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 September 30, 2007

[ ] 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 October 31, 2007
                    -----                               -------------------

         Common Stock, $250.00 par value                      23,661



<PAGE>

<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.............................................................    18

   ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................    37

   ITEM 4.   CONTROLS AND PROCEDURES...................................................................    37

PART II.     OTHER INFORMATION

   ITEM 6.   EXHIBITS..................................................................................    38

SIGNATURES.............................................................................................    40

</TABLE>

<PAGE>
<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)

                                                                                      September 30,  December 31,
                                                                                          2007           2006
                                                                                          ----           ----
                                                                                       (unaudited)

                                                    ASSETS
                                                    ------

Cash and cash equivalents:
<S>                                                                                    <C>               <C>
     Cash and due from banks........................................................  $   183,580        215,974
     Short-term investments.........................................................       76,956        153,583
                                                                                      -----------     ----------
          Total cash and cash equivalents...........................................      260,536        369,557
                                                                                      -----------     ----------

Investment securities:
     Trading........................................................................           --         81,168
     Available for sale.............................................................    1,145,870      1,359,729
     Held to maturity (fair value of $19,403 and $23,971, respectively).............       19,647         24,049
                                                                                      -----------     ----------
          Total investment securities...............................................    1,165,517      1,464,946
                                                                                      -----------     ----------

Loans:
     Commercial, financial and agricultural.........................................    2,181,136      1,934,912
     Real estate construction and development.......................................    2,001,226      1,832,504
     Real estate mortgage...........................................................    3,773,803      3,615,148
     Consumer and installment.......................................................       89,351         83,008
     Loans held for sale............................................................       99,470        216,327
                                                                                      -----------     ----------
          Total loans...............................................................    8,144,986      7,681,899
     Unearned discount..............................................................      (12,213)       (15,418)
     Allowance for loan losses......................................................     (140,165)      (145,729)
                                                                                      -----------     ----------
          Net loans.................................................................    7,992,608      7,520,752
                                                                                      -----------     ----------

Bank premises and equipment, net....................................................      216,633        178,417
Goodwill and other intangible assets................................................      314,084        295,382
Bank-owned life insurance...........................................................      115,831        113,778
Deferred income taxes...............................................................      102,459        100,175
Other assets........................................................................      104,368        115,707
                                                                                      -----------     ----------
          Total assets..............................................................  $10,272,036     10,158,714
                                                                                      ===========     ==========

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

Deposits:
     Noninterest-bearing demand.....................................................  $ 1,195,950      1,281,108
     Interest-bearing demand........................................................      921,447        981,939
     Savings and money market.......................................................    2,676,244      2,352,575
     Time deposits of $100 or more..................................................    1,478,159      1,419,579
     Other time deposits............................................................    2,350,545      2,407,885
                                                                                      -----------     ----------
          Total deposits............................................................    8,622,345      8,443,086
Other borrowings....................................................................      310,772        373,899
Notes payable.......................................................................       10,000         65,000
Subordinated debentures.............................................................      353,733        297,966
Deferred income taxes...............................................................       40,854         42,826
Accrued expenses and other liabilities..............................................       71,829        130,033
Minority interest in subsidiary.....................................................        5,642          5,469
                                                                                      -----------     ----------
          Total liabilities.........................................................    9,415,175      9,358,279
                                                                                      -----------     ----------
<PAGE>

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

 Preferred stock:
     $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..........................................................        9,685          9,685
Retained earnings...................................................................      840,779        784,864
Accumulated other comprehensive loss................................................      (12,581)       (13,092)
                                                                                      -----------     ----------
          Total stockholders' equity................................................      856,861        800,435
                                                                                      -----------     ----------
          Total liabilities and stockholders' equity................................  $10,272,036     10,158,714
                                                                                      ===========     ==========

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       Nine Months Ended
                                                                           September 30,           September 30,
                                                                       --------------------    ---------------------
                                                                          2007       2006         2007       2006
                                                                          ----       ----         ----       ----
Interest income:
<S>                                                                     <C>         <C>          <C>        <C>
     Interest and fees on loans....................................... $ 160,134    153,394      471,713    426,456
     Investment securities............................................    16,493     13,881       49,867     43,514
     Short-term investments...........................................     1,478      1,018        5,671      3,288
                                                                       ---------  ---------    ---------  ---------
          Total interest income.......................................   178,105    168,293      527,251    473,258
                                                                       ---------  ---------    ---------  ---------
Interest expense:
     Deposits:
       Interest-bearing demand........................................     2,242      2,057        7,171      5,832
       Savings and money market.......................................    21,012     13,491       59,809     36,929
       Time deposits of $100 or more..................................    18,299     15,902       53,533     41,716
       Other time deposits............................................    27,881     25,526       83,851     68,706
     Other borrowings.................................................     4,361      4,322       13,653     12,263
     Notes payable....................................................       544      1,434        2,088      4,331
     Subordinated debentures..........................................     5,920      6,377       17,668     17,751
                                                                       ---------  ---------    ---------  ---------
          Total interest expense......................................    80,259     69,109      237,773    187,528
                                                                       ---------  ---------    ---------  ---------
          Net interest income.........................................    97,846     99,184      289,478    285,730
Provision for loan losses.............................................    17,000      2,000       26,000      8,000
                                                                       ---------  ---------    ---------  ---------
          Net interest income after provision for loan losses.........    80,846     97,184      263,478    277,730
                                                                       ---------  ---------    ---------  ---------
Noninterest income:
     Service charges on deposit accounts and customer service fees....    12,053     11,122       34,322     32,350
     Gain on loans sold and held for sale.............................     3,535      4,604       12,019     17,524
     Net (loss) gain on investment securities.........................       (74)     1,603       (1,314)    (2,384)
     Bank-owned life insurance investment income......................     1,081        665        2,793      2,432
     Investment management income.....................................     1,447      2,036        4,499      6,633
     Insurance fee and commission income..............................     1,750      1,491        5,313      3,325
     Other............................................................     7,048      8,473       17,828     21,490
                                                                       ---------  ---------    ---------  ---------
          Total noninterest income....................................    26,840     29,994       75,460     81,370
                                                                       ---------  ---------    ---------  ---------
Noninterest expense:
     Salaries and employee benefits...................................    43,093     42,454      132,053    124,558
     Occupancy, net of rental income..................................     8,321      6,997       23,489     19,657
     Furniture and equipment..........................................     4,944      4,158       14,171     12,237
     Postage, printing and supplies...................................     1,609      1,550        5,040      4,964
     Information technology fees......................................     8,995      9,365       27,515     27,616
     Legal, examination and professional fees.........................     2,535      2,078        6,949      6,583
     Amortization of intangible assets................................     3,142      2,243        9,295      5,440
     Advertising and business development.............................     1,577      1,826        5,147      5,703
     Charitable contributions.........................................     1,664      1,594        5,042      4,918
     Other............................................................     8,649      8,208       25,964     24,663
                                                                       ---------  ---------    ---------  ---------
          Total noninterest expense...................................    84,529     80,473      254,665    236,339
                                                                       ---------  ---------    ---------  ---------
          Income before provision for income taxes and minority
              interest in income (loss) of subsidiary.................    23,157     46,705       84,273    122,761
Provision for income taxes............................................     8,087     17,249       30,129     42,452
                                                                       ---------  ---------    ---------  ---------
          Income before minority interest in income (loss)
              of subsidiary...........................................    15,070     29,456       54,144     80,309
Minority interest in income (loss) of subsidiary......................        74       (204)         175       (440)
                                                                       ---------  ---------    ---------  ---------
          Net income..................................................    14,996     29,660       53,969     80,749
Preferred stock dividends.............................................       196        196          524        524
                                                                       ---------  ---------    ---------  ---------
          Net income available to common stockholders................. $  14,800     29,464       53,445     80,225
                                                                       =========  =========    =========  =========

Basic earnings per common share....................................... $  625.48   1,245.28     2,258.77   3,390.62
                                                                       =========  =========    =========  =========

Diluted earnings per common share..................................... $  623.84   1,231.06     2,243.90   3,347.84
                                                                       =========  =========    =========  =========

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

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

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



                                                          FIRST BANKS, INC.

                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME - (UNAUDITED)
                       Nine Months Ended September 30, 2007 and 2006 and Three Months Ended December 31, 2006
                                       (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>        <C>         <C>
Balances, December 31, 2005..............................  $12,822     241     5,915      5,910     673,956    (19,906)    678,938
                                                                                                                           -------
Nine months ended September 30, 2006:
  Comprehensive income: (1)
    Net income...........................................       --      --        --         --      80,749         --      80,749
    Other comprehensive income, net of tax:
      Unrealized gains on investment securities..........       --      --        --         --          --      1,460       1,460
      Reclassification adjustment for investment
         securities losses included in net income........       --      --        --         --          --      1,487       1,487
      Derivative instruments:
         Current period transactions.....................       --      --        --         --          --      1,773       1,773
                                                                                                                           -------
  Total comprehensive income.............................                                                                   85,469
  Class A preferred stock dividends, $0.80 per share.....       --      --        --         --        (513)        --        (513)
  Class B preferred stock dividends, $0.07 per share.....       --      --        --         --         (11)        --         (11)
                                                           -------     ---     -----      -----     -------    -------     -------
Balances, September 30, 2006.............................   12,822     241     5,915      5,910     754,181    (15,186)    763,883
                                                                                                                           -------
Three months ended December 31, 2006:
  Comprehensive income:
    Net income...........................................       --      --        --         --      30,945         --      30,945
    Other comprehensive income, net of tax:
      Unrealized gains on investment securities..........       --      --        --         --          --      2,206       2,206
      Reclassification adjustment for investment
         securities gains included in net income.........       --      --        --         --          --       (245)       (245)
      Derivative instruments:
         Current period transactions.....................       --      --        --         --          --        133         133
                                                                                                                           -------
  Total comprehensive income.............................                                                                   33,039
  Adjustment for the utilization of net operating
      losses associated with prior acquisitions..........       --      --        --      3,775          --         --       3,775
  Class A preferred stock dividends, $0.40 per share.....       --      --        --         --        (256)        --        (256)
  Class B preferred stock dividends, $0.04 per share.....       --      --        --         --          (6)        --          (6)
                                                           -------     ---     -----      -----     -------    -------     -------
Balances, December 31, 2006..............................   12,822     241     5,915      9,685     784,864    (13,092)    800,435
                                                                                                                           -------
Nine months ended September 30, 2007:
  Comprehensive income: (1)
    Net income...........................................       --      --        --         --      53,969         --      53,969
    Other comprehensive income, net of tax:
      Unrealized losses on investment securities.........       --      --        --         --          --     (4,448)     (4,448)
      Reclassification adjustment for investment
         securities gains included in net income.........       --      --        --         --          --        (94)        (94)
      Derivative instruments:
         Current period transactions.....................       --      --        --         --          --      5,053       5,053
                                                                                                                           -------
  Total comprehensive income.............................                                                                   54,480
  Cumulative effect of change in accounting principle....       --      --        --         --       2,470         --       2,470
  Class A preferred stock dividends, $0.80 per share.....       --      --        --         --        (513)        --        (513)
  Class B preferred stock dividends, $0.07 per share.....       --      --        --         --         (11)        --         (11)
                                                           -------     ---     -----      -----     -------    -------     -------
Balances, September 30, 2007.............................  $12,822     241     5,915      9,685     840,779    (12,581)    856,861
                                                           =======     ===     =====      =====     =======    =======     =======
<PAGE>

