising  interest rates during 2005 and 2006,  total interest  income on our loan
portfolio was adversely impacted by decreased earnings on our interest rate swap
agreements  designated  as cash  flow  hedges.  Higher  interest  rates  and the
maturities  of  interest  rate swap  agreements  designated  as cash flow hedges
resulted in decreased earnings on our swap agreements thereby  contributing to a
reduction in yields on our loan  portfolio,  and a reduction of our net interest
income of $1.6  million and $4.3 million for the three and six months ended June
30, 2006, respectively, compared to the same periods in 2005. Interest income on
our loan  portfolio  for 2006  reflects a $2.0 million  recovery of interest and
fees from the payoff of a single  nonaccrual  loan, as further  described  under
"--Loans and Allowance for Loan Losses." We primarily  attribute the increase in
average  loans of $1.12  billion and $1.05  billion for the three and six months
ended June 30,  2006,  respectively,  over the  comparable  periods in 2005,  to
internal  growth  and our  acquisitions  completed  in 2005 and 2006,  partially
offset by a $138.9 million reduction related to the securitization of certain of
our residential mortgage loans held in our loan portfolio, and reductions in our
nonperforming  loan  portfolio due to the sale of certain  nonperforming  loans,
loan  payoffs  and/or  external  refinancing  of  various  credits,  as  further
described  under  "--Loans and  Allowance  for Loan  Losses."  Our  acquisitions
completed in 2005 and during the first six months of 2006 provided loans, net of
unearned  discount,   of  $209.6  million  and  $269.3  million,  in  aggregate,
respectively,  on the dates of  acquisition.  The  components of the increase in
average  loans for the first six months of 2006  compared  to the same period in
2005 were primarily:  a $504.4 million  increase in average real estate mortgage
loans;  a $336.4  million  increase  in average  real  estate  construction  and
development  loans; a $145.1 million increase in average  commercial,  financial
and  agricultural  loans; and a $60.0 million increase in average loans held for
sale. The increase in residential  real estate  mortgage loans resulted from our
recent  acquisitions and the retention of a portion of our residential  mortgage
loan production that would have previously been sold in the secondary market.

         Average investment  securities were $1.29 billion and $1.32 billion for
the three and six months  ended June 30, 2006,  respectively,  compared to $1.68
billion and $1.71 billion for the  comparable  periods in 2005. The yield on our
investment portfolio was 4.70% and 4.60% for the three and six months ended June
30, 2006,  respectively,  compared to 4.22% and 4.18% for the comparable periods
in 2005.  Investment  securities provided by our acquisitions  completed in 2005
and during the first six months of 2006 were $20.1 million and $18.4 million, in
aggregate, respectively, as of the respective acquisition dates. Funds available
from deposit growth and excess short-term investments,  as well as maturities of
investment  securities,  were  utilized  to fund  internal  loan  growth  and to
reinvest in higher-yielding  available-for-sale  investment securities. In March
2006 and April 2006, our investment securities increased $77.1 million and $61.8
million, respectively, due to the securitization of $138.9 million of certain of
our  residential  mortgage loans held in our loan  portfolio.  Additionally,  as
further  described  in  Note  9 to our  Consolidated  Financial  Statements,  we
terminated  $150.0 million of our term  repurchase  agreements  during the first
quarter of 2006 and  recognized  a combined  loss of $2.4 million on the sale of
$150.0 million of  available-for-sale  investment securities associated with the
termination of the term repurchase agreements.  In addition, we terminated $50.0
million of our term repurchase  agreements during the second quarter of 2006 and
recognized a loss of $310,000 on the sale of $50.0 million of available-for-sale
investment  securities  associated  with the  termination of the term repurchase
agreement.

         Average  deposits  increased to $7.95 billion and $7.84 billion for the
three and six months ended June 30, 2006,  respectively,  from $7.04 billion and
$7.07 billion for the  comparable  periods in 2005. For the three and six months
ended June 30, 2006,  the  aggregate  weighted  average rate paid on our deposit
portfolio  increased  104 basis  points and 103 basis points to 3.09% and 2.95%,
respectively,  from 2.05% and 1.92% for the  comparable  periods  in 2005.  This
increase is primarily  attributable to the rising interest rate environment.  In
addition,  the decreased  earnings  associated with certain of our interest rate
swap agreements  designated as fair value hedges,  as well as the termination of
$150.0 million of fair value hedges in February 2005,  resulted in a decrease in
our net interest  income.  The  increase in average  deposits is  reflective  of
internal  growth  stemming  from  our  deposit  development   programs  and  our
acquisitions  completed  in 2005 and during the first six months of 2006,  which
provided  deposits,  in  aggregate,   of  $238.1  million  and  $135.1  million,
respectively.  Average demand and savings  deposits were $4.34 billion and $4.36
billion for the three and six months ended June 30, 2006, respectively, compared
to $4.21 billion and $4.25 billion for the comparable  periods in 2005.  Average
time  deposits were $3.61 billion and $3.48 billion for the three and six months
ended June 30, 2006,  respectively,  compared to $2.83 billion and $2.82 billion
for the comparable periods in 2005.
<PAGE>
         Average other borrowings decreased to $311.8 million and $385.8 million
for the three and six months  ended June 30,  2006,  respectively,  compared  to
$569.2  million  and $573.6  million  for the  comparable  periods in 2005.  The
aggregate weighted average rate paid on our other borrowings was 4.18% and 4.15%
for the three and six months  ended June 30,  2006,  respectively,  compared  to
2.98% and 2.65% for the  comparable  periods in 2005. The increased rate paid on
our other borrowings  reflects the rising  short-term  interest rate environment
that began in mid-2004.  The $187.7 million decrease in average other borrowings
for 2006 is primarily  attributable  to the  termination  of $150.0  million and
$50.0 million of term repurchase  agreements in the first and second quarters of
2006, respectively, as further described in Note 9 to our Consolidated Financial
Statements.  In addition,  on March 17, 2006 and May 10, 2006,  we prepaid $20.5
million and $14.8  million,  respectively,  of FHLB  advances that were acquired
with certain bank acquisitions.

         Our notes  payable  averaged  $95.2  million and $97.5  million for the
three and six months ended June 30, 2006, respectively, compared to $4.0 million
and $5.8 million for the  comparable  periods in 2005.  The  aggregate  weighted
average rate paid on our notes payable was 6.23% and 5.99% for the three and six
months ended June 30, 2006,  respectively,  compared to 10.44% and 8.38% for the
comparable  periods in 2005.  The  weighted  average rate paid  reflects  unused
credit  commitment  and letter of credit  facility  fees on our  secured  credit
agreement.  Exclusive of these fees, the weighted average rate paid on our notes
payable  was 6.17% and 5.93% for the three and six months  ended June 30,  2006,
respectively, compared to 3.85% and 3.82% for the comparable periods in 2005. In
August 2005, we entered into an Amended and Restated  Secured  Credit  Agreement
and restructured  our overall  financing  arrangement.  In conjunction with this
transaction,  we  borrowed  $80.0  million  on the term loan in August  2005 and
borrowed the  remaining  $20.0  million on the term loan in November  2005.  The
proceeds  of the term  loan were used to fund our  acquisition  of IBOC,  and to
partially fund the redemption of our 10.24%  subordinated  debentures  issued to
First Preferred  Capital Trust II in September 2005, as further discussed below.
We subsequently  repaid $15.0 million of the term loan during 2006, reducing the
balance to $85.0 million at June 30, 2006. The outstanding balance of our former
$100.0 million credit facility was repaid in full in June 2005 through dividends
from our subsidiary  bank. As further  described in Note 13 to our  Consolidated
Financial  Statements,  we recently entered into an Amendment to our Amended and
Restated  Secured  Credit  Agreement  and  reduced  certain  components  of  our
financing arrangement, including the overall pricing structure.

         Average subordinated  debentures were $276.5 million and $253.4 million
for the three and six months  ended June 30,  2006,  respectively,  compared  to
$273.8  million for the three and six months ended June 30, 2005.  The aggregate
weighted  average rate paid on our  subordinated  debentures was 8.30% and 9.05%
for the three and six months  ended June 30,  2006,  respectively,  compared  to
7.86% and 7.45% for the  comparable  periods  in 2005.  Interest  expense on our
subordinated debentures was $5.7 million and $11.4 million for the three and six
months  ended June 30,  2006,  respectively,  compared to $5.4 million and $10.1
million for the comparable periods in 2005. As previously  discussed,  we issued
$41.2 million of variable  rate  subordinated  debentures  in March 2006,  $20.6
million of  variable  rate  subordinated  debentures  in April  2006,  and $25.8
million of variable rate subordinated  debentures in June 2006 to partially fund
our bank  acquisitions.  In addition,  in September  2005, we repaid in full our
outstanding $59.3 million of 10.24%  subordinated  debentures that we previously
issued  in  October  2000.  The  reduction  of  these  outstanding  subordinated
debentures,  which carried a high interest  rate,  improved  future net interest
income and net interest  margin.  However,  the earnings  impact of our interest
rate swap  agreements  had a declining  impact in the  reduction of our interest
expense  associated with our subordinated  debentures.  These interest rate swap
agreements  increased  interest expense by $814,000 for the three and six months
ended June 30, 2006, and reduced  interest  expense by $649,000 and $1.8 million
for the three and six  months  ended  June 30,  2005,  respectively.  As further
discussed  under  "--Interest  Rate Risk  Management,"  on February 14, 2006, we
terminated our single  remaining $25.0 million notional fair value interest rate
swap agreement associated with our subordinated debentures. In February 2006, we
recognized  additional  expense of $849,000 in aggregate,  representing  the net
basis adjustment  associated with the swap agreement terminated in February 2006
and the remaining net basis adjustments  associated with the fair value interest
rate swap agreements that we terminated in May 2005.