-------------------------
(1) Disclosure of comprehensive income:
                                                                        Three Months Ended       Nine Months Ended
                                                                           September 30,           September 30,
                                                                       --------------------     -------------------
                                                                          2007       2006         2007       2006
                                                                          ----       ----         ----       ----
    Comprehensive income:
      Net income....................................................... $14,996     29,660       53,969     80,749
      Other comprehensive income, net of tax:
        Unrealized gains (losses) on investment securities.............   4,117     13,363       (4,448)     1,460
        Reclassification adjustment for investment
           securities (gains) losses included in net income............      --       (252)         (94)     1,487
        Derivative instruments:
           Current period transactions.................................   5,649      1,935        5,053      1,773
                                                                        -------    -------      -------    -------
    Total comprehensive income......................................... $24,762     44,706       54,480     85,469
                                                                        =======    =======      =======    =======

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)
                                                                                                Nine Months Ended
                                                                                                  September 30,
                                                                                            -------------------------
                                                                                                2007         2006
                                                                                                ----         ----
Cash flows from operating activities:
<S>                                                                                         <C>              <C>
     Net income.........................................................................    $  53,969        80,749
     Adjustments to reconcile net income to net cash provided by operating activities:
       Depreciation and amortization of bank premises and equipment.....................       15,162        13,698
       Amortization of intangible assets................................................        9,295         5,440
       Other amortization, net of accretion.............................................        2,800         5,458
       Originations of loans held for sale..............................................     (433,016)     (731,297)
       Proceeds from sales of loans held for sale.......................................      484,899       723,368
       Payments received on loans held for sale.........................................       14,507        25,289
       Provision for loan losses........................................................       26,000         8,000
       Provision for current income taxes...............................................       28,773        39,242
       Provision for deferred income taxes..............................................        1,356         3,210
       Decrease (increase) in accrued interest receivable...............................        6,667        (4,365)
       (Decrease) increase in accrued interest payable..................................       (9,581)        6,902
       Proceeds from sales of trading securities........................................       81,038         6,840
       Maturities of trading securities.................................................       16,651           657
       Purchases of trading securities..................................................      (17,939)      (60,877)
       Gain on loans sold and held for sale.............................................      (12,019)      (17,524)
       Net loss on investment securities................................................        1,314         2,384
       Gain on sales of branches, net of expenses.......................................       (1,018)           --
       Other operating activities, net..................................................       (9,085)      (17,724)
       Minority interest in income (loss) of subsidiary.................................          175          (440)
                                                                                            ---------     ---------
          Net cash provided by operating activities.....................................      259,948        89,010
                                                                                            ---------     ---------

Cash flows from investing activities:
     Cash paid for acquired entities, net of cash and cash equivalents received.........      (16,233)     (245,031)
     Cash paid for sale of branches, net of cash and cash equivalents sold..............      (48,926)           --
     Proceeds from sales of investment securities available for sale....................          487       198,009
     Maturities of investment securities available for sale.............................      858,873       771,714
     Maturities of investment securities held to maturity...............................        4,510         2,177
     Purchases of investment securities available for sale..............................     (643,548)     (571,153)
     Purchases of investment securities held to maturity................................         (133)         (865)
     Proceeds from sales of commercial loans held for sale..............................       33,471        34,228
     Net increase in loans..............................................................     (437,023)     (499,582)
     Recoveries of loans previously charged-off.........................................        6,360        12,405
     Purchases of bank premises and equipment...........................................      (48,734)      (22,041)
     Other investing activities, net....................................................        7,159        (2,307)
                                                                                            ---------     ---------
          Net cash used in investing activities.........................................     (283,737)     (322,446)
                                                                                            ---------     ---------

Cash flows from financing activities:
     Increase (decrease) in demand, savings and money market deposits...................      139,206      (202,750)
     (Decrease) increase in time deposits...............................................      (67,228)      488,795
     Decrease in Federal Home Loan Bank advances........................................      (33,325)      (43,368)
     Decrease in securities sold under agreements to repurchase.........................      (63,002)     (113,733)
     Repayments of notes payable........................................................      (55,000)      (25,000)
     Proceeds from issuance of subordinated debentures..................................       77,322        87,631
     Repayments of subordinated debentures..............................................      (82,681)           --
     Payment of preferred stock dividends...............................................         (524)         (524)
                                                                                            ---------     ---------
          Net cash (used in) provided by financing activities...........................      (85,232)      191,051
                                                                                            ---------     ---------
          Net decrease in cash and cash equivalents.....................................     (109,021)      (42,385)
Cash and cash equivalents, beginning of period..........................................      369,557       286,652
                                                                                            ---------     ---------
Cash and cash equivalents, end of period................................................    $ 260,536       244,267
                                                                                            =========     =========

Supplemental disclosures of cash flow information:
     Cash paid during the period for:
        Interest on liabilities.........................................................    $ 247,354       180,626
        Income taxes....................................................................        1,636        28,472
                                                                                            =========     =========
     Noncash investing and financing activities:
        Securitization and transfer of loans to investment securities...................    $      --       138,944
        Loans held for sale transferred to loan portfolio...............................       86,559            --
        Loans transferred to other real estate..........................................       10,169         6,199
                                                                                            =========     =========

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 2006 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 nine months ended September 30, 2007 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2007.

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 2006 amounts have been made to conform
to the 2007 presentation.

First Banks operates  through its wholly owned  subsidiary bank holding company,
The San Francisco  Company (SFC),  and SFC's wholly owned subsidiary bank, First
Bank, both headquartered in St. Louis, Missouri. First Bank operates through its
branch banking  offices and  subsidiaries:  First Bank Business  Capital,  Inc.;
Missouri  Valley  Partners,  Inc.  (MVP);  Adrian N. Baker & Company;  Universal
Premium  Acceptance  Corporation  and  its  wholly  owned  subsidiary,  UPAC  of
California, Inc. (collectively,  UPAC); and Small Business Loan Source LLC (SBLS
LLC). All of the subsidiaries are wholly owned,  except SBLS LLC, which is 76.0%
owned by First Bank and 24.0% owned by First Capital  America,  Inc. (FCA) as of
September 30, 2007, as further described in Note 6 to the Consolidated Financial
Statements.

Significant  Accounting Policies.  First Banks implemented  Financial Accounting
Standards  Board (FASB)  Interpretation  No. 48 -- Accounting for Uncertainty in
Income Taxes, an Interpretation of Statement of Financial  Accounting  Standards
No. 109 --  Accounting  for  Income  Taxes,  on  January  1, 2007 (FIN 48).  The
implementation  of FIN 48 resulted in the recognition of a cumulative  effect of
change  in  accounting  principle  of $2.5  million,  which was  recorded  as an
increase to beginning retained earnings,  as further described in Note 12 to the
Consolidated Financial Statements. Interest related to unrecognized tax benefits
is included  in  interest  expense and  penalties  related to  unrecognized  tax
benefits are included in noninterest expense.

(2)      ACQUISITIONS, INTEGRATION COSTS AND OTHER CORPORATE TRANSACTIONS

Completed  Acquisitions.  On  February  28,  2007,  First  Banks  completed  its
acquisition  of  Royal  Oaks  Bancshares,  Inc.  and its  wholly  owned  banking
subsidiary, Royal Oaks Bank, ssb (collectively, Royal Oaks) for $38.6 million in
cash. Royal Oaks was  headquartered in Houston,  Texas and operated five banking
offices in the Houston area. In addition, at the time of the acquisition,  Royal
Oaks was in the process of opening a de novo branch  banking  office  located in
the Heights, near downtown Houston, which subsequently opened on April 16, 2007.
The  acquisition  served to expand  First Banks'  banking  franchise in Houston,
Texas.  The  transaction was funded through  internally  generated funds and the
issuance of subordinated  debentures  associated  with the private  placement of
$25.0 million of trust preferred  securities  through a newly formed  affiliated
statutory trust, as further  described in Note 11 to the Consolidated  Financial
Statements.  At the time of the  acquisition,  Royal  Oaks had  assets of $206.9
million, loans, net of unearned discount, of $175.5 million,  deposits of $159.1
million  and  stockholders'  equity of $9.6  million.  The assets  acquired  and
liabilities  assumed  were  recorded  at  their  estimated  fair  value  on  the
acquisition date. Goodwill was $23.0 million and core deposit intangibles, which
are being amortized over five years  utilizing the  straight-line  method,  were
$4.7  million.  Goodwill  and core  deposit  intangibles  associated  with  this
acquisition are not deductible for tax purposes. Royal Oaks Bancshares, Inc. and
Royal Oaks Bank, ssb were merged with and into SFC and First Bank, respectively,
at the time of the acquisition.

Pending  Acquisitions.  On August 3, 2007, First Banks entered into an Agreement
and Plan of Merger  providing for the acquisition of Coast  Financial  Holdings,
Inc.  and  its  wholly  owned   banking   subsidiary,   Coast  Bank  of  Florida
(collectively,  Coast). Coast, headquartered in Bradenton,  Florida, operates 20
banking offices in Florida's Manatee, Pinellas, Hillsborough and Pasco counties,

<PAGE>

and has two planned de novo branch  offices,  one located in the Pinellas County
community of Clearwater,  and the other located in Sarasota County. At September
30, 2007, Coast had assets of $664.5 million,  loans, net of unearned  discount,
of $564.9 million,  deposits of $632.3 million and stockholders' equity of $22.3
million.  Under the terms of the Agreement and Plan of Merger,  each outstanding
share of Coast's  common stock will be  converted  into and will  represent  the
right to receive an amount equal to  approximately  $22.1 million divided by the
number of shares of Coast's common stock outstanding, or approximately $3.40 per
share in cash, without interest thereon. This price is subject to adjustment if,
on a  specified  date  immediately  prior  to the date  the  transaction  closes
(Determination  Date),  each of the  following  conditions  exist:  (a)  Coast's
allowance for loan and lease losses plus its tangible equity is less than 75% of
Coast's  nonperforming  loans and  leases  plus other real  estate  owned  (such
difference  is  referred  to as the  "Deficiency"),  and (b) the  Deficiency  is
greater  than  $1.0  million.  If each of the  above  conditions  exists  on the
Determination  Date,  then the $22.1  million  will be  reduced  to the  nearest
$500,000 increment, upward or downward, to the full amount of the Deficiency and
the per share merger  price will be reduced  accordingly.  As of  September  30,
2007,  the  Deficiency,  which is  subject to  further  adjustment  prior to the
closing date of the transaction,  was $1.3 million.  The  transaction,  which is
subject to regulatory  and  shareholder  approvals,  is expected to be completed
during the fourth quarter of 2007.