         The following  table sets forth,  on a  tax-equivalent  basis,  certain
information  relating to our average  balance  sheets,  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:



<PAGE>
<TABLE>
<CAPTION>


                                            Three Months Ended June 30,                        Six Months Ended June 30,
                                --------------------------------------------------  ------------------------------------------------
                                           2006                     2005                     2006                     2005
                                -------------------------  -----------------------  -----------------------  -----------------------
                                           Interest                 Interest                 Interest                 Interest
                                  Average  Income/ Yield/  Average  Income/ Yield/  Average  Income/ Yield/  Average  Income/ Yield/
                                  Balance  Expense  Rate   Balance  Expense  Rate   Balance  Expense  Rate   Balance  Expense  Rate
                                  -------  -------  ----   -------  -------  ----   -------  -------  ----   -------  -------  ----
                                                                    (dollars expressed in thousands)

             ASSETS
             ------

Interest-earning assets:
<S>                             <C>        <C>     <C>   <C>         <C>     <C>   <C>        <C>     <C>   <C>        <C>     <C>
   Loans (1)(2)(3)(4).......... $7,349,881 141,876 7.74% $6,227,487  99,534  6.41% $7,253,904 273,337 7.60% $6,205,923 193,804 6.30%
   Investment securities (4)...  1,289,270  15,112 4.70   1,676,866  17,629  4.22   1,320,108  30,145 4.60   1,709,203  35,414 4.18
   Short-term investments......     93,877   1,147 4.90      47,788     351  2.95      95,819   2,270 4.78      65,447     860 2.65
                                ---------- -------       ---------- -------        ---------- -------       ---------- -------
         Total interest-earning
           assets..............  8,733,028 158,135 7.26   7,952,141 117,514  5.93   8,669,831 305,752 7.11   7,980,573 230,078 5.81
                                           -------                  -------                   -------                  -------
Nonearning assets..............    726,127                  653,522                   716,081                  653,976
                                ----------               ----------                ----------               ----------
         Total assets.......... $9,459,155               $8,605,663                $9,385,912               $8,634,549
                                ==========               ==========                ==========               ==========


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

Interest-bearing liabilities:
   Interest-bearing deposits:
     Interest-bearing demand
       deposits................ $  960,951   1,947 0.81% $  882,567     932  0.42% $  965,467   3,775 0.79% $  884,053   1,820 0.42%
     Savings deposits..........  2,119,269  12,255 2.32   2,082,986   6,331  1.22   2,124,351  23,438 2.22   2,140,218  12,075 1.14
     Time deposits of $100
       or more.................  1,315,690  14,258 4.35     846,317   6,246  2.96   1,247,926  25,814 4.17     826,965  11,600 2.83
     Other time deposits (3)...  2,295,087  23,146 4.05   1,988,122  16,156  3.26   2,235,407  43,180 3.90   1,989,449  30,135 3.05
                                ---------- -------       ----------  ------        ---------- -------       ---------- -------
         Total interest-bearing
           deposits............  6,690,997  51,606 3.09   5,799,992  29,665  2.05   6,573,151  96,207 2.95   5,840,685  55,630 1.92
   Other borrowings............    311,753   3,246 4.18     569,222   4,234  2.98     385,839   7,941 4.15     573,585   7,534 2.65
   Notes payable (5)...........     95,154   1,477 6.23       3,956     103 10.44      97,536   2,897 5.99       5,801     241 8.38
   Subordinated debentures (3).    276,493   5,722 8.30     273,803   5,365  7.86     253,366  11,374 9.05     273,802  10,111 7.45
                                ---------- -------       ----------  ------        ---------- -------       ---------- -------
         Total interest-bearing
           liabilities.........  7,374,397  62,051 3.37   6,646,973  39,367  2.38   7,309,892 118,419 3.27   6,693,873  73,516 2.21
                                           -------                   ------                   -------                  -------
Noninterest-bearing liabilities:
   Demand deposits.............  1,262,590                1,243,568                 1,266,847                1,225,511
   Other liabilities...........    104,851                   97,246                   102,695                  100,299
                                ----------               ----------                ----------               ----------
         Total liabilities.....  8,741,838                7,987,787                 8,679,434                8,019,683
Stockholders' equity...........    717,317                  617,876                   706,478                  614,866
                                ----------               ----------                ----------               ----------
         Total liabilities and
           stockholders' equity $9,459,155               $8,605,663                $9,385,912               $8,634,549
                                ==========               ==========                ==========               ==========


Net interest income............             96,084                   78,147                   187,333                  156,562
                                           =======                   ======                   =======                  =======
Interest rate spread...........                    3.89                      3.55                     3.84                     3.60
Net interest margin (6)........                    4.41%                     3.94%                    4.36%                    3.96%
                                                   ====                     =====                     ====                     ====

--------------------
(1)  For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2)  Interest income on loans includes loan fees.
(3)  Interest income and interest expense include the effects of interest rate swap agreements.
(4)  Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The tax-equivalent adjustments  were
     approximately $404,000 and $787,000 for the three and six months ended June 30, 2006, and $326,000 and $662,000 for
     the comparable periods in 2005, respectively.
(5)  Interest expense on our notes payable includes commitment, arrangement and renewal fees. Exclusive of  these  fees,
     the interest rates paid were 6.17% and 5.93% for the three and six months ended June 30, 2006, and 3.85% and  3.82%
     for the comparable periods in 2005, respectively.
(6)  Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-
     earning assets.

</TABLE>



<PAGE>


Provision for Loan Losses

         We recorded provisions for loan losses of $5.0 million and $6.0 million
for the three and six months ended June 30, 2006,  respectively.  The provisions
recorded during 2006 were commensurate with growth within our loan portfolio, as
well as an increase in  nonperforming  loans  during the three months ended June
30, 2006,  following a  significant  reduction in our  nonperforming  loans from
December 31, 2005 to March 31, 2006,  as further  discussed  under  "--Loans and
Allowance for Loan Losses." We recorded a negative  provision for loan losses of
$8.0 million for the three and six months ended June 30, 2005  commensurate with
the  decreasing  credit risk that  existed in the loan  portfolio  during  those
periods.  During the three and six months  ended June 30, 2005,  we  experienced
improvement  in  nonperforming  loans that was  primarily  attributable  to loan
payoffs  and/or  external  refinancings,  as well  as a  reduction  in net  loan
charge-offs during the first six months of 2005.

         We recorded net loan  charge-offs  of $1.2 million for the three months
ended June 30, 2006, compared to net loan recoveries of $2.1 million for the six
months ended June 30, 2006. Net loan recoveries for the first six months of 2006
included a loan recovery of $5.0 million on the payoff of a single loan that was
transferred to our held for sale portfolio on December 31, 2005. We recorded net
loan recoveries of $3.6 million for the three months ended June 30, 2005 and net
loan  charge-offs  of $3.0 million for the six months  ended June 30, 2005.  Our
nonperforming  loans decreased $24.2 million, or 24.9%, to $73.0 million at June
30, 2006, from $97.2 million at December 31, 2005.  However,  our  nonperforming
loans at June 30, 2006  increased $5.9 million,  or 8.8%,  from $67.1 million at
March 31, 2006. The decrease in the overall level of nonperforming  loans during
the six  months  ended  June 30,  2006  reflects  improvement  in asset  quality
resulting from the sale of nonperforming loans that were transferred to the held
for  sale  portfolio  on  December  31,  2005,   loan  payoffs  and/or  external
refinancing  of  various  credits,  and a  significant  reduction  in  net  loan
charge-offs, as further discussed under "--Loans and Allowance for Loan Losses,"
partially  offset by the placement of an $8.9 million loan on nonaccrual  status
in the first  quarter of 2006,  and the  placement  of a $10.0  million  loan on
nonaccrual  status in the  second  quarter  of 2006,  which  contributed  to the
increase in nonperforming loans from March 31, 2006 to June 30, 2006. Loans past
due 90 days or more and still  accruing  interest  were $5.7 million at June 30,
2006,  compared to $2.2  million at March 31, 2006 and $5.6  million at December
31,  2005.  The  increase  in loans past due 90 days or more and still  accruing
interest  during the second quarter of 2006 is primarily  attributable  to loans
acquired during the second quarter of 2006.