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 $189,000 as
of September 30, 2007, as  summarized  in the following  table,  is comprised of
contractual obligations under salary continuation agreements to five individuals
with  remaining  terms  ranging  from  approximately  one to nine 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.  The following
table summarizes the cumulative  acquisition and integration costs  attributable
to the Company's  acquisitions,  which were accrued as of the consummation dates
of the respective acquisition and 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, 2006.............................   $  386              --            386
         Nine Months Ended September 30, 2007:
             Amounts accrued during the period....................      100             512            612
             Payments.............................................     (297)           (512)          (809)
                                                                     ------           -----          -----
         Balance at September 30, 2007............................   $  189              --            189
                                                                     ======           =====          =====
</TABLE>


Other Corporate Transactions. On July 19, 2007, First Bank completed the sale of
two banking offices located in Denton and Garland,  Texas (collectively,  Branch
Offices)  to Synergy  Bank,  SSB, a  subsidiary  of  Premier  Bancshares,  Inc.,
resulting in a pre-tax gain of $1.0 million. At the time of the transaction, the
Branch Offices had loans, net of unearned discount,  of $911,000 and deposits of
$52.0 million.

During the nine months ended September 30, 2007, First Bank opened the following
de novo branch offices:

      Branch Office Location                                Date Opened
      ----------------------                                -----------
        St. Louis, Missouri                              January 22, 2007
        Katy (Houston), Texas                            February 26, 2007
        Lincoln (Sacramento), California                  March 12, 2007
        Dardenne Prairie (St. Louis), Missouri              May 9, 2007
        Chula Vista (San Diego), California                June 25, 2007
        Brentwood (San Francisco), California           September 24, 2007


<PAGE>


(3)      GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets, net of amortization, were comprised of the
following at September 30, 2007 and December 31, 2006:
<TABLE>
<CAPTION>

                                                          September 30, 2007            December 31, 2006
                                                       ------------------------      -----------------------
                                                         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 (1)............   $ 64,201     (25,917)          60,867     (18,850)
             Customer list intangibles...............     23,320      (2,034)          23,320        (913)
             Goodwill associated with
                P&A Transactions (2).................      2,210      (1,395)           2,210      (1,288)
                                                        --------    --------         --------    --------
                   Total.............................   $ 89,731     (29,346)          86,397     (21,051)
                                                        ========    ========         ========    ========

         Unamortized intangible assets:
             Goodwill associated with
                stock purchases......................   $253,699                      230,036
                                                        ========                     ========
         ---------------
         (1)  The core deposit intangibles' gross carrying amount  and  accumulated  amortization  were  reduced
              by $1.4 million and $1.0 million, respectively, during the third  quarter  of  2007 in conjunction
              with  the  sale of the Branch Offices on July 19, 2007,  as  further  described  in  Note 2 to the
              Consolidated Financial Statements.
         (2)  P&A Transactions represent transactions structured as purchases of certain assets  and  assumption
              of selected liabilities.
</TABLE>

Amortization  of  intangible  assets was $3.1  million and $9.3  million for the
three and nine months ended September 30, 2007,  respectively,  and $2.2 million
and $5.4 million for the comparable periods in 2006.  Amortization of intangible
assets,  including  amortization  of core  deposit  intangibles,  customer  list
intangibles and goodwill associated with P&A Transactions, has been estimated in
the following table, and does not take into  consideration  any potential future
acquisitions or branch office purchases.
<TABLE>
<CAPTION>
                                                                         (dollars expressed in thousands)
         Year ending December 31:
<S>                                                                                  <C>
              2007 remaining.......................................................  $  3,111
              2008.................................................................    12,446
              2009.................................................................    10,660
              2010.................................................................    10,282
              2011.................................................................     7,980
              2012.................................................................     2,399
              Thereafter...........................................................    13,507
                                                                                     --------
                  Total............................................................  $ 60,385
                                                                                     ========
</TABLE>
<PAGE>
Changes in the  carrying  amount of goodwill for the three and nine months ended
September 30, 2007 and 2006 were as follows:
<TABLE>
<CAPTION>
                                                                 Three Months Ended      Nine Months Ended
                                                                    September 30,          September 30,
                                                                --------------------    -------------------
                                                                  2007       2006         2007       2006
                                                                  ----       ----         ----       ----
                                                                     (dollars expressed in thousands)

<S>                                                             <C>         <C>          <C>        <C>
         Balance, beginning of period........................   $254,943    226,811      230,958    167,056
         Goodwill acquired during the period (1).............       (121)     4,365       24,538     64,171
         Acquisition-related adjustments (2).................        (23)       646         (625)       666
         Other adjustments (3)...............................       (250)        --         (250)        --
         Amortization - P&A Transactions.....................        (35)       (36)        (107)      (107)
                                                                --------   --------     --------   --------
         Balance, end of period..............................   $254,514    231,786      254,514    231,786
                                                                ========   ========     ========   ========
         ---------------
         (1)  Goodwill   acquired  during  the   period  includes  additional  purchase  accounting  adjustments
              pertaining  to  the  acquisition  of  Royal Oaks  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.
         (2)  Acquisition-related  adjustments  include  additional  purchase  accounting  adjustments for prior
              years' acquisitions 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.  Acquisition-related adjustments  recorded in 2007 primarily
              pertain to the acquisition of San Diego Community Bank  in  August  2006  and  acquisition-related
              adjustments  recorded  in 2006  primarily pertain  to  the  acquisition of  Northway State Bank in
              October 2005.
         (3)  Other adjustments recorded in 2007 pertain to the sale of  the Branch  Offices  on  July 19, 2007,
              as further described in Note 2 to the Consolidated Financial Statements.
</TABLE>

(4)      SERVICING RIGHTS

Mortgage Banking Activities.  At September 30, 2007 and December 31, 2006, First
Banks  serviced  mortgage  loans for others  totaling  $982.8  million and $1.04
billion,   respectively.   Changes  in  mortgage   servicing   rights,   net  of
amortization,  for the three and nine months ended  September  30, 2007 and 2006
were as follows:
<TABLE>
<CAPTION>
                                                                   Three Months Ended      Nine Months Ended
                                                                      September 30,          September 30,
                                                                  --------------------    -------------------
                                                                     2007      2006         2007       2006
                                                                     ----      ----         ----       ----
                                                                       (dollars expressed in thousands)

<S>                                                                <C>         <C>          <C>        <C>
         Balance, beginning of period...........................   $ 5,004     7,237        5,867      6,623
         Originated mortgage servicing rights (1)...............       286       275          941      3,003
         Amortization...........................................      (637)     (998)      (2,155)    (3,112)
                                                                   -------    ------       ------     ------
         Balance, end of period.................................   $ 4,653     6,514        4,653      6,514
                                                                   =======    ======       ======     ======
         ------------------------
         (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.  Additionally,  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.
</TABLE>

First Banks did not incur any impairment of mortgage servicing rights during the
three and nine months ended September 30, 2007 and 2006.
<PAGE>

Amortization  of  mortgage  servicing  rights  at  September  30,  2007 has been
estimated in the following table:
<TABLE>
<CAPTION>
                                                                              (dollars expressed in thousands)

         Year ending December 31:
<S>                                                                                       <C>
              2007 remaining...........................................................   $   460
              2008.....................................................................     1,258
              2009.....................................................................       836
              2010.....................................................................       660
              2011.....................................................................       548
              2012.....................................................................       548
              Thereafter...............................................................       343
                                                                                          -------
                  Total................................................................   $ 4,653
                                                                                          =======
</TABLE>

Other Servicing  Activities.  At September 30, 2007 and December 31, 2006, First
Banks  serviced  United  States Small  Business  Administration  (SBA) loans for
others totaling $150.0 million and $143.4 million, respectively.  Changes in SBA
servicing  rights,  net of amortization  and impairment,  for the three and nine
months ended September 30, 2007 and 2006 were as follows:
<TABLE>
<CAPTION>

                                                                   Three Months Ended      Nine Months Ended
                                                                      September 30,          September 30,
                                                                  --------------------    -------------------
                                                                     2007       2006        2007       2006
                                                                     ----       ----        ----       ----
                                                                       (dollars expressed in thousands)

<S>                                                                <C>          <C>         <C>        <C>
         Balance, beginning of period...........................   $ 7,620      8,209       8,064      9,489
         Originated SBA servicing rights........................       709        215       1,699        533
         Amortization...........................................      (417)      (396)     (1,233)    (1,254)
         Impairment.............................................       (56)      (180)       (674)      (920)
                                                                   -------     ------      ------     ------
         Balance, end of period.................................   $ 7,856      7,848       7,856      7,848
                                                                   =======     ======      ======     ======
</TABLE>

Amortization of SBA servicing rights at September 30, 2007 has been estimated in
the following table:
<TABLE>
<CAPTION>

                                                                              (dollars expressed in thousands)

         Year ending December 31:
<S>                                                                                       <C>
              2007 remaining...........................................................   $   426
              2008.....................................................................     1,493
              2009.....................................................................     1,219
              2010.....................................................................       992
              2011.....................................................................       805
              2012.....................................................................       651
              Thereafter...............................................................     2,270
                                                                                          -------
                  Total................................................................   $ 7,856
                                                                                          =======
</TABLE>
<PAGE>

(5)      EARNINGS PER COMMON SHARE

The following is a reconciliation  of basic and diluted earnings per share (EPS)
for the three and nine months ended September 30, 2007 and 2006:
<TABLE>
<CAPTION>
                                                                                                  Per Share
                                                                     Income        Shares          Amount
                                                                     ------        ------          ------
                                                            (dollars in thousands, except share and per share data)

     Three months ended September 30, 2007:
<S>                                                                  <C>            <C>           <C>
         Basic EPS - income available to common stockholders......   $14,800        23,661        $  625.48
         Effect of dilutive securities:
           Class A convertible preferred stock....................       192           370            (1.64)
                                                                     -------       -------        ---------
         Diluted EPS - income available to common stockholders....   $14,992        24,031        $  623.84
                                                                     =======       =======        =========

     Three months ended September 30, 2006:
         Basic EPS - income available to common stockholders......   $29,464        23,661        $1,245.28
         Effect of dilutive securities:
           Class A convertible preferred stock....................       192           430           (14.22)
                                                                     -------       -------        ---------
         Diluted EPS - income available to common stockholders....   $29,656        24,091        $1,231.06
                                                                     =======       =======        =========

     Nine months ended September 30, 2007:
         Basic EPS - income available to common stockholders......   $53,445        23,661        $2,258.77
         Effect of dilutive securities:
           Class A convertible preferred stock....................       513           385           (14.87)
                                                                     -------       -------        ---------
         Diluted EPS - income available to common stockholders....   $53,958        24,046        $2,243.90
                                                                     =======       =======        =========

     Nine months ended September 30, 2006:
         Basic EPS - income available to common stockholders......   $80,225        23,661        $3,390.62
         Effect of dilutive securities:
           Class A convertible preferred stock....................       513           456           (42.78)
                                                                     -------       -------        ---------
         Diluted EPS - income available to common stockholders....   $80,738        24,117        $3,347.84
                                                                     =======       =======        =========
</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 $7.5
million  and $23.0  million for the three and nine months  ended  September  30,
2007,  respectively,  and $7.8  million  and $22.8  million  for the  comparable
periods in 2006. First Services,  L.P. leases  information  technology and other
equipment from First Bank. First Services,  L.P. paid First Bank rental fees for
the use of that equipment of $903,000 and $2.9 million during the three and nine
months ended September 30, 2007, respectively, and $976,000 and $3.2 million for
the comparable periods in 2006.

First Brokerage America, L.L.C., a limited liability company indirectly owned by
First  Banks'   Chairman  and  members  of  his   immediate   family,   received
approximately  $1.2 million and $3.6 million for the three and nine months ended
September 30, 2007, respectively,  and $703,000 and $2.1 million,  respectively,
for the comparable  periods in 2006, in gross  commissions  paid by unaffiliated
third-party  companies.  The  commissions  received were primarily in connection
with the  sales  of  annuities,  securities  and  other  insurance  products  to
customers of First Bank.  First Brokerage  America,  L.L.C.  paid  approximately
$51,000 and  $137,000 for the three and nine months  ended  September  30, 2007,
respectively,  and $28,000 and $79,000 for the  comparable  periods in 2006,  to
First Bank in rental  payments for  occupancy of First Bank  premises from which
brokerage business is conducted.

On January 16, 2007, First Banks contributed  48,796 shares of common stock held
in its  available-for-sale  investment securities portfolio with a fair value of
$1.7  million  to  the  Dierberg  Operating  Foundation,  Inc.  (Foundation),  a
charitable  foundation  established by First Banks'  Chairman and members of his
immediate  family.  In conjunction with this  transaction,  First Banks recorded
charitable  contributions expense of $1.7 million, which was partially offset by
a gain on the contribution of these available-for-sale  investment securities of
$147,000,  representing the difference between the cost basis and the fair value
of the common stock on the date of the  contribution.  In addition,  First Banks
recognized  a tax  benefit of $1.0  million  associated  with this  transaction.
During the second and third quarter of 2007, First Bank contributed $1.3 million
and $1.5 million,  respectively,  to the Foundation,  thereby bringing the total
value of charitable contributions to the Foundation to $4.5 million for the nine
months  ended  September  30,  2007.  During  the  three and nine  months  ended
September  30,  2006,  First Bank  contributed  $1.5  million and $4.5  million,
respectively, to the Foundation.
<PAGE>

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 $99,000 and $296,000 for the three and nine
months ended September 30, 2007, respectively,  and $96,000 and $287,000 for the
comparable periods in 2006.

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  pursuant to a written  option  agreement with First Bank. On January 2,
2007,  First Bank  contributed $4.0 million to SBLS LLC in the form of a capital
contribution,  which increased  First Bank's  ownership of SBLS LLC to 63.9% and
decreased FCA's ownership to 36.1%. On June 29, 2007,  First Bank contributed an
additional  $7.8  million  to SBLS  LLC in the form of a  capital  contribution,
thereby  increasing  First Bank's  ownership of SBLS LLC to 76.0% and decreasing
FCA's ownership to 24.0%.

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 provided 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  was  payable  monthly,  in  arrears,  on the
outstanding balances at a rate equal to First Bank's prime lending rate minus 50
basis points. On March 1, 2007, SBLS LLC modified the Agreement with First Bank.
The primary modifications to the structure of the financing arrangement included
(a) an increase  in the  warehouse  line of credit  from $50.0  million to $60.0
million;  and (b) interest was payable monthly,  in arrears,  on the outstanding
balances  at a rate  equal to First  Bank's  prime  lending  rate minus 50 basis
points,  with the  option  of  electing  to have a  portion  of the  outstanding
principal  balance  in  amounts  not  greater  than  $40.0  million,  in minimum
increments  of  $500,000,  bear  interest at a fixed rate per annum equal to the
one-month  London  Interbank  Offered Rate (LIBOR)  plus 215 basis  points,  the
three-month LIBOR plus 215 basis points or the long-term interest rate swap rate
plus 215 basis  points,  provided  that no more than three  fixed-rate  interest
periods  may be in effect at any given  time and no  interest  period may extend
beyond the maturity  date.  During the third  quarter of 2007,  SBLS LLC further
modified  the  Agreement  with First  Bank.  The  primary  modifications  to the
structure of the financing arrangement included (a) an extension of the maturity
date to June 30, 2010 and (b) interest was payable monthly,  in arrears,  on the
outstanding  balances at a rate equal to First Bank's  prime  lending rate minus
100  basis  points,  with  the  option  of  electing  to have a  portion  of the
outstanding  principal  balance in amounts not greater  than $40.0  million,  in
minimum increments of $500,000, bear interest at a fixed rate per annum equal to
the one-month LIBOR plus 165 basis points,  the three-month LIBOR plus 165 basis
points or the long-term interest rate swap rate plus 165 basis points,  provided
that no more than three  fixed-rate  interest  periods would be in effect at any
given time and no interest period would extend beyond the maturity date.

On September 28, 2007, the existing loan under the Agreement was refinanced by a
Promissory  Note entered  into  between SBLS LLC and First Bank that  provides a
$75.0  million  unsecured  revolving  line of  credit  with a  maturity  date of
September 30, 2008.  Interest is payable monthly, in arrears, on the outstanding
loan  balances at a current rate equal to the 30-day LIBOR plus 40 basis points.
The balance of advances  outstanding under the Promissory Note was $47.7 million
at September 30, 2007. The balance of advances  outstanding  under the Agreement
was $47.5 million at December 31, 2006.  Interest  expense  recorded by SBLS LLC
under the Agreement and the Promissory  Note for the three and nine months ended
September 30, 2007 was $835,000 and $2.7 million, respectively, and $796,000 and
$2.0  million for the  comparable  periods in 2006.  The balance of the advances
under the Promissory Note and the related  interest  expense  recognized by SBLS
LLC are fully eliminated for purposes of the Consolidated Financial Statements.

First Bank has had in the past, and may have in the future, loan transactions in
the ordinary  course of business  with its  directors  and/or their  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  $54.8
million  and  $55.9  million  at  September  30,  2007 and  December  31,  2006,
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 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 initial  phase of a  corporate-wide  upgrade of personal  computers  to
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
for this phase of the project with fees not to exceed $500,000.  First Bank made
payments of $478,000  under the contract for the first phase of the project,  of
which  $471,000 in payments  were made during 2005 and an  additional  $7,000 in
payments  were made during the three months  ended March 31, 2006.  During 2006,
First Bank evaluated the second phase of its  corporate-wide  personal  computer
upgrade  project  and  entered  into a  contract  with  WWT in  August  2006 for
additional  information  technology  services.   Prior  to  entering  into  this
contract,  the  Audit  Committee  of  First  Banks  reviewed  and  approved  the
utilization  of WWT for  this  phase of the  project  with  fees  not to  exceed
$500,000.  First Bank made  payments of $379,000  under the contract for the now
completed  second phase of the project,  of which $367,000 in payments were made
in the fourth  quarter of 2006 and an  additional  $12,000 in payments were made
during the first quarter of 2007.

(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 1 capital  (as  defined  in the  regulations)  to  risk-weighted
assets,  and of Tier 1 capital to average  assets.  Management  believes,  as of
September 30, 2007, First Banks and First Bank were each well capitalized. As of
September  30, 2007,  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 1  risk-based  and Tier 1  leverage  ratios as set  forth in the  following
table.

At  September  30, 2007 and  December  31,  2006,  First Banks' and First Bank's
required and actual capital ratios were as follows:
<TABLE>
<CAPTION>


                                                            Actual
                                          ------------------------------------------     For         To be Well
                                           September 30, 2007     December 31, 2006    Capital    Capitalized Under
                                          --------------------   -------------------   Adequacy   Prompt Corrective
                                             Amount    Ratio       Amount     Ratio    Purposes   Action Provisions
                                             ------    -----       ------     -----    --------   -----------------
                                               (dollars expressed in thousands)

Total capital (to risk-weighted assets):
<S>                                       <C>          <C>       <C>          <C>        <C>            <C>
    First Banks.......................... $1,024,818   10.64%    $ 929,688    10.25%     8.0%           10.0%
    First Bank...........................    981,660   10.22       925,013    10.23      8.0            10.0

Tier 1 capital (to risk-weighted assets):
    First Banks..........................    843,366    8.76       789,967     8.71      4.0             6.0
    First Bank...........................    861,302    8.96       811,530     8.97      4.0             6.0

Tier 1 capital (to average assets):
    First Banks..........................    843,366    8.41       789,967     8.13      3.0             5.0
    First Bank...........................    861,302    8.61       811,530     8.38      3.0             5.0
</TABLE>

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
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 determined that the Federal  Reserve's final rules that will be effective in
March 2009, if implemented  as of September 30, 2007,  would reduce First Banks'
Tier 1 capital (to risk-weighted  assets) and Tier 1 capital (to average assets)
to 7.88% and 7.56%, respectively,  and would not have an impact on total capital
(to risk-weighted assets).

(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 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,   employee  benefit  and  commercial  and  personal
insurance services, internet banking, remote deposit, automated teller machines,
telephone  banking,   safe  deposit  boxes,  and  trust,   private  banking  and
institutional  money management  services.  The revenues generated by First Bank
and its subsidiaries  consist  primarily of interest income,  generated from the
loan and investment security portfolios, service charges and fees generated from
deposit  products and  services,  and fees  generated  by First Banks'  mortgage
banking,   insurance,   and  trust,  private  banking  and  institutional  money
management  business  units.  First Banks'  products and services are offered to
customers  primarily  within its  respective  geographic  areas,  which  include
eastern Missouri,  Illinois,  including the Chicago  metropolitan area, southern
and northern California,  and Houston and Dallas,  Texas. Certain loan products,
including  small  business  loans and insurance  premium  financing  loans,  are
available nationwide through SBLS LLC and UPAC.