         Our  allowance  for loan  losses was $147.4  million at June 30,  2006,
compared to $140.2  million at March 31, 2006 and $135.3 million at December 31,
2005,  representing  1.94%,  1.96% and 1.93% of loans, net of unearned discount,
respectively.  Our allowance  for loan losses as a percentage  of  nonperforming
loans was  201.81% at June 30,  2006,  compared to 209.00% at March 31, 2006 and
139.23% at December 31, 2005. Management has closely monitored its operations to
address the ongoing  challenges posed by the significant  level of nonperforming
loans  acquired with our CIB Bank  acquisition  completed in November  2004. The
level  of  nonperforming  loans  associated  with our  purchase  of CIB Bank has
decreased to $18.1 million,  or 24.8% of nonperforming  loans, at June 30, 2006.
These  levels  are  down   significantly   from  $55.0  million,   or  56.6%  of
nonperforming loans, at December 31, 2005. We continue our efforts to reduce the
overall level of  nonperforming  loans in our loan portfolio and in the acquired
loan portfolios  subsequent to their  acquisition  dates.  Management  considers
these  factors in its overall  assessment  of the adequacy of the  allowance for
loan losses.

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


Noninterest Income

         Noninterest  income was $25.9  million and $51.4  million for the three
and six months ended June 30, 2006, respectively, in comparison to $26.2 million
and  $47.4  million  for the  comparable  periods  in 2005.  Noninterest  income
consists  primarily of service charges on deposit  accounts and customer service
fees, mortgage-banking revenues, investment management income and other income.

         Service  charges on deposit  accounts  and  customer  service fees were
$11.0  million  and $21.2  million  for the three and six months  ended June 30,
2006,  respectively,  in  comparison  to $10.2 million and $19.5 million for the
comparable periods in 2005. The increase in service charges and customer service
fees is primarily  attributable  to increased  demand deposit  account  balances
associated  with internal  growth and our  acquisitions of FBA, IBOC, NSB, FNBS,
Community Bank and FINB completed in April 2005,  September 2005,  October 2005,
January  2006,  April  2006 and May 2006,  respectively.  The  increase  is also
attributable to additional  products and services  available and utilized by our
retail and commercial customer base,  increased fee income from customer service
charges for  non-sufficient  fund and  returned  check fees,  as well as pricing
increases on certain  service  charges and customer  service fees  instituted to
reflect current market conditions.
<PAGE>

         The gain on loans  sold and held for sale was $6.1  million  and  $12.9
million  for the three and six months  ended  June 30,  2006,  respectively,  in
comparison to $6.8 million and $11.4 million for the comparable periods in 2005.
We  attribute  the  decrease  for the  three  months  ended  June 30,  2006,  in
comparison  to the  comparable  period in 2005,  to a decrease  in the volume of
mortgage  loans  originated  and  subsequently  sold  in  the  secondary  market
primarily  resulting from an increase in market interest rates. We attribute the
increase for the six months ended June 30, 2006, in comparison to the comparable
period in 2005, to a $1.7 million gain,  before  applicable income taxes, on the
sale of certain  nonperforming  loans in March 2006 that were transferred to our
loans held for sale portfolio on December 31, 2005, and the  recognition of $1.2
million  and  $927,000  of income in March  2006 and April  2006,  respectively,
generated from the capitalization of mortgage servicing rights pertaining to the
securitization of $77.1 million and $61.8 million,  respectively, of residential
mortgage loans held in our loan portfolio, as further discussed in Note 4 to our
Consolidated  Financial  Statements.  The  increase  was  partially  offset by a
decrease in the volume of mortgage loans originated and subsequently sold in the
secondary market primarily resulting from an increase in market interest rates.

         Noninterest income includes a net loss on investment securities of $1.2
million  and $4.0  million  for the three and six months  ended  June 30,  2006,
respectively.  The net loss in 2006  resulted  primarily  from  sales of certain
available-for-sale  investment  securities  associated  with the  termination of
three $50.0 million term repurchase  agreements during the first quarter of 2006
and the  termination  of $50.0  million  of a  $150.0  million  term  repurchase
agreement  in April 2006,  as further  discussed  in Note 9 to our  Consolidated
Financial Statements. The net loss also includes a net loss of $907,000 and $1.3
million for the three and six months ended June 30, 2006, respectively,  related
to changes in the market  value of  securities  held in our  trading  portfolio.
There were no gains or losses on  investment  securities  recorded for the three
and six months ended June 30, 2005.

         Bank-owned  life  insurance  investment  income was  $652,000  and $1.8
million  for the three and six months  ended  June 30,  2006,  respectively,  in
comparison to $1.3 million and $2.5 million for the comparable  periods in 2005.
The decrease in investment  income  reflects a reduced return on the performance
of the  underlying  investments  surrounding  the insurance  contracts  which is
primarily  attributable  to the portfolio mix of investments  and overall market
conditions.

         Investment  management income was $2.3 million and $4.6 million for the
three and six months ended June 30, 2006,  respectively,  in  comparison to $2.2
million  and  $4.2  million  for the  comparable  periods  in  2005,  reflecting
increased  portfolio  management fees generated by MVP, our institutional  money
management  subsidiary,  primarily  attributable to new business development and
overall growth in assets under management.  Despite the increase,  we anticipate
the level of income  generated  by  portfolio  management  fees will  decline in
future  months as a result of the loss of  certain  customers.  However,  we are
currently unable to predict the level of such decline.

         Other income was $7.1  million and $14.9  million for the three and six
months ended June 30, 2006, respectively, in comparison to $5.7 million and $9.8
million for the comparable  periods in 2005. We attribute the primary components
of the increase in other income to:

         >>    commission fee income of $1.8 million  generated by Adrian Baker,
               our  insurance  brokerage  agency  acquired on March 31, 2006, as
               further  described  in  Note  2  to  our  Consolidated  Financial
               Statements;

         >>    a decrease of $380,000  and an increase of $1.1  million in gains
               on sales of other real estate for the three and six months  ended
               June 30, 2006,  respectively,  in  comparison  to the  comparable
               periods in 2005.  Gains on sales of other real estate were $8,000
               and $1.6  million  for the three and six  months  ended  June 30,
               2006,  respectively,  and included a $1.5 million gain recognized
               on the sale of a parcel  of other  real  estate in  January  2006
               acquired  with our  acquisition  of CIB  Bank.  Gains on sales of
               other real  estate  for the three and six  months  ended June 30,
               2005 were $388,000 and $502,000, respectively;

         >>    a release fee of $938,000  received on funds collected during the
               first quarter of 2006 from a loan  previously sold in March 2005,
               in  which  First  Bank was  entitled  to 25% of any  future  fees
               collected on the loan under a defined  release fee agreement that
               was entered into in conjunction with the loan sale;

         >>    a  decrease  of   $521,000  in  net  losses  on  our   derivative
               instruments; and

         >>    income  associated  with  continued  growth and  expansion of our
               banking  franchise,  including  our de novo branch office and our
               acquisitions completed during 2005 and 2006; partially offset by
<PAGE>

         >>    a net  decrease  of  $681,000  in loan  servicing  fees.  The net
               decrease is primarily  attributable to a net decrease of $746,000
               in fees from loans  serviced  for others and the  recognition  of
               $740,000 of  impairment  charges on SBA  servicing  rights due to
               payoffs  received  on  existing  loans,  partially  offset  by  a
               decrease  of  $343,000  and  $462,000  of   amortization  of  SBA
               servicing rights and mortgage servicing rights, respectively.


Noninterest Expense

         Noninterest  expense was $81.1 million and $155.9 million for the three
and six months ended June 30, 2006, respectively, in comparison to $70.2 million
and $134.0  million for the comparable  periods in 2005.  Our  efficiency  ratio
decreased  slightly to 66.68% and 65.51% for the three and six months ended June
30, 2006,  respectively,  from 67.45% and 65.93% for the  comparable  periods in
2005. The efficiency ratio is used by the financial services industry to measure
an  organization's  operating  efficiency.  The efficiency  ratio represents the
ratio of noninterest  expense to net interest income and noninterest income. The
increase in  noninterest  expense was  primarily  attributable  to  increases in
expenses  resulting  from  our  2005 and 2006  acquisitions,  and  increases  in
salaries and employee benefits expense, occupancy expense, net of rental income,
information technology fees and charitable contributions expense.

         Salaries  and  employee  benefits  expense was $42.6  million and $82.1
million  for the three and six months  ended  June 30,  2006,  respectively,  in
comparison  to $34.5  million and $67.5  million for the  comparable  periods in
2005.  We  attribute  the overall  increase to  increased  salaries and employee
benefits  expenses  associated  with  an  aggregate  of 14  additional  branches
acquired in 2005 and 2006, one de novo branch opened in 2005,  the  acquisitions
of UPAC, our insurance premium finance company,  and Adrian Baker, our insurance
brokerage  agency,  in addition to generally  higher salary and employee benefit
costs associated with employing and retaining qualified personnel, including the
implementation of enhanced  incentive  compensation and employee benefits plans.
Our  number  of  employees  on  a  full-time   equivalent   basis  increased  to
approximately  2,560  employees  at June  30,  2006,  from  approximately  2,230
employees at June 30, 2005.

         Occupancy,  net of rental income,  and furniture and equipment  expense
totaled  $10.5 million and $20.7 million for the three and six months ended June
30, 2006, respectively,  in comparison to $9.0 million and $18.3 million for the
comparable  periods in 2005.  The increase is primarily  attributable  to higher
levels of expense  resulting from our acquisitions in 2005 and 2006, which added
14 branch  offices,  the opening of one de novo branch  office in 2005,  and our
acquisitions of UPAC and Adrian Baker, as discussed  above. The increase is also
attributable to increased technology equipment expenditures, continued expansion
and  renovation  of  certain   corporate  and  branch  offices,   and  increased
depreciation expense associated with acquisitions and capital expenditures.

         Information technology fees were $9.2 million and $18.3 million for the
three and six months ended June 30, 2006,  respectively,  in  comparison to $9.4
million and $17.5  million  for the  comparable  periods in 2005.  As more fully
described in Note 6 to our Consolidated  Financial  Statements,  First Services,
L.P., a limited partnership  indirectly owned by our Chairman and members of his
immediate  family,  provides  information  technology  and  various  operational
support services to our subsidiaries  and us.  Information  technology fees also
include fees paid to outside  servicers  associated  with our  mortgage  lending
division  and our small  business  lending and  institutional  money  management
subsidiaries.   We  primarily  attribute  the  increased  level  of  information
technology fees to the additional  branch offices  provided by our  acquisitions
and de novo  branch  office  openings;  certain  de-conversion  costs from other
providers   associated   with  our   acquisitions;   growth  and   technological
advancements  consistent with our product and service  offerings;  and continued
expansion and upgrades to technological  equipment,  networks and  communication
channels;  partially  offset by expense  reductions  resulting from  information
technology  conversions  of our  acquisitions  completed in 2005, as well as the
achievement  of  certain  efficiencies  associated  with the  implementation  of
various technology projects.

         Legal,  examination  and  professional  fees were $2.4 million and $4.5
million  for the three and six months  ended  June 30,  2006,  respectively,  in
comparison to $2.1 million and $4.5 million for the comparable  periods in 2005.
The  continued   expansion  of  overall   corporate   activities,   the  ongoing
professional  services  utilized  by  certain  of  our  acquired  entities,  and
increased legal fees associated with commercial loan  documentation,  collection
efforts and  certain  defense  litigation  have all  contributed  to the overall
expense levels in 2005 and 2006.

         Amortization   of   intangibles   associated   with  the   purchase  of
subsidiaries  was $1.7  million  and $3.2  million  for the three and six months
ended June 30,  2006,  respectively,  in  comparison  to $1.1  million  and $2.4
million for the comparable periods in 2005. The increase is attributable to core
deposit  intangibles  associated  with  our  acquisitions  of FBA,  IBOC and NSB
completed in 2005 and our acquisition of FNBS, Community Bank and FINB completed
in January 2006,  April 2006 and May 2006,  and to the customer list and related
intangibles  associated  with our  acquisition of Adrian Baker in March 2006, as
more fully described in Note 3 to our Consolidated Financial Statements.
<PAGE>

         Charitable  contributions expense was $1.7 million and $3.3 million for
the three and six months ended June 30, 2006,  respectively,  in  comparison  to
$1.6 million and $1.7 million for the  comparable  periods in 2005. The increase
is  primarily  attributable  to First  Bank's  charitable  contributions  to the
Dierberg  Operating  Foundation,  Inc., a charitable  foundation  created by our
Chairman and members of his immediate  family, as further discussed in Note 6 to
our Consolidated Financial Statements.

         Other  expense was $8.2 million and $15.3 million for the three and six
months  ended June 30, 2006,  respectively,  in  comparison  to $8.8 million and
$14.9 million for the  comparable  periods in 2005.  Other  expense  encompasses
numerous general and administrative  expenses including  insurance,  freight and
courier  services,   correspondent  bank  charges,   miscellaneous   losses  and
recoveries,  expenses on other real estate owned, memberships and subscriptions,
transfer  agent  fees,  sales  taxes and travel,  meals and  entertainment.  The
decrease  and  increase  for the three and six  months  ended  June 30,  2006 in
comparison  to the  comparable  periods  in  2005,  respectively,  is  primarily
attributable to:

         >>    a  $617,000  specific  reserve  established  in March 2006 and an
               increase of $746,000 to the specific reserve in June 2006 for the
               estimated loss associated with a $3.1 million  unfunded letter of
               credit acquired with the acquisition of CIB Bank;

         >>    a $470,000 loss  recognized on a liquidation  sale of residential
               real estate and personal property of an SBA guaranteed loan; and

         >>    expenses  associated  with continued  growth and expansion of our
               banking  franchise,  including  our de novo branch office and our
               acquisitions completed during 2005 and 2006; partially offset by

         >>    a decrease  of  $939,000 of  expenditures  on other real  estate.
               Expenditures  on other real estate were $131,000 and $171,000 for
               the three  and six  months  ended  June 30,  2006,  respectively.
               Expenditures  and losses on other real estate were  $958,000  and
               $1.1  million for the three and six months  ended June 30,  2005,
               and  included an  expenditure  of  $812,000  recorded in May 2005
               related to a parcel of other real estate  acquired in conjunction
               with our CIB Bank acquisition.


Provision for Income Taxes

         The  provision for income taxes was $13.5 million and $25.2 million for
the three and six months ended June 30, 2006,  respectively,  in  comparison  to
$15.0  million  and  $28.3  million  for the  comparable  periods  in 2005.  The
effective  tax rate was 38.0% and 33.1% for the three and six months  ended June
30, 2006,  respectively,  in  comparison  to 35.9% and 36.6% for the  comparable
periods in 2005. The decrease in the effective tax rate for the six months ended
June 30, 2006 is  primarily  attributable  to a $3.2  million  reduction  of the
provision  for  federal  and state  income  taxes in the first  quarter  of 2006
resulting from the reversal of certain tax reserves no longer deemed  necessary.
Exclusive of  nonrecurring  transactions,  the adjusted  effective  tax rate was
38.0% and 37.7% for the three and six months ended June 30, 2006,  respectively,
in comparison to 37.9% and 37.7% for the comparable periods in 2005.


                          Interest Rate Risk Management

         We utilize derivative financial instruments to assist in our management
of interest rate  sensitivity  by modifying the  repricing,  maturity and option
characteristics  of certain assets and  liabilities.  The  derivative  financial
instruments  we held as of June 30, 2006 and December 31, 2005 are summarized as
follows:
<TABLE>
<CAPTION>


                                                             June 30, 2006              December 31, 2005
                                                        -----------------------     ------------------------
                                                         Notional      Credit        Notional       Credit
                                                          Amount      Exposure        Amount       Exposure
                                                          ------      --------        ------       --------
                                                                  (dollars expressed in thousands)

<S>                                                     <C>              <C>         <C>             <C>
         Cash flow hedges.............................  $ 200,000        --          300,000         114
         Fair value hedges............................         --        --           25,000         748
         Interest rate floor agreement................    100,000         1          100,000          70
         Interest rate lock commitments...............      6,400        --            5,900          --
         Forward commitments to sell
           mortgage-backed securities.................     49,000        --           47,000          --
                                                        =========       ===         ========         ===
</TABLE>
<PAGE>

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

         During the three and six months  ended June 30,  2006,  we realized net
interest expense of $990,000 and $2.3 million,  respectively,  on our derivative
financial  instruments,  whereas  during the three and six months ended June 30,
2005,   we  realized  net  interest   income  of  $297,000  and  $3.9   million,
respectively,  on our derivative financial  instruments.  The decreased earnings
are primarily  attributable to continued increases in prevailing interest rates,
the maturity of $200.0  million and $100.0 million  notional  amount of interest
rate swap  agreements  designated  as cash flow  hedges in March  2005 and April
2006,  respectively,  and the termination of $150.0 million,  $101.2 million and
$25.0 million  notional  amount of interest rate swap  agreements  designated as
fair value hedges in February 2005, May 2005 and February 2006, respectively, as
further  discussed below.  Although the Company has implemented other methods to
mitigate the reduction in net interest  income,  the maturity and termination of
the swap  agreements has resulted in a compression of our net interest margin of
approximately  six basis points and 15 basis points for the three and six months
ended June 30, 2006,  respectively,  in comparison to the comparable  periods in
2005. In addition,  the  increasing  interest rate  environment  has mitigated a
portion  of the  effect of the  reduced  earnings  on our  derivative  financial
instruments.  We  recorded  net  losses  on  derivative  instruments,  which are
included in  noninterest  income in our  consolidated  statements of income,  of
$3,000  and  $69,000  for the three  and six  months  ended  June 30,  2006,  in
comparison to net losses of $590,000 for the comparable periods in 2005. The net
losses  recorded in 2006 reflect changes in the value of our interest rate floor
agreement  entered into in September 2005, as further  discussed  below. The net
losses recorded in 2005 reflect  valuation changes in the fair value of our fair
value hedges and the underlying hedged liabilities.

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

         >>    During  March 2001,  April 2001,  and July 2003,  we entered into
               interest rate swap agreements of $200.0  million,  $175.0 million
               and $200.0 million notional amount, respectively.  The underlying
               hedged  assets  are  certain  loans  within our  commercial  loan
               portfolio.  The swap  agreements,  which have been  designated as
               cash flow  hedges,  provide  for us to  receive  a fixed  rate of
               interest and pay an adjustable rate of interest equivalent to the
               weighted average prime lending rate minus 2.82%, 2.82% and 2.85%,
               respectively.  The terms of the swap agreements provide for us to
               pay and receive  interest on a quarterly basis. In November 2001,
               we  terminated   $75.0  million   notional  amount  of  the  swap
               agreements  originally  entered  into in  April  2001 in order to
               appropriately  modify our overall  hedge  position in  accordance
               with our interest rate risk management  program,  and on April 2,
               2006, the remaining  $100.0 million notional amount of these swap
               agreements  matured.  In addition,  the $200.0  million  notional
               amount swap  agreement that we entered into in March 2001 matured
               in  March  2005.  The  amount  receivable  by us  under  the swap
               agreements was $1.1 million and $2.4 million at June 30, 2006 and
               December 31,  2005,  respectively,  and the amount  payable by us
               under the swap  agreements  was $1.8  million and $2.5 million at
               June 30, 2006 and December 31, 2005, respectively.