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             Consolidated Totals
                                        ----------------------------    ---------------------------    ---------------------------
                                         September 30,  December 31,    September 30,  December 31,    September 30,  December 31,
                                             2007           2006            2007           2006            2007           2006
                                             ----           ----            ----           ----            ----           ----
                                                                     (dollars expressed in thousands)
Balance sheet information:

<S>                                       <C>             <C>               <C>            <C>          <C>             <C>
Investment securities..................  $ 1,141,782      1,439,118         23,735         25,828        1,165,517      1,464,946
Loans, net of unearned discount........    8,132,773      7,666,481             --             --        8,132,773      7,666,481
Goodwill and other intangible assets...      314,084        295,382             --             --          314,084        295,382
Total assets...........................   10,241,940     10,116,246         30,096         42,468       10,272,036     10,158,714
Deposits...............................    8,668,137      8,550,062        (45,792)      (106,976)       8,622,345      8,443,086
Other borrowings.......................      310,772        373,899             --             --          310,772        373,899
Notes payable..........................           --             --         10,000         65,000           10,000         65,000
Subordinated debentures................           --             --        353,733        297,966          353,733        297,966
Stockholders' equity...................    1,158,969      1,086,876       (302,108)      (286,441)         856,861        800,435
                                         ===========     ==========       ========       ========       ==========     ==========
<PAGE>

                                                                             Corporate, Other
                                                                             and Intercompany
                                                 First Bank                  Reclassifications             Consolidated Totals
                                        ----------------------------    ---------------------------    ---------------------------
                                             Three Months Ended              Three Months Ended            Three Months Ended
                                                September 30,                   September 30,                 September 30,
                                        ----------------------------    ---------------------------    ---------------------------
                                             2007           2006            2007           2006            2007           2006
                                             ----           ----            ----           ----            ----           ----
                                                                     (dollars expressed in thousands)
Income statement information:

Interest income........................  $   177,769        168,024            336            269          178,105        168,293
Interest expense.......................       73,840         61,445          6,419          7,664           80,259         69,109
                                         -----------     ----------       --------       --------       ----------     ----------
  Net interest income..................      103,929        106,579         (6,083)        (7,395)          97,846         99,184
Provision for loan losses..............       17,000          2,000             --             --           17,000          2,000
                                         -----------     ----------       --------       --------       ----------     ----------
  Net interest income after provision
    for loan losses....................       86,929        104,579         (6,083)        (7,395)          80,846         97,184
                                         -----------     ----------       --------       --------       ----------     ----------
Noninterest income.....................       26,991         29,840           (151)           154           26,840         29,994
Amortization of intangible assets......        3,142          2,243             --             --            3,142          2,243
Other noninterest expense..............       80,244         78,117          1,143            113           81,387         78,230
                                         -----------     ----------       --------       --------       ----------     ----------
  Income before provision for income
    taxes and minority interest in
    income (loss) of subsidiary........       30,534         54,059         (7,377)        (7,354)          23,157         46,705
Provision for income taxes.............       10,703         19,827         (2,616)        (2,578)           8,087         17,249
                                         -----------     ----------       --------       --------       ----------     ----------
  Income before minority interest in
    income (loss) of subsidiary........       19,831         34,232         (4,761)        (4,776)          15,070         29,456
Minority interest in income (loss)
    of subsidiary......................           74           (204)            --             --               74           (204)
                                         -----------     ----------       --------       --------       ----------     ----------
  Net income...........................  $    19,757         34,436         (4,761)        (4,776)          14,996         29,660
                                         ===========     ==========       ========       ========       ==========     ==========

                                                                             Corporate, Other
                                                                             and Intercompany
                                                 First Bank                  Reclassifications             Consolidated Totals
                                        ----------------------------    ---------------------------    ---------------------------
                                              Nine Months Ended              Nine Months Ended              Nine Months Ended
                                                September 30,                  September 30,                  September 30,
                                        ----------------------------    ---------------------------    ---------------------------
                                             2007           2006            2007           2006            2007           2006
                                             ----           ----            ----           ----            ----           ----
                                                                     (dollars expressed in thousands)
Income statement information:

Interest income........................  $   526,415        472,551            836            707          527,251        473,258
Interest expense.......................      218,164        165,808         19,609         21,720          237,773        187,528
                                         -----------     ----------       --------       --------       ----------     ----------
  Net interest income..................      308,251        306,743        (18,773)       (21,013)         289,478        285,730
Provision for loan losses..............       26,000          8,000             --             --           26,000          8,000
                                         -----------     ----------       --------       --------       ----------     ----------
  Net interest income after provision
    for loan losses....................      282,251        298,743        (18,773)       (21,013)         263,478        277,730
                                         -----------     ----------       --------       --------       ----------     ----------
Noninterest income.....................       75,787         81,596           (327)          (226)          75,460         81,370
Amortization of intangible assets......        9,295          5,440             --             --            9,295          5,440
Other noninterest expense..............      241,308        228,535          4,062          2,364          245,370        230,899
                                         -----------     ----------       --------       --------       ----------     ----------
  Income before provision for income
    taxes and minority interest in
    income (loss) of subsidiary........      107,435        146,364        (23,162)       (23,603)          84,273        122,761
Provision for income taxes.............       38,658         50,717         (8,529)        (8,265)          30,129         42,452
                                         -----------     ----------       --------       --------       ----------     ----------
  Income before minority interest in
    income (loss) of subsidiary........       68,777         95,647        (14,633)       (15,338)          54,144         80,309
Minority interest in income (loss)
    of subsidiary......................          175           (440)            --             --              175           (440)
                                         -----------     ----------       --------       --------       ----------     ----------
  Net income...........................  $    68,602         96,087        (14,633)       (15,338)          53,969         80,749
                                         ===========     ==========       ========       ========       ==========     ==========
</TABLE>
<PAGE>

(9)      OTHER BORROWINGS

Other  borrowings  were  comprised of the  following  at September  30, 2007 and
December 31, 2006:
<TABLE>
<CAPTION>
                                                                            September 30,   December 31,
                                                                                2007            2006
                                                                                ----            ----
                                                                          (dollars expressed in thousands)

         Securities sold under agreements to repurchase:
<S>                                                                           <C>              <C>
             Daily.........................................................   $206,872         169,874
             Term..........................................................    100,000         200,000
         FHLB advances.....................................................      3,900           4,025
                                                                              --------        --------
                  Total....................................................   $310,772         373,899
                                                                              ========        ========
</TABLE>

The maturity dates,  par amounts,  interest rate spreads and interest rate floor
strike  prices on First Bank's term  repurchase  agreements  as of September 30,
2007 and December 31, 2006 were as follows:
<TABLE>
<CAPTION>
                                                                             Interest Rate   Interest Rate Floor
                  Maturity Date                             Par Amount         Spread (1)      Strike Price (1)
                  -------------                             ----------         ------          ------------
                                                        (dollars expressed
                                                           in thousands)
         September 30, 2007:
<S>                                                         <C>                    <C>             <C>
             October 12, 2010.............................  $ 100,000      LIBOR - 0.5100%         4.50%
                                                            =========

         December 31, 2006:
             July 19, 2010 (2)............................  $ 100,000      LIBOR + 0.5475%         5.00%
             October 12, 2010.............................    100,000      LIBOR - 0.5100%         4.50%
                                                            ---------
                                                            $ 200,000
                                                            =========
         ------------------------
         (1)  The interest rate paid on the term repurchase agreements is based on the three-month LIBOR plus or
              minus the spread amount shown minus a floating rate, subject to a 0% floor, equal to two times the
              differential  between  the  three-month LIBOR and the strike price shown, if the three-month LIBOR
              falls below the strike price associated with the interest rate floor agreements.
         (2)  First Bank terminated this term repurchase agreement on August 7,  2007, resulting in a prepayment
              penalty of $330,000.
</TABLE>

(10)     NOTES PAYABLE

On August 8, 2007,  First Banks  entered into a $125.0  million  Secured  Credit
Agreement with a group of unaffiliated  financial  institutions  (Secured Credit
Agreement) to renew and modify its existing $96.0 million First Amendment to its
Amended  and  Restated   Secured  Credit   Agreement,   dated  August  10,  2006
(Predecessor  Agreement).  The  terms  and  conditions  of  the  Secured  Credit
Agreement  provide for a $125.0 million revolving credit facility that includes:
(i) a $5.0 million  sub-facility  for the issuance of standby letters of credit;
(ii) a $10.0  million  sub-facility  for  swingline  loans  (from  the  Agent as
Swingline  Lender);  and (iii)  three-year  term loan  conversion  options  with
minimum  borrowing  amounts of $10.0 million,  amortizing  with equal  quarterly
installments  of  principal  based  on a  four-year  straight-line  amortization
schedule and a final  maturity of three years from  execution of each term loan,
including  the existing  term loan,  which had a balance of $35.0  million as of
August 8, 2007 (Existing Term Loan). Each term loan, including the Existing Term
Loan, will reduce the availability  under the revolving  credit facility.  First
Banks has the right to request an increase in the Secured  Credit  Agreement  to
$150.0  million,  with a  minimum  increase  of  $10.0  million  and  additional
increments of $5.0 million.  Interest is payable on  outstanding  principal loan
balances  of the  revolving  credit  loan and each term loan 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  principal loan balances and First Banks'
net  income  for  the  preceding  four  calendar  quarters.  If the  outstanding
principal loan balances  under the revolving  credit loan and each term loan are
accruing at the prime rate,  interest is payable  quarterly  in arrears.  If the
outstanding  principal  loan balances  under the revolving  credit loan and each
term loan 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  facility.  Amounts may be borrowed under the revolving  credit  facility
until  August 7,  2008,  at which time the  principal  and  interest  is due and
payable, excluding the term loans. First Banks' Existing Term Loan is payable in
quarterly installments of $5.0 million, at a minimum, with the remaining balance
to be repaid in full, including any unpaid interest,  upon maturity on March 31,
2009.  Interest  is  payable  on  outstanding  principal  loan  balances  of the
swingline  loans at a  floating  rate  equal to the  lender's  prime  rate.  The
principal  balances of the  swingline  loans,  together  with accrued and unpaid
interest,  are payable on the next to occur date of either the  fifteenth day of
the month or the last business day of the month following the advance date(s) of
the swingline loans.

Letters of credit issued to unaffiliated  third parties on behalf of First Banks
under the $5.0  million  standby  letter of credit  sub-facility  portion of the
Secured  Credit  Agreement  were $450,000 at September 30, 2007 and December 31,
2006, and had not been drawn on by the counterparties. First Banks had not drawn
any advances on the revolving credit sub-facility  portion of the Secured Credit
Agreement as of September 30, 2007 and December 31, 2006. During the nine months
ended  September  30, 2007,  First Banks made  payments of $55.0  million on the
outstanding  principal  balance of the Existing Term Loan,  reducing the balance
from $65.0 million at December 31, 2006 to $10.0 million at September 30, 2007.

The Secured 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
Secured Credit  Agreement is secured by First Banks'  ownership  interest in the
capital  stock of SFC and  First  Bank.  First  Banks  and  First  Bank  were in
compliance  with  all  restrictions  and  requirements  of  the  Secured  Credit
Agreement and the  Predecessor  Agreement at September 30, 2007 and December 31,
2006.