         The maturity dates, notional amounts,  interest rates paid and received
and fair value of our  interest  rate swap  agreements  designated  as cash flow
hedges as of June 30, 2006 and December 31, 2005 were as follows:
<TABLE>
<CAPTION>

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

         June 30, 2006:
<S>                                                    <C>              <C>           <C>         <C>
             July 31, 2007...........................  $ 200,000        5.40%         3.08%       $ (5,340)
                                                       =========        ====          ====        ========

         December 31, 2005:
             April 2, 2006...........................  $ 100,000        4.43%         5.45%       $    205
             July 31, 2007...........................    200,000        4.40          3.08          (5,296)
                                                       ---------                                  --------
                                                       $ 300,000        4.41          3.87        $ (5,091)
                                                       =========        ====          ====        ========
</TABLE>


<PAGE>


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

         >>    During  January  2001,  we entered into $150.0  million  notional
               amount of five-year  interest rate swap  agreements that provided
               for us to receive a fixed rate of interest and pay an  adjustable
               rate of interest  equivalent to the three-month  London Interbank
               Offering Rate, or LIBOR. The underlying hedged liabilities were a
               portion  of our  other  time  deposits.  The  terms  of the  swap
               agreements  provided for us to pay interest on a quarterly  basis
               and receive interest on a semiannual  basis. In February 2005, we
               terminated  the  swap  agreements.  The  termination  of the swap
               agreements  resulted from an increasing level of  ineffectiveness
               associated with the  correlation of the hedge  positions  between
               the swap agreements and the underlying  hedged  liabilities  that
               had  been  anticipated  as  the  swap  agreements   neared  their
               originally   scheduled   maturity  dates  in  January  2006.  The
               resulting $3.1 million basis adjustments of the underlying hedged
               liabilities  were recorded as interest expense over the remaining
               weighted average maturity of the underlying hedged liabilities of
               approximately  ten  months.  At  December  31,  2005,  the  basis
               adjustments  associated  with  these swap  agreements  were fully
               amortized.

         >>    During May 2002, March 2003 and April 2003, we entered into $55.2
               million,   $25.0  million  and  $46.0  million  notional  amount,
               respectively,  of interest rate swap agreements that provided for
               us to receive a fixed rate of interest and pay an adjustable rate
               of interest equivalent to the three-month LIBOR plus 2.30%, 2.55%
               and 2.58%, respectively. The underlying hedged liabilities were a
               portion  of our  subordinated  debentures.  The terms of the swap
               agreements  provided  for us to pay  and  receive  interest  on a
               quarterly basis.  The amounts  receivable and payable by us under
               the swap  agreements  at  December  31,  2005 were  $506,000  and
               $420,000,  respectively.  In May 2005,  we  terminated  the $55.2
               million and $46.0 million  notional  swap  agreements in order to
               appropriately  modify future hedge  positions in accordance  with
               our interest rate risk management program. The resulting $854,000
               basis  adjustment  of  the  underlying  hedged  liabilities,   in
               aggregate,  was being recorded as a reduction of interest expense
               over  the   remaining   maturities  of  the   underlying   hedged
               liabilities,  which ranged from 26 to 28 years at the time of the
               termination.  Effective  February 16,  2006,  we  terminated  the
               remaining $25.0 million  notional swap agreement.  In conjunction
               with this  transaction,  we recorded the  resulting  $1.7 million
               basis  adjustment of the underlying  hedged  liabilities  and the
               remaining  balance of the basis  adjustments  associated with the
               swap  agreements  that  were  terminated  in May  2005,  totaling
               $834,000,   in  our  consolidated   statements  of  income.   The
               recognition of the net basis adjustments on all of the terminated
               fair value  interest rate swap  agreements  resulted in a pre-tax
               loss of $849,000 that was recorded in February 2006.

Interest  Rate Floor  Agreement.  In  September  2005,  we entered into a $100.0
million notional amount three-year  interest rate floor agreement in conjunction
with our  interest  rate  risk  management  program.  The  interest  rate  floor
agreement provides for us to receive a quarterly fixed rate of interest of 5.00%
should the three-month  LIBOR equal or fall below the strike price of 2.00%. The
carrying value of the interest rate floor agreement,  which is included in other
assets in our  consolidated  balance sheets,  was $1,000 and $70,000 at June 30,
2006 and December 31, 2005, respectively.
<PAGE>

         During 2003 and 2004, we entered into five term  repurchase  agreements
under master repurchase  agreements with unaffiliated third parties,  as further
described in Note 9 to our  Consolidated  Financial  Statements.  The underlying
securities  associated with the term repurchase  agreements are  mortgage-backed
securities and callable U.S.  Government agency securities and are held by other
financial  institutions  under  safekeeping  agreements.   The  term  repurchase
agreements  were entered into with the  objective  of  stabilizing  net interest
income over time,  further protecting our net interest margin against changes in
interest rates and providing funding for security  purchases.  The interest rate
floor  agreements  included  within  the term  repurchase  agreements  represent
embedded  derivative  instruments which, in accordance with existing  accounting
literature  governing derivative  instruments,  are not required to be separated
from the term repurchase agreements and accounted for separately as a derivative
financial  instrument.  As such, the term repurchase agreements are reflected in
other  borrowings in our  consolidated  balance sheets and the related  interest
expense is reflected as interest expense on other borrowings in our consolidated
statements of income.  In March 2005, in accordance  with our interest rate risk
management program, we modified our term repurchase  agreements to terminate the
interest rate cap agreements  embedded within the agreements and  simultaneously
enter into interest rate floor agreements,  also embedded within the agreements.
These modifications resulted in adjustments to the existing interest rate spread
to  LIBOR  for  the  underlying  agreements.  The  modified  terms  of the  term
repurchase agreements became effective during the second quarter of 2005. We did
not incur any costs associated with the  modifications of the agreements nor did
the modifications result in a change to the accounting treatment of the embedded
derivative  instruments.  In November  2005,  we terminated a $50.0 million term
repurchase agreement with a maturity date of August 15, 2006, and simultaneously
recognized a loss of $2.9 million on the sale of  available-for-sale  investment
securities associated with the termination of the term repurchase agreement.  As
further  discussed  in  Note  9 to our  Consolidated  Financial  Statements,  on
February  14,  2006,  we  terminated  the  two  $50.0  million  term  repurchase
agreements  with maturity  dates of June 14, 2007, and recognized a $1.6 million
loss on the sale of $100.0 million of  available-for-sale  investment securities
associated with the termination of the term repurchase agreements;  on March 28,
2006, we terminated the $50.0 million term repurchase  agreement with a maturity
date of August 1, 2007,  and  recognized  a  $746,000  loss on the sale of $50.0
million  of   available-for-sale   investment  securities  associated  with  the
termination  of the  term  repurchase  agreement;  and on  April  28,  2006,  we
terminated $50.0 million of the $150.0 million term repurchase  agreement with a
maturity date of January 12, 2007, and recognized a $310,000 loss on the sale of
$50.0 million of  available-for-sale  investment  securities associated with the
termination  of the term  repurchase  agreement.  Our  termination  transactions
entered  into in 2006  resulted  in a  reduction  of $200.0  million of our term
repurchase  agreements,  the  recognition  of a $2.7 million loss on the sale of
$200.0  million  of  investment   securities  held  in  our   available-for-sale
investment   portfolio,   and  prepayment  penalties  of  $306,000  incurred  in
conjunction with the early termination of the term repurchase agreements.

Pledged  Collateral.  At June 30, 2006 and  December  31,  2005,  we had pledged
investment  securities  available for sale with a fair value of $6.1 million and
$5.1  million,   respectively,   in  connection  with  our  interest  rate  swap
agreements.  In addition,  at December 31, 2005, we had a $2.0 million letter of
credit  issued on our behalf to the  counterparty  and had pledged  cash of $1.8
million as collateral in connection with our interest rate swap agreements.

Interest Rate Lock  Commitments / Forward  Commitments  to Sell  Mortgage-Backed
Securities.  Derivative  financial  instruments issued by us consist of interest
rate lock commitments to originate  fixed-rate loans to be sold.  Commitments to
originate  fixed-rate loans consist  primarily of residential real estate loans.
These net loan  commitments  and loans  held for sale are  hedged  with  forward
contracts  to sell  mortgage-backed  securities.  The  carrying  value  of these
interest  rate lock  commitments  included in other  assets in our  consolidated
balance  sheets was  $460,000  and  ($49,000)  at June 30, 2006 and December 31,
2005, respectively.