(11)     SUBORDINATED DEBENTURES

First Banks has formed or assumed  various  affiliated  Delaware or  Connecticut
statutory and business trusts  (collectively,  the Trusts) that were created for
the sole purpose of issuing  trust  preferred  securities.  The trust  preferred
securities  were  issued in  private  placements,  with the  exception  of First
Preferred  Capital  Trust III and First  Preferred  Capital Trust IV, which were
issued in  underwritten  public  offerings.  First  Banks owns all of the common
securities of the Trusts.  The gross  proceeds of the offerings were used by the
Trusts to purchase  fixed rate or 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  accrued  on the
subordinated  debentures  were $5.9 million and $17.6  million for the three and
nine months ended September 30, 2007,  respectively,  and $6.1 million and $16.1
million for the comparable periods in 2006.
<PAGE>

A summary of the  subordinated  debentures  issued to the Trusts in  conjunction
with the trust preferred securities offerings at September 30, 2007 and December
31, 2006 were as follows:

<TABLE>
<CAPTION>

                                                                                                                  Subordinated
                                                                                                                   Debentures
                                                                                                              --------------------
                                                                                                    Trust     September   December
                                                     Maturity            Call          Interest   Preferred      30,         31,
     Name of Trust              Issuance Date          Date              Date (1)      Rate (2)   Securities    2007        2006
     -------------              -------------          ----              ----          ----       ----------    ----        ----

Variable Rate
-------------
<S>                               <C>             <C>                 <C>              <C>         <C>         <C>         <C>
First Bank Capital Trust (3)      April 2002      April 22, 2032      April 22, 2007   + 387.5 bp  $25,000         --      25,774
First Bank Statutory Trust II   September 2004  September 20, 2034  September 20, 2009 + 205.0 bp   20,000     20,619      20,619
Royal Oaks Capital Trust I (4)    October 2004    January 7, 2035     January 7, 2010  + 240.0 bp    4,000      4,124          --
First Bank Statutory Trust III   November 2004  December 15, 2034   December 15, 2009  + 218.0 bp   40,000     41,238      41,238
First Bank Statutory Trust IV     March 2006      March 15, 2036      March 15, 2011   + 142.0 bp   40,000     41,238      41,238
First Bank Statutory Trust V      April 2006      June 15, 2036       June 15, 2011    + 145.0 bp   20,000     20,619      20,619
First Bank Statutory Trust VI     June 2006       July 7, 2036        July 7, 2011     + 165.0 bp   25,000     25,774      25,774
First Bank Statutory Trust VII   December 2006  December 15, 2036   December 15, 2011  + 185.0 bp   50,000     51,547      51,547
First Bank Statutory Trust
   VIII (5)                      February 2007    March 30, 2037      March 30, 2012   + 161.0 bp   25,000     25,774          --
First Bank Statutory Trust
   X (6)                          August 2007   September 15, 2037  September 15, 2012 + 230.0 bp   15,000     15,464          --
First Bank Statutory Trust
   IX (7)                       September 2007  December 15, 2037   December 15, 2012  + 225.0 bp   25,000     25,774          --
First Bank Statutory Trust
   XI (8)                       September 2007  December 15, 2037   December 15, 2012  + 285.0 bp   10,000     10,310          --

Fixed Rate
----------
First Preferred Capital
   Trust III (9)                 November 2001  December 31, 2031   December 31, 2006     9.00%     55,200         --          --
First Bank Statutory Trust        March 2003      March 20, 2033      March 20, 2008      8.10%     25,000     25,774      25,774
First Preferred Capital
   Trust IV                       April 2003      June 30, 2033       June 30, 2008       8.15%     46,000     47,423      47,423


(1)  The subordinated debentures are callable at the option of First Banks on  the call date  shown at  100% of the principal amount
     plus accrued and unpaid interest.
(2)  The interest rates paid on the trust preferred securities are based on  either a  fixed  rate or  a variable rate. The variable
     rate is based on the three-month LIBOR plus the basis point spread shown, with the exception of First Bank Capital Trust, which
     was based on the six-month LIBOR plus the basis point spread shown.
(3)  On April 22, 2007, First Banks redeemed the cumulative variable rate trust preferred  securities  at the  liquidation  value of
     $1,000 per preferred security, together with distributions accumulated and unpaid to  the redemption  date. In conjunction with
     this  transaction, First Banks paid in full its outstanding $25.8 million of subordinated debentures that were  issued by First
     Banks to First Bank Capital Trust. The funds necessary for  the  redemption  of the  subordinated  debentures  were provided by
     internally generated funds and the net proceeds from the issuance of $25.8 million of  subordinated  debentures  to  First Bank
     Statutory Trust VIII (FBST VIII) on February 23, 2007, as further described below.
(4)  In conjunction with the acquisition of Royal Oaks on February 28, 2007, as  further  described in  Note 2  to the  Consolidated
     Financial Statements, First Banks assumed the  subordinated  debentures of  Royal Oaks  Capital Trust I, a  Delaware  statutory
     trust.
(5)  On February 23, 2007, FBST VIII,  a newly  formed  Delaware  statutory  trust,  issued  25,000  variable  rate  trust preferred
     securities at $1,000 per security in a private placement, and  issued  774  common  securities  to  First Banks  at  $1,000 per
     security. Interest is payable quarterly in arrears.
(6)  On August 31, 2007, First Bank Statutory Trust X, a newly formed Delaware  statutory  trust, issued  15,000 variable rate trust
     preferred securities at$1,000 per security in a private placement, and issued 464 common  securities  to  First Banks at $1,000
     per security. Interest is payable quarterly in arrears, beginning on December 15, 2007.
(7)  On September 20, 2007, First  Bank  Statutory  Trust  IX,  a newly formed Delaware statutory trust, issued 25,000 variable rate
     trust preferred securities at $1,000 per security in a private placement, and  issued  774  common securities to First Banks at
     $1,000 per security. Interest is payable quarterly in arrears, beginning on December 15, 2007.
(8)  On September 28, 2007, First Bank Statutory Trust XI, a newly formed  Delaware  statutory  trust,  issued  10,000 variable rate
     trust preferred securities at $1,000 per security in a private placement, and issued 310 common  securities  to  First Banks at
     $1,000 per security. Interest is payable quarterly in arrears, beginning on December 15, 2007.
(9)  On December 31, 2006, First Banks redeemed the cumulative fixed rate trust preferred securities at the liquidation value of $25
     per preferred security, together with distributions accumulated and  unpaid  to  the redemption date. In  conjunction with this
     transaction, First Banks paid in full its outstanding $56.9 million of subordinated debentures that were  issued by First Banks
     to First Preferred Capital Trust III. The net proceeds associated with these transactions  were  paid  on January 2, 2007.  The
     funds necessary for the redemption  of  the  subordinated  debentures  were  provided by internally generated funds and the net
     proceeds from the issuance of additional subordinated debentures to First Bank Statutory Trust VII on December 14, 2006.
</TABLE>

(12)     INCOME TAXES

On January 1, 2007, First Banks implemented FIN 48. The implementation of FIN 48
resulted  in the  recognition  of a  cumulative  effect of change in  accounting
principle  of $2.5  million,  which was  recorded as an  increase  to  beginning
retained earnings.
<PAGE>
First Banks' liability for unrecognized tax benefits was $2.5 million at January
1, 2007, after  consideration of the $2.5 million cumulative effect of change in
accounting  principle  adjustment to the beginning balance of retained earnings.
The total  amount of federal and state  unrecognized  tax benefits at January 1,
2007 that, if recognized, would affect the effective tax rate, was $1.4 million,
net of the federal tax benefit.  First Banks'  liability  for  unrecognized  tax
benefits was $11.7  million at September  30, 2007,  of which $2.1 million would
affect the  effective  tax rate,  if  recognized.  During the nine months  ended
September 30, 2007, First Banks recorded additional liabilities for unrecognized
tax benefits of $9.2 million that, if  recognized,  would decrease the effective
tax rate by  $684,000,  net of the Federal tax  benefit.  First Banks  expects a
reduction of $759,000 in unrecognized state tax benefits during the remainder of
2007 as a result of the statute of limitations closing for the 2002 and 2003 tax
years,  of  which  the  impact  to the  effective  tax rate is  estimated  to be
approximately $442,000, net of the Federal tax benefit.

In accordance with FIN 48, it is First Banks' policy to separately  disclose any
interest or penalties  arising from the  application  of federal or state income
taxes.  Interest  related to  unrecognized  tax benefits is included in interest
expense and  penalties  related to  unrecognized  tax  benefits  are included in
noninterest  expense.  At January 1, 2007 and September 30, 2007, the balance of
interest  accrued on  unrecognized  tax benefits was $944,000 and $1.4  million,
respectively.  The amount of interest  expense  recognized  during the three and
nine months ended  September 30, 2007 was ($2,000) and  $468,000,  respectively.
First Banks expects a reduction of approximately $216,000 in accrued interest on
unrecognized  tax  benefits  during  the  remainder  of 2007 as a result  of the
statute of  limitations  closing for the 2002 and 2003 tax years.  There were no
penalties related to tax matters accrued at January 1, 2007, nor did the Company
recognize  any  penalties  during the three and nine months ended  September 30,
2007.

First Banks and its  subsidiaries  file  income tax returns in the U.S.  federal
jurisdiction and various states.  Management of First Banks believes the accrual
for tax liabilities is adequate for all open audit years based on its assessment
of many  factors,  including  past  experience  and  interpretations  of tax law
applied to the facts of each matter.  This  assessment  relies on estimates  and
assumptions.  First Banks is no longer subject to U.S. federal,  state and local
income tax  examination by tax authorities for the years prior to 2002, with the
exception of certain states where the statute of  limitations is four years.  In
those  circumstances,  First Banks is no longer subject to  examination  for the
years  prior to 2001.  At  September  30,  2007,  there were no federal or state
income tax examinations in process.

(13)     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 September  30, 2007 and  December  31,  2006,  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.

(14)     SUBSEQUENT EVENTS

In October 2007, First Banks completed the sale of approximately $9.4 million of
certain  repurchased and other residential  mortgage loans that were transferred
to loans held for sale during the quarter ended September 30, 2007.  First Banks
did not  recognize a gain or loss on the sale of these loans in October  2007 as
these loans were carried at lower of cost or market value at September 30, 2007.
The sale resulted in a decrease in  nonperforming  loans of  approximately  $8.6
million, in aggregate.

In  November  2007,  First Banks  securitized  approximately  $102.0  million of
certain  residential  mortgage loans held in its loan portfolio and subsequently
sold the securities. In conjunction with the securitization of the loans and the
sale of the  securities,  First  Banks  recorded  a net  gain  of  approximately
$146,000.
<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,  and 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:  our ability to consummate  pending  acquisitions;  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,  pending
litigation,  unknown  liabilities  and/or integration issues with the businesses
that we have acquired.  For discussion of these and other risk factors, refer to
our 2006 Annual Report on Form 10-K, as filed with the  Securities  and Exchange
Commission.  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, and SFC's
wholly owned  subsidiary  bank,  First Bank,  both  headquartered  in St. Louis,
Missouri. First Bank operates through its subsidiaries, as listed below, and its
branch banking offices.  First Bank's subsidiaries are wholly owned except Small
Business  Loan Source  LLC, or SBLS LLC,  which is 76.0% owned by First Bank and
24.0% owned by First Capital America, Inc. as of September 30, 2007.