<PAGE>



                       Loans and Allowance for Loan Losses

         Interest and fees on loans,  which  represent the  principal  source of
income for First Banks,  were 89.9% and 89.5% of total  interest  income for the
three and six months ended June 30, 2006,  respectively,  in comparison to 84.9%
and 84.4% for the  comparable  periods in 2005.  Total  loans,  net of  unearned
discount,  increased to $7.60  billion,  or 79.0% of total  assets,  at June 30,
2006, compared to $7.02 billion, or 76.6% of total assets, at December 31, 2005.
The overall  increase in loans, net of unearned  discount,  in 2006 is primarily
attributable  to internal loan growth and our  acquisitions  of FNBS,  Community
Bank, FINB and UPAC, which provided loans, net of unearned  discount,  of $269.2
million, in aggregate,  partially offset by the securitization of $138.9 million
of certain residential mortgage loans, and the sale and payoff of certain of our
nonperforming  loans  that  were held for sale at  December  31,  2005.  The net
increase in our loan portfolio is primarily attributable to:

         >>    an increase of $244.7 million in our real estate construction and
               development   portfolio   resulting   primarily   from  new  loan
               originations and seasonal  fluctuations on existing and available
               credit  lines,  as well as $3.9 million of loans  provided by our
               acquisition of FNBS;

         >>    an increase of $226.3  million in our  commercial,  financial and
               agricultural  portfolio,  primarily attributable to internal loan
               production,   and  $153.6   million  of  loans  provided  by  our
               acquisition of UPAC, and $12.7  million,  in aggregate,  of loans
               provided by our acquisitions of FNBS, Community Bank and FINB;

         >>    an  increase  of  $92.0  million  in  our  real  estate  mortgage
               portfolio.  The net increase was attributable to: internal growth
               within  our  loan  portfolio  of  approximately  $232.3  million,
               largely  attributable  to the retention of certain  mortgage loan
               production in our residential real estate mortgage portfolio; our
               acquisitions  of FNBS,  Community  Bank and FINB,  which provided
               loans of $98.6 million; partially offset by the securitization of
               $77.1 million and $61.8 million of certain  residential  mortgage
               loans in March 2006 and April 2006, respectively,  which resulted
               in a change  in our asset  structure  from  residential  mortgage
               loans  to  available-for-sale   investment  securities;  and  the
               transfer of $100.0  million of certain loans to our held for sale
               portfolio  following a  commitment  to sell these loans in August
               2006; and

         >>    a $17.3  million  increase  in our loans held for sale  portfolio
               resulting   from  the  transfer  of  $100.0  million  of  certain
               residential  mortgage  loans to our loans held for sale portfolio
               on June 30, 2006, partially offset by timing of loan sales in the
               secondary  mortgage  market,  the sale of  certain  nonperforming
               loans that were  transferred  to our held for sale  portfolio  on
               December 31, 2005, and the payoff of a single  nonperforming loan
               in January 2006 that was included in our held for sale  portfolio
               at December 31, 2005, as further discussed below.



<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 June 30, 2006 and December 31, 2005:
<TABLE>
<CAPTION>

                                                                                   June 30,        December 31,
                                                                                     2006              2005
                                                                                     ----              ----
                                                                                (dollars expressed in thousands)
         Commercial, financial and agricultural:
<S>                                                                              <C>                   <C>
           Nonaccrual.........................................................   $   15,730            4,948
         Real estate construction and development:
           Nonaccrual.........................................................       14,399           11,137
         Real estate mortgage:
           One-to-four family residential:
              Nonaccrual......................................................        8,773            9,576
              Restructured....................................................            9               10
           Multi-family residential loans:
              Nonaccrual......................................................          649              740
           Commercial real estate loans:
              Nonaccrual......................................................       33,286           70,625
         Consumer and installment:
           Nonaccrual.........................................................          184              160
                                                                                 ----------        ---------
                  Total nonperforming loans...................................       73,030           97,196
         Other real estate....................................................        5,460            2,025
                                                                                 ----------        ---------
                  Total nonperforming assets..................................   $   78,490           99,221
                                                                                 ==========        =========

         Loans, net of unearned discount......................................   $7,600,591        7,020,771
                                                                                 ==========        =========

         Loans past due 90 days or more and still accruing....................   $    5,737            5,576
                                                                                 ==========        =========

         Ratio of:
           Allowance for loan losses to loans.................................         1.94%            1.93%
           Nonperforming loans to loans.......................................         0.96             1.38
           Allowance for loan losses to nonperforming loans...................       201.81           139.23
           Nonperforming assets to loans and other real estate................         1.03             1.41
                                                                                 ==========        =========
</TABLE>

         Nonperforming  loans,  consisting  of loans on  nonaccrual  status  and
certain  restructured  loans,  were $73.0 million at June 30, 2006,  compared to
$67.1  million at March 31, 2006 and $97.2  million at December 31, 2005.  Other
real estate  owned was $5.5  million,  $3.3 million and $2.0 million at June 30,
2006,  March 31, 2006 and  December 31, 2005,  respectively.  Our  nonperforming
assets,  consisting of  nonperforming  loans and other real estate  owned,  were
$78.5 million at June 30, 2006,  compared to $70.4 million at March 31, 2006 and
$99.2 million at December 31, 2005. A significant  portion of our  nonperforming
assets includes  nonperforming loans associated with our acquisition of CIB Bank
in November 2004,  which have decreased to $18.1 million,  or 24.8% of our total
nonperforming loans, at June 30, 2006, from $18.2 million, or 27.1% of our total
nonperforming  loans, at March 31, 2006, and from $55.0 million, or 56.6% of our
nonperforming  loans,  at December 31, 2005.  Nonperforming  loans were 0.96% of
loans, net of unearned discount,  at June 30, 2006,  compared to 0.94% of loans,
net of unearned  discount,  at March 31, 2006 and 1.38% at  December  31,  2005.
Additionally,  loans past due 90 days or more and still  accruing  interest were
$5.7  million at June 30,  2006,  compared to $2.2 million at March 31, 2006 and
$5.6 million at December 31, 2005.  Nonperforming loans at June 30, 2006 reflect
a $24.2 million,  or 24.9%,  decrease from  nonperforming  loans at December 31,
2005, and a $5.9 million,  or 8.8%,  increase from nonperforming  loans at March
31, 2006. The 24.9% decrease in nonperforming  loans during the six months ended
June 30, 2006 primarily resulted from our plans to reduce  nonperforming  assets
through the sale of certain  nonperforming  loans,  loan payoffs and/or external
refinancing of various  credits.  We had been actively  marketing  approximately
$59.7 million of nonperforming  loans that were transferred to our held for sale
portfolio on December 31, 2005.  In January 2006, we received a payoff on one of
the loans held for sale that had a carrying  value of $12.4  million at December
31, 2005. In conjunction with this transaction, we recognized a loan recovery of
$5.0  million and  interest  and late fees of $2.0  million on the payoff of the
loan.  In March 2006,  we completed  the sale of the  majority of the  remaining
loans held for sale that had a carrying value of approximately $32.5 million, in
aggregate,  at December 31, 2005,  and recorded a pre-tax gain of  approximately
$1.7  million  on  the  sale  of  these  loans.  The  overall  decrease  in  our
nonperforming  loans  during  2006 was  partially  offset by two credits of $8.9
million and $10.0  million that were placed on  nonaccrual  status in March 2006
and June 2006,  respectively,  following deterioration of the financial position
of the borrowers.
<PAGE>

         We recorded net loan  charge-offs  of $1.2 million for the three months
ended June 30, 2006, compared to net loan recoveries of $2.1 million for the six
months ended June 30, 2006. We recorded net loan  recoveries of $3.6 million for
the three  months ended June 30, 2005 and net loan  charge-offs  of $3.0 million
for the six months ended June 30, 2005. Net loan  recoveries for 2006 included a
loan  recovery  of $5.0  million  on the  payoff  of a single  loan in the first
quarter of 2006,  as discussed  above.  Our allowance for loan losses was $147.4
million at June 30,  2006,  compared  to $140.2  million  at March 31,  2006 and
$135.3  million  at  December  31,  2005.  Our  allowance  for loan  losses as a
percentage  of loans,  net of  unearned  discount,  was 1.94% at June 30,  2006,
compared  to 1.96% at March  31,  2006 and  1.93%  at  December  31,  2005.  Our
allowance for loan losses as a percentage of nonperforming  loans was 201.81% at
June 30, 2006, compared to 209.00% at March 31, 2006 and 139.23% at December 31,
2005. We continue to closely  monitor our loan portfolio and address the ongoing
challenges  posed by the  economic  environment,  including  reduced loan demand
within certain  sectors of our loan  portfolio.  We consider this in our overall
assessment  of the  adequacy of the  allowance  for loan  losses.  In  addition,
although we have experienced  continued  improvement in our nonperforming  asset
levels, we continue our efforts to reduce the overall level of these assets.

         Each month, the credit  administration  department  provides management
with detailed  lists of loans on the watch list and summaries of the entire loan
portfolio by risk rating. These are coupled with analyses of changes in the risk
profile  of the  portfolio,  changes in  past-due  and  nonperforming  loans and
changes  in watch  list and  classified  loans over  time.  In this  manner,  we
continually  monitor the overall  increases or decreases in the level of risk in
the  portfolio.  Factors are applied to the loan  portfolio for each category of
loan risk to  determine  acceptable  levels of  allowance  for loan  losses.  In
addition,  a quarterly  evaluation  of each lending  unit is performed  based on
certain factors,  such as lending personnel  experience,  recent credit reviews,
loan concentrations and other factors. Based on this evaluation,  changes to the
allowance  for  loan  losses  may  be  required  due to the  perceived  risk  of
particular  portfolios.  The calculated  allowance required for the portfolio is
then  compared to the actual  allowance  balance to  determine  the  adjustments
necessary  to  maintain  the  allowance  at  appropriate  levels.  In  addition,
management exercises a certain degree of judgment in its analysis of the overall
adequacy of the allowance for loan losses. In its analysis, management considers
the change in the portfolio,  including  growth,  composition,  the ratio of net
loans to total  assets,  and the economic  conditions of the regions in which we
operate.  Based on this quantitative and qualitative  analysis,  adjustments are
made to the allowance  for loan losses.  Such  adjustments  are reflected in our
consolidated statements of income.

         Changes in the  allowance  for loan losses for the three and six months
ended June 30, 2006 and 2005 were as follows:
<TABLE>
<CAPTION>

                                                           Three Months Ended            Six Months Ended
                                                                June 30,                     June 30,
                                                         ----------------------        --------------------
                                                            2006        2005             2006        2005
                                                            ----        ----             ----        ----
                                                                  (dollars expressed in thousands)

<S>                                                       <C>          <C>              <C>         <C>
         Balance, beginning of period................     $140,235     144,154          135,330     150,707
         Acquired allowance for loan losses..........        3,368         419            3,944         419
                                                          --------    --------         --------    --------
                                                           143,603     144,573          139,274     151,126
                                                          --------    --------         --------    --------
         Loans charged-off...........................       (2,896)     (2,385)          (6,341)    (15,021)
         Recoveries of loans previously charged-off..        1,676       5,976            8,450      12,059
                                                          --------    --------         --------    --------
           Net loan recoveries (charge-offs).........       (1,220)      3,591            2,109      (2,962)
                                                          --------    --------         --------    --------
         Provision for loan losses...................        5,000      (8,000)           6,000      (8,000)
                                                          --------    --------         --------    --------
         Balance, end of period......................     $147,383     140,164          147,383     140,164
                                                          ========    ========         ========    ========
</TABLE>





<PAGE>


                                    Liquidity

         Our  liquidity  is the ability to maintain a cash flow that is adequate
to fund  operations,  service debt  obligations  and meet  obligations and other
commitments  on a timely basis.  We receive  funds for  liquidity  from customer
deposits,  loan  payments,  maturities  of  loans  and  investments,   sales  of
investments and earnings.  In addition,  we may avail ourselves of other sources
of funds by issuing  certificates  of deposit in  denominations  of  $100,000 or
more, borrowing federal funds, selling securities under agreements to repurchase
and utilizing borrowings from the FHLB and other borrowings,  including our term
loan and our  revolving  credit line.  The aggregate  funds  acquired from these
sources were $1.74  billion and $1.72  billion at June 30, 2006 and December 31,
2005, respectively.

         The  following  table  presents the  maturity  structure of these other
sources of funds,  which consists of certificates of deposit of $100,000 or more
and other borrowings, including our notes payable, at June 30, 2006:

<TABLE>
<CAPTION>

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

<S>                                                        <C>                  <C>                <C>
         Three months or less...........................   $   410,071          231,889            641,960
         Over three months through six months...........       332,818            5,000            337,818
         Over six months through twelve months..........       394,062          110,000            504,062
         Over twelve months.............................       191,436           66,107            257,543
                                                           -----------          -------          ---------
              Total.....................................   $ 1,328,387          412,996          1,741,383
                                                           ===========          =======          =========
</TABLE>

         In addition to these  sources of funds,  First Bank has  established  a
borrowing  relationship  with  the  Federal  Reserve  Bank  of St.  Louis.  This
borrowing  relationship,  which is  secured by  commercial  loans,  provides  an
additional liquidity facility that may be utilized for contingency  purposes. At
June 30, 2006 and December 31, 2005, First Bank's  borrowing  capacity under the
agreement was approximately $661.1 million and $743.6 million,  respectively. In
addition, First Bank's borrowing capacity through its relationship with the FHLB
was  approximately  $742.1  million  and  $679.3  million  at June 30,  2006 and
December 31, 2005,  respectively.  First Bank had FHLB advances  outstanding  of
$26.1  million  and  $39.3  million  at June 30,  2006 and  December  31,  2005,
respectively, of which $1.1 million and $39.3 million, respectively, represented
advances assumed in conjunction with various acquisitions. On March 17, 2006 and
May 10,  2006,  First  Bank  prepaid  $20.5  million  and $14.8  million of FHLB
advances,   respectively,   that  were  assumed  in  conjunction  with  previous
acquisitions,  as  further  described  in Note 9 to our  Consolidated  Financial
Statements.

         In addition  to our owned  banking  facilities,  we have  entered  into
long-term leasing  arrangements to support our ongoing activities.  The required
payments under such  commitments and other  contractual  obligations at June 30,
2006 were as follows:
<TABLE>
<CAPTION>

                                                    Less than      1-3        3-5       Over
                                                     1 Year       Years      Years     5 Years     Total
                                                     ------       -----      -----     -------     -----
                                                                (dollars expressed in thousands)

<S>                                               <C>             <C>        <C>        <C>         <C>
         Operating leases.......................  $    12,575     21,027     13,530     21,948      69,080
         Certificates of deposit (1)............    2,930,308    568,783    140,615     15,061   3,654,767
         Other borrowings (1)...................      326,889        235        872         --     327,996
         Notes payable (1)......................       20,000     65,000         --         --      85,000
         Subordinated debentures (1)............           --         --         --    304,270     304,270
         Other contractual obligations..........        1,138        292         14         17       1,461
                                                  -----------   --------   --------   --------   ---------
              Total.............................  $ 3,290,910    655,337    155,031    341,296   4,442,574
                                                  ===========   ========   ========   ========   =========
         ---------------
         (1) Amounts exclude the related interest expense accrued on these obligations as of June 30, 2006.
</TABLE>

         Management  believes the available  liquidity and operating  results of
First  Bank will be  sufficient  to  provide  funds for growth and to permit the
distribution  of  dividends  to us  sufficient  to meet our  operating  and debt
service  requirements,  both on a short-term  and  long-term  basis,  and to pay
interest  on the  subordinated  debentures  that  we  issued  to our  affiliated
statutory and business financing trusts.




<PAGE>



                       Effects of New Accounting Standards

         In November 2003, the Emerging  Issues Task Force,  or EITF,  reached a
consensus on certain  disclosure  requirements  under EITF Issue No.  03-1,  The
Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to  Certain
Investments.  The new disclosure  requirements  apply to investments in debt and
marketable equity securities that are accounted for under Statement of Financial
Accounting  Standards,  or SFAS, No. 115,  Accounting for Certain Investments in
Debt and Equity Securities, and SFAS No. 124, Accounting for Certain Investments
Held by  Not-for-Profit  Organizations.  Effective for fiscal years ending after
December 15, 2003,  companies are required to disclose information about debt or
marketable  equity  securities  with market  values below  carrying  values.  We
previously adopted the disclosure  requirements of EITF Issue No. 03-1. In March
2004, the EITF came to a consensus regarding EITF Issue No. 03-1.  Securities in
scope are those  subject to SFAS No. 115 and SFAS No.  124.  The EITF  adopted a
three-step  model that requires  management  to determine if impairment  exists,
decide  whether it is other  than  temporary,  and  record  other-than-temporary
losses  in  earnings.  In  September  2004,  the FASB  approved  issuing a Staff
Position to delay the requirement to record  impairment  losses under EITF Issue
No. 03-1, but broadened the scope to include additional types of securities.  As
proposed,  the delay would have applied only to those debt securities  described
in paragraph 16 of EITF Issue No. 03-1, the Consensus that provides guidance for
determining  whether an  investment's  impairment  is other than  temporary  and
should be  recognized  in income.  In June 2005,  the FASB  directed the EITF to
issue EITF Issue No.  03-1-a,  Implementation  Guidance for the  Application  of
Paragraph 16 of EITF Issue No. 03-1, as final. In November 2005, the FASB issued
FASB  Staff  Position,  or  FSP,  FAS  115-1  and  FAS  124-1,  The  Meaning  of
Other-Than-Temporary  Impairment and Its Application to Certain Investments. The
FSP addresses  determining when an investment is considered impaired and whether
that impairment is other than temporary,  and measuring an impairment  loss. The
FSP  also   addresses   the   accounting   after   an   entity   recognizes   an
other-than-temporary   impairment,   and  requires  certain   disclosures  about
unrealized  losses  that the entity did not  recognize  as  other-than-temporary
impairments. The FSP is effective for reporting periods beginning after December
15, 2005. On January 1, 2006, we implemented  the  requirements of FSP FAS 115-1
and FAS 124-1,  which did not have a material effect on our financial  condition
or results of operations.

         In March 2005,  the Federal  Reserve  adopted a final rule,  Risk-Based
Capital  Standards:  Trust  Preferred  Securities and the Definition of Capital,
which allows for the continued limited  inclusion of trust preferred  securities
in Tier I  capital.  We have  evaluated  the  impact  of the  final  rule on our
financial condition and results of operations, and determined the implementation
of the Federal  Reserve's final rules that will be effective in March 2009 would
reduce our bank holding company's Tier I capital (to  risk-weighted  assets) and
Tier I capital  (to  average  assets),  as  further  described  in Note 7 to our
Consolidated Financial Statements.