       >>   First Bank Business Capital, Inc.;
       >>   Missouri Valley Partners, Inc., or MVP;
       >>   Adrian N. Baker & Company, or Adrian Baker;
       >>   Universal  Premium   Acceptance   Corporation and  its  wholly owned
            subsidiary,  UPAC of California,  Inc., collectively UPAC; and
       >>   SBLS LLC.

At September 30, 2007, we had assets of $10.27 billion,  loans,  net of unearned
discount,  of $8.13 billion,  deposits of $8.62 billion and stockholders' equity
of  $856.9  million,  and  currently  operate  198  branch  banking  offices  in
California, Illinois, Missouri and Texas.

Through  First Bank,  we offer a broad range of  financial  services,  including
commercial and personal deposit products,  commercial and consumer lending,  and
many other  financial  products and services.  Commercial  and personal  deposit
products include 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.
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.  Consumer lending includes  residential real estate,  home equity and
installment  lending.  Other financial services include mortgage banking,  debit
cards,  brokerage  services,   employee  benefit  and  commercial  and  personal
insurance services, internet banking, remote deposit, automated teller machines,
telephone  banking,   safe  deposit  boxes,  and  trust,   private  banking  and
institutional  money management  services.  The revenues generated by First Bank
and its subsidiaries  consist  primarily of interest income,  generated from the

<PAGE>

loan and investment security portfolios, service charges and fees generated from
deposit  products  and  services,  and fees  and  commissions  generated  by our
mortgage banking,  insurance, and trust, private banking and institutional money
management  business  units.  Our  extensive  line of products  and services are
offered to  customers  primarily  within our  geographic  areas,  which  include
eastern Missouri,  Illinois,  including the Chicago  metropolitan area, southern
and northern California,  and Houston and Dallas,  Texas. Certain loan products,
including  small  business  loans and insurance  premium  financing  loans,  are
available nationwide through SBLS LLC and UPAC.

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 $10.27  billion at  September  30, 2007  reflecting  a $113.3
million  increase from $10.16  billion at December 31, 2006. The net increase in
our total assets  reflects  internal loan growth,  our acquisition of Royal Oaks
Bancshares, Inc., or Royal Oaks, on February 28, 2007, and the opening of six de
novo  branch  offices  during  the first  nine  months of 2007,  offset by a net
decrease  in our  investment  securities  portfolio  and in cash and  short-term
investments, which include federal funds sold and interest-bearing deposits. Our
acquisition of Royal Oaks provided  assets of $206.9  million,  as summarized in
the table below and further  described in Note 2 to our  Consolidated  Financial
Statements.

Loans,  net of unearned  discount,  increased $466.3 million to $8.13 billion at
September 30, 2007, from $7.67 billion at December 31, 2006, reflecting internal
growth  and the  addition  of  $175.5  million  of  loans  associated  with  our
acquisition of Royal Oaks, partially offset by a decrease in loans held for sale
as a result of a decline in one-to-four family mortgage loan production volumes,
as further  discussed  under  "--Loans and  Allowance  for Loan  Losses."  Funds
available from maturities of investment  securities and deposit growth,  as well
as funds available from short-term  investments,  were utilized to fund internal
loan growth.

Our investment securities portfolio decreased $299.4 million to $1.17 billion at
September 30, 2007,  from $1.46 billion at December 31, 2006.  Funds provided by
maturities  of  investment   securities  were   reinvested  in   higher-yielding
investment securities as well as used to fund internal loan growth. The decrease
in our investment  securities portfolio also includes an $81.2 million reduction
in our trading  portfolio  following the liquidation of our trading portfolio in
July 2007.

Goodwill and other  intangible  assets increased $18.7 million to $314.1 million
at  September  30,  2007,  primarily  resulting  from  goodwill and core deposit
intangibles  recorded in conjunction with our acquisition of Royal Oaks, as more
fully described in Note 2 and Note 3 to our Consolidated Financial Statements.

The  overall  increase in our total  assets  also  reflects an increase of $38.2
million in net bank premises and equipment,  primarily due to our acquisition of
Royal Oaks and capital  expenditures  associated  with de novo  branch  offices,
branch  remodels  and branch  relocations,  along with an  increase  in deferred
income  taxes  of  $2.3  million,  as  more  fully  described  in Note 12 to our
Consolidated Financial Statements.  The overall increase in our total assets was
partially offset by an $11.3 million decrease in other assets.

As shown in the following  table,  we completed our  acquisition  of Royal Oaks,
located in Houston,  Texas,  on February 28, 2007,  adding a total of six branch
offices.  In addition,  we further  expanded our branch office  network with the
opening of six de novo  branch  offices  during  the first nine  months of 2007,
located in Sacramento, San Diego and San Francisco,  California, Houston, Texas,
and two in the St. Louis, Missouri metropolitan area.
<TABLE>
<CAPTION>

                                                Loans,                                                     Number
                                                Net of                                       Goodwill        of
            Entity /                Total      Unearned   Investment               Purchase  and Other     Banking
         Closing Date               Assets     Discount   Securities   Deposits     Price   Intangibles   Locations
         ------------               ------     --------   ----------   --------     -----   -----------   ---------
                                                         (dollars expressed in thousands)
Royal Oaks Bancshares, Inc.
Houston, Texas
<S>                                <C>          <C>          <C>        <C>         <C>        <C>            <C>
February 28, 2007                  $206,900     175,500      4,100      159,100     38,600     27,700         6
                                   ========     =======      =====      =======     ======     ======        ==
</TABLE>




<PAGE>


Deposits  increased  $179.3 million to $8.62 billion at September 30, 2007, from
$8.44  billion at  December  31,  2006,  reflecting  growth in savings and money
market deposits  through enhanced  product  campaigns,  in addition to growth in
time deposits  greater than $100,000.  Deposits  provided by our  acquisition of
Royal Oaks were $159.1 million, in aggregate. Our deposit growth during the nine
months  ended  September  30,  2007  reflects a $323.7  million  increase in our
savings and money  market  accounts,  and a $58.6  million  increase in our time
deposits of $100,000 or more;  partially  offset by an $85.2 million  decline in
our  noninterest-bearing  demand  accounts,  a  $60.5  million  decline  in  our
interest-bearing  demand deposits, and a $57.3 million decline in our other time
deposits.  Organic  growth in our  savings,  money  market and time  deposits is
primarily  attributable  to our  continued  focus  on  marketing  these  deposit
products,  our deposit  pricing  strategies  and our ongoing  efforts to further
develop multiple account relationships with our customers. Deposits at September
30, 2007  decreased  $131.0  million from $8.75  billion at June 30,  2007.  The
decrease in deposits  during the third  quarter of 2007 reflects the sale of two
banking  offices  located in Denton and Garland,  Texas on July 19, 2007,  which
resulted in a decrease in deposits of $52.0 million.  In addition,  we completed
certain margin  improvement  initiatives  associated with our deposit  portfolio
during the third quarter of 2007.  These  initiatives,  in addition to increased
competition  on  interest  rates  within our market  areas,  contributed  to the
attrition  of certain  deposits  during  the  quarter.  The impact of  continued
aggressive  competition  within our market  areas,  coupled with an  anticipated
amount  of  attrition  associated  with our 2006 and 2007  acquisitions  and our
recent margin improvement initiatives,  continue to have a significant influence
on the level of our deposits and the interest rates paid on those deposits.

Other  borrowings,  which are comprised of securities  sold under  agreements to
repurchase and Federal Home Loan Bank, or FHLB, advances, were $310.8 million at
September 30, 2007 compared to $373.9 million at December 31, 2006. The decrease
reflects the termination of a $100.0 million term repurchase agreement in August
2007, as further described in Note 9 to our Consolidated  Financial  Statements,
partially  offset by a $37.0 million  increase in retail  securities  sold under
agreements to repurchase.

Notes payable  decreased $55.0 million to $10.0 million at September 30, 2007 as
a result of scheduled quarterly principal  installment  payments of $5.0 million
and  additional  prepayments  of $40.0  million  on our term loan  facility,  as
further described in Note 10 to our Consolidated Financial Statements.

Subordinated  debentures  increased $55.8 million to $353.7 million at September
30, 2007,  from $298.0  million at December 31, 2006.  On February 23, 2007,  we
issued  $25.8  million of variable  rate  subordinated  debentures  in a private
placement to First Bank Statutory Trust VIII, a newly formed  statutory trust. A
portion of the proceeds from the issuance of these  subordinated  debentures was
utilized to fund our  acquisition of Royal Oaks. We also assumed $4.1 million of
subordinated  debentures  with our  acquisition  of Royal  Oaks that  Royal Oaks
Bancshares,  Inc. had previously  issued to Royal Oaks Capital Trust I. On April
22,  2007,  we  repaid in full  $25.8  million  of  variable  rate  subordinated
debentures that were issued to First Bank Capital Trust, or FBCT, in conjunction
with the redemption of the cumulative  variable rate trust preferred  securities
issued by FBCT.  During the third quarter of 2007, we issued an additional $51.5
million of variable rate subordinated  debentures in private placements to three
newly formed  statutory  trusts.  On August 31, 2007, we issued $15.5 million of
variable  rate  subordinated  debentures  to First  Bank  Statutory  Trust X; on
September  20,  2007,  we issued  $25.8  million of variable  rate  subordinated
debentures  to First Bank  Statutory  Trust IX; and on September  28,  2007,  we
issued $10.3  million of variable  rate  subordinated  debentures  to First Bank
Statutory  Trust  XI,  as  further  described  in  Note  11 to our  Consolidated
Financial Statements.

On January 2, 2007, we repaid in full $56.9 million of  subordinated  debentures
in  conjunction  with the December 31, 2006  redemption  of the trust  preferred
securities of our former business trust, First Preferred Capital Trust III. This
payment contributed to a decrease in our accrued expenses and other liabilities,
which  declined $58.2 million to $71.8 million at September 30, 2007 from $130.0
million at December 31, 2006.

Stockholders' equity was $856.9 million and $800.4 million at September 30, 2007
and  December  31,  2006,  respectively.   The  increase  of  $56.4  million  is
attributable to: (a) net income of $54.0 million;  (b) a $2.5 million cumulative
effect of a change in  accounting  principle  recorded in  conjunction  with our
adoption of Financial Accounting Standards Board, or FASB, Interpretation No. 48
-- Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109
-- Accounting  for Income Taxes,  or FIN 48, as further  discussed in Note 1 and
Note 12 to our Consolidated Financial Statements; and (c) a $511,000 decrease in
accumulated other  comprehensive  loss,  comprised of a $5.1 million increase in
accumulated other comprehensive  income related to an increase in the fair value
of  our  derivative  financial  instruments,  and a  $4.5  million  increase  in
accumulated other  comprehensive loss related to a decrease in the fair value of
our available-for-sale investment securities portfolio;  partially offset by (d)
dividends of $524,000 paid on our Class A and Class B preferred stock.