         In May 2005,  the FASB  issued SFAS No. 154 --  Accounting  Changes and
Error  Corrections.  SFAS No.  154,  a  replacement  of APB  Opinion  No.  20 --
Accounting  Changes  and FASB  SFAS No. 3 --  Reporting  Accounting  Changes  in
Interim Financial Statements,  requires retrospective  application for voluntary
changes in accounting  principles  unless it is impracticable to do so. SFAS No.
154 is effective  for  accounting  changes and  corrections  of errors in fiscal
years  beginning  after  December 15, 2005.  Early  application is permitted for
accounting changes and corrections of errors during fiscal years beginning after
June 1, 2005. On January 1, 2006, we implemented  the  requirements  of SFAS No.
154, which did not have a material effect on our financial  condition or results
of operations.

         In March 2006,  the FASB issued SFAS No. 156 - Accounting for Servicing
of  Financial  Assets.  SFAS No.  156,  an  amendment  of FASB  SFAS  No.  140 -
Accounting for Transfers and Servicing of Financial  Assets and  Extinguishments
of Liabilities,  allows mark-to-market accounting for servicing rights resulting
in  reporting  that is similar to fair value hedge  accounting,  but without the
effort and system costs needed to identify  effective  hedging  instruments  and
document  hedging  relationships.  SFAS No. 156 is  effective  for fiscal  years
beginning  after  September  15,  2006.  Early  adoption is  permitted as of the
beginning  of a company's  fiscal  year  unless the  company has already  issued
interim  financial   statements  during  that  fiscal  year.  We  are  currently
evaluating  the  requirements  of SFAS No.  156 to  determine  its impact on our
financial condition and results of operations.

         In June 2006, the FASB issued FASB  Interpretation No. 48 -- Accounting
for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109 -- Accounting
for Income  Taxes.  FASB  interpretation  No. 48 clarifies  the  accounting  for
uncertainty in income taxes in financial statements and prescribes a recognition
threshold and  measurement  attribute for financial  statement  recognition  and
measurement of a tax position taken or expected to be taken. The  Interpretation
also provides guidance on derecognition, classification, interest and penalties,
accounting   in  interim   periods,   disclosure   and   transition.   The  FASB
Interpretation  is effective for fiscal years beginning after December 15, 2006.
We are currently  evaluating the requirements of FASB  Interpretation  No. 48 to
determine its impact on our financial condition and results of operations.
<PAGE>

      ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         At December 31, 2005, our risk management  program's  simulation  model
indicated a loss of projected  net interest  income in the event of a decline in
interest  rates.  We are  "asset-sensitive,"  indicating  that our assets  would
generally reprice with changes in rates more rapidly than our liabilities. While
a decline in interest  rates of less than 100 basis points was projected to have
a  relatively  minimal  impact  on our net  interest  income,  an  instantaneous
parallel  decline in the interest  yield curve of 100 basis  points  indicated a
pre-tax  projected loss of approximately  6.4% of net interest income,  based on
assets and  liabilities  at December 31, 2005. At June 30, 2006, we remain in an
"asset-sensitive" position and thus, remain subject to a higher level of risk in
a  declining  interest  rate  environment.  Although we do not  anticipate  that
instantaneous shifts in the yield curve as projected in our simulation model are
likely,  these are  indications  of the effects that  changes in interest  rates
would have over time.  Our  asset-sensitive  position,  coupled with declines in
income  associated  with our  interest  rate swap  agreements  and  increases in
prevailing interest rates, is reflected in our net interest margin for the three
and six months ended June 30, 2006 as compared to the comparable periods in 2005
and further discussed under  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations."  During the three
and six months ended June 30,  2006,  our  asset-sensitive  position and overall
susceptibility to market risks have not changed materially.  However, prevailing
interest rates have continued to increase  during the three and six months ended
June 30, 2006.



<PAGE>


                        ITEM 4 - CONTROLS AND PROCEDURES

         Our Chief  Executive  Officer  and our  Chief  Financial  Officer  have
evaluated the  effectiveness  of our  "disclosure  controls and  procedures" (as
defined in Rules  13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of
1934, or the Exchange  Act), as of the end of the period covered by this report.
Based on such  evaluation,  our Chief Executive  Officer and our Chief Financial
Officer  have  concluded  that,  as of the end of  such  period,  the  Company's
disclosure  controls and  procedures  are  effective in  recording,  processing,
summarizing  and  reporting,  on a  timely  basis,  information  required  to be
disclosed  by the  Company in the  reports  that it files or  submits  under the
Exchange Act. There have not been any changes in the Company's  internal control
over  financial  reporting  (as such  term is  defined  in Rules  13a-15(f)  and
15d-15(f) under the Exchange Act) during the fiscal quarter to which this report
relates that have materially  affected,  or are reasonably  likely to materially
affect,  the  Company's   disclosure  controls  and  procedures  over  financial
reporting.



<PAGE>


                           PART II - OTHER INFORMATION

          ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         At the April 27, 2006 Annual  Meeting of  Shareholders  of First Banks,
Messrs.  James F.  Dierberg,  Allen H. Blake,  Gordon A.  Gundaker,  Terrance M.
McCarthy,   Steven  F.  Schepman,  David  L.  Steward  and  Douglas  H.  Yaeger,
constituting all of the directors, were unanimously re-elected.
<PAGE>

                                ITEM 6 - EXHIBITS

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

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

           4.1      Indenture  between  First  Banks,   Inc.,  as  Issuer,   and
                    Wilmington Trust Company, as Trustee,  dated as of April 28,
                    2006 - filed herewith.

           4.2      Amended  and  Restated  Declaration  of Trust of First  Bank
                    Statutory Trust V by and among Wilmington Trust Company,  as
                    Delaware Trustee and the Institutional Trustee, First Banks,
                    Inc.,  as Sponsor,  and Allen H. Blake,  Peter D. Wimmer and
                    Lisa K. Vansickle, as Administrators,  dated as of April 28,
                    2006 - filed herewith.

           4.3      Guarantee  Agreement by and between  First  Banks,  Inc. and
                    Wilmington Trust Company, dated as of April 28, 2006 - filed
                    herewith.

           4.4      Placement  Agreement by and among First Banks,  Inc.,  First
                    Bank Statutory Trust V and FTN Financial Capital Markets and
                    Keefe, Bruyette & Woods, Inc., as Placement Agents, dated as
                    of April 27, 2006 - filed herewith.

           4.5      Floating  Rate  Junior   Subordinated   Deferrable  Interest
                    Debenture of First Banks, Inc., dated as of April 28, 2006 -
                    filed herewith.

           4.6      Capital Securities Subscription Agreement by and among First
                    Bank  Statutory  Trust  V,  First  Banks,   Inc.  and  First
                    Tennessee Bank National  Association,  dated as of April 28,
                    2006 - filed herewith.

           4.7      Capital  Securities  Certificate P-1 of First Bank Statutory
                    Trust V, dated as of April 28, 2006 - filed herewith.

           4.8      Indenture  between First Banks,  Inc., as Issuer,  and Wells
                    Fargo Bank, National  Association,  as Trustee,  dated as of
                    June 16, 2006 - filed herewith.

           4.9      Amended  and  Restated  Declaration  of Trust of First  Bank
                    Statutory  Trust VI by and among Wells Fargo  Delaware Trust
                    Company,  as Delaware  Trustee,  Wells Fargo Bank,  National
                    Association, as Institutional Trustee, First Banks, Inc., as
                    Sponsor,  and  Allen  H.  Blake  and Lisa K.  Vansickle,  as
                    Administrators, dated as of June 16, 2006 - filed herewith.

           4.10     Guarantee  Agreement by and between  First  Banks,  Inc. and
                    Wells Fargo Bank, National Association, dated as of June 16,
                    2006 - filed herewith.

           4.11     Purchase  Agreement  among  First Bank  Statutory  Trust VI,
                    Issuer,  First Banks, Inc., Sponsor, and Bear, Stearns & Co.
                    Inc., Initial  Purchaser,  dated as of June 14, 2006 - filed
                    herewith.

           4.12     Junior  Subordinated  Debt Security due 2036 of First Banks,
                    Inc., dated as of June 16, 2006 - filed herewith.

           4.13     Debenture Subscription Agreement by and between First Banks,
                    Inc. and First Bank Statutory Trust VI, dated as of June 16,
                    2006 - filed herewith.

           4.14     Capital Securities Certificate P-001 of First Bank Statutory
                    Trust VI, dated as of June 16, 2006 - filed herewith.

           31.1     Rule 13a-14(a) / 15d-14(a) Certifications of Chief Executive
                    Officer - filed herewith.

           31.2     Rule 13a-14(a) / 15d-14(a) Certifications of Chief Financial
                    Officer - filed herewith.

           32.1     Section 1350  Certifications  of Chief  Executive  Officer -
                    filed herewith.

           32.2     Section 1350  Certifications  of Chief  Financial  Officer -
                    filed herewith.
<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.



Date:  August 11, 2006

                                  FIRST BANKS, INC.


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


                                  By: /s/ Steven F. Schepman
                                      ------------------------------------------
                                          Steven F. Schepman
                                          Senior Vice President and
                                          Chief Financial Officer
                                          (Principal Financial and Accounting
                                          Officer)