<PAGE>

                              Results of Operations

Net Income.  Net income was $15.0  million for the three months ended  September
30,  2007,  compared to $29.7  million for the  comparable  period in 2006.  Net
income was $54.0 million for the nine months ended September 30, 2007,  compared
to $80.7 million for the comparable period in 2006. Our return on average assets
was 0.58% and 0.70% for the three and nine  months  ended  September  30,  2007,
respectively,  compared to 1.22% and 1.14% for the  comparable  periods in 2006.
Our return on average stockholders' equity was 7.06% and 8.70% for the three and
nine months  ended  September  30,  2007,  respectively,  compared to 16.01% and
15.08% for the comparable periods in 2006. The decline in earnings for the three
and nine months ended  September  30, 2007 reflects an increase in our provision
for loan  losses;  compression  of our net  interest  margin  due  primarily  to
increased  deposit  costs  and  competitive   pressure  on  loan  yields;  lower
noninterest  income levels  primarily  attributable to reduced  mortgage banking
revenues;  and higher  noninterest  expense levels  primarily  related to recent
acquisitions and expansionary de novo branch offices.

Our net interest  income was $97.8 million and $289.5  million for the three and
nine months ended  September 30, 2007,  respectively,  compared to $99.2 million
and $285.7 million for the comparable  periods in 2006. Our net interest  margin
declined  to 4.12% for the three  and nine  months  ended  September  30,  2007,
compared to 4.45% and 4.39% for the  comparable  periods in 2006. The decline in
our net interest  margin  primarily  resulted  from an increase in higher priced
deposits driven by highly competitive  pricing within our markets and a shift in
our  deposit  mix to  increased  time  deposits  and  savings  and money  market
accounts,  in contrast to demand accounts,  as well as competitive  pressures on
loan yields.  The average rates paid on  interest-bearing  deposits increased to
3.70% for the three and nine months  ended  September  30,  2007,  respectively,
compared  to the same  periods  in 2006,  while  the  average  yield  earned  on
interest-earning  assets decreased to 7.48% for the three months ended September
30, 2007 and  increased to 7.49% for the nine months ended  September  30, 2007,
compared to the same  periods in 2006,  contributing  to a reduction  in our net
interest  margin.  Average  interest-earning  assets  increased 6.6% and 7.9% to
$9.47  billion and $9.44  billion for the three and nine months ended  September
30, 2007, respectively,  from $8.88 billion and $8.74 billion for the comparable
periods in 2006. See further discussion under "--Net Interest Income."

Our provision  for loan losses  increased to $17.0 million and $26.0 million for
the three and nine months ended  September 30, 2007,  respectively,  compared to
$2.0 million and $8.0 million for the  comparable  periods in 2006. The increase
in our provision for loan losses was primarily driven by loan growth,  increased
net loan  charge-offs and  deterioration in asset quality within our one-to-four
family  residential  mortgage and real estate  construction and development loan
portfolios, as further discussed under "--Loans and Allowance for Loan Losses."

Noninterest  income was $26.8  million and $75.5  million for the three and nine
months ended  September  30, 2007,  respectively,  compared to $30.0 million and
$81.4 million for the comparable periods in 2006. The decline in our noninterest
income primarily  resulted from a decline in mortgage banking revenues including
significantly  reduced gains on loans sold and held for sale.  The gain on loans
sold and held for sale decreased to $3.5 million and $12.0 million for the three
and nine months ended September 30, 2007, respectively, compared to $4.6 million
and $17.5  million for the same  periods in 2006 due  primarily to a decrease in
the volume of loans  originated and sold.  Gains on loans sold and held for sale
for the nine months ended September 30, 2006 also include a $1.7 million gain on
the sale of  certain  nonperforming  loans and $2.1  million of  increased  loan
servicing income generated from the  capitalization of mortgage servicing rights
related to the  securitization of $138.9 million of residential  mortgage loans.
The decrease in noninterest  income is also  attributable to a $2.8 million gain
recognized in the third  quarter of 2006 on the cash exchange of stock  received
as settlement in full of a previously  charged-off  loan. The overall decline in
noninterest  income was  partially  offset by  increased  revenue  from  service
charges on deposits and customer service fees generated by higher deposit levels
and changes in the overall mix of our deposit portfolio; increased insurance fee
and  commission  income  generated  through  our  recently  acquired   insurance
brokerage  subsidiary  in March 2006; a gain on the sale of First Bank's  Denton
and Garland,  Texas  branches of $1.0 million  during the third quarter of 2007;
and a  decrease  in  losses  on  sales of  investment  securities.  See  further
discussion under "--Noninterest Income."

Noninterest  expense was $84.5 million and $254.7 million for the three and nine
months ended  September  30, 2007,  respectively,  compared to $80.5 million and
$236.3  million  for the same  periods in 2006.  We  attribute  the  increase in
overall expense levels,  specifically  salaries and employee  benefits  expense,
occupancy and furniture and equipment  expense,  and  amortization of intangible
assets,  to the significant  expansion of our branch office network and employee
base  following  the  completion  of numerous  acquisitions  of banks and branch
offices  in 2006 and  2007;  the  acquisition  of UPAC,  our  insurance  premium
financing  company,  and Adrian Baker, our insurance  brokerage agency, in 2006;
and the  opening of six de novo branch  offices  during the first nine months of
2007. We continue to closely  monitor our noninterest  expense levels,  and have
implemented  certain expense reduction  measures,  including but not limited to,
certain  staffing  reductions  primarily  associated  with our mortgage  banking

<PAGE>

division  in  light  of the  discontinuation  of the  origination  and  sale  of
sub-prime  loans in the  secondary  market.  We are also  evaluating  additional
expense reduction measures in an effort to reduce our noninterest expense levels
in future periods. See further discussion under "--Noninterest Expense."

Net Interest Income. Net interest income,  expressed on a tax-equivalent  basis,
increased  to $290.7  million  for the nine months  ended  September  30,  2007,
compared  to $286.9  million for the  comparable  period in 2006.  Net  interest
income,  expressed on a tax-equivalent basis, decreased to $98.3 million for the
three  months  ended  September  30,  2007,  compared  to $99.6  million for the
comparable  period in 2006.  Our net  interest  margin  declined 33 and 27 basis
points to 4.12% for the three and nine months ended  September  30,  2007,  from
4.45% and 4.39% for the comparable  periods in 2006. Net interest  income is the
difference between interest earned on our interest-earning assets, such as loans
and   investment   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  expressed 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  computed on a
tax-equivalent  basis by average  interest-earning  assets.  The  interest  rate
spread is the  difference  between the average  tax-equivalent  yield  earned on
interest-earning   assets  and  the  average   rate  paid  on   interest-bearing
liabilities.

The increase in net interest  income during the nine months ended  September 30,
2007  compared  to the same  period in 2006  reflects  an  increase  in  average
interest-earning  assets  provided  by  internal  growth  and our  2006 and 2007
acquisitions,  and  increasing  rates  earned  on our  interest-earning  assets,
partially  offset by an increase  in average  interest-bearing  liabilities  and
interest rates paid on those  liabilities.  The decrease in net interest  income
during the three months ended  September 30, 2007 compared to the same period in
2006  reflects  lower  rates  earned  on  interest-earning   assets,   primarily
attributable to a reduction in yields on our loan portfolio, as discussed below,
and an increase in average interest-bearing  liabilities and interest rates paid
on  those   liabilities,   partially   offset   by  an   increase   in   average
interest-earning assets.

The  decline in our net  interest  margin was  primarily  due to an  increase in
higher priced deposits driven by competitive conditions within our markets and a
shift in our deposit mix that  reflects  increased  average  time  deposits  and
savings and money market accounts,  in contrast to demand accounts.  The average
rates paid on our interest-bearing  deposits increased 37 and 62 basis points to
3.70% during the three and nine months ended  September 30, 2007,  respectively,
compared  to 3.33% and 3.08% for the same  periods in 2006.  The  average  yield
earned on our  interest-earning  assets decreased five basis points to 7.48% for
the three months ended September 30, 2007, compared to 7.53% for the same period
in 2006,  and  increased  23 basis  points  to 7.49% for the nine  months  ended
September 30, 2007,  from 7.26% for the same period in 2006,  contributing  to a
reduction of our net interest margin. Average  interest-earning assets increased
$586.3  million,  or 6.6%, to $9.47 billion for the three months ended September
30, 2007,  from $8.88  billion for the  comparable  period in 2006,  and average
interest-earning  assets increased $694.5 million, or 7.9%, to $9.44 billion for
the nine months ended  September 30, 2007, from $8.74 billion for the comparable
period in 2006.  The increase is primarily  attributable  to continued  internal
loan growth, and interest-earning  assets provided by our acquisitions completed
in 2006 and 2007,  which provided  assets,  in aggregate,  of $794.3 million and
$206.9 million,  respectively.  Average  interest-bearing  liabilities increased
$619.3  million,  or 8.2%, to $8.16 billion for the three months ended September
30, 2007,  from $7.54  billion for the  comparable  period in 2006,  and average
interest-bearing liabilities increased $725.2 million, or 9.8%, to $8.11 billion
for the nine  months  ended  September  30,  2007,  from $7.39  billion  for the
comparable period in 2006.

Interest  income on our loan  portfolio,  expressed on a  tax-equivalent  basis,
increased  to $160.4  million  and $472.3  million for the three and nine months
ended  September 30, 2007,  respectively,  compared to $153.5 million and $426.9
million  for the  comparable  periods in 2006.  Average  loans,  net of unearned
discount, increased $441.7 million and $573.8 million to $8.08 billion and $7.96
billion for the three and nine months ended  September  30, 2007,  respectively,
from $7.63 billion and $7.38  billion for the  comparable  periods in 2006.  The
yield on our loan  portfolio  decreased  10 basis  points to 7.88% for the three
months ended September 30, 2007,  compared to 7.98% for the comparable period in
2006,  reflecting  competitive  pressures on loan yields within our markets,  an
increase in the average  amount of nonaccrual  loans during the third quarter of
2007 compared to the same period in 2006, and a 50 basis point drop in the prime
rate on September 18, 2007. The yield on our loan  portfolio  increased 21 basis
points to 7.94% for the nine months ended September 30, 2007,  compared to 7.73%
for the same period in 2006,  reflecting  the rise in short-term  interest rates
during the period.  The increase in average loans reflects  internal  growth and
our  acquisitions  completed in 2006 and 2007,  partially  offset by the sale of
certain  loans in the second and third  quarters of 2007,  as further  described
under  "--Loans  and  Allowance  for  Loan  Losses,"  and a  reduction  in loans
throughout  2006  related to the  securitization  of certain of our  residential
mortgage  loans  held in our loan  portfolio,  the sale of  certain  residential

<PAGE>

mortgage and other  loans,  loan  payoffs and  external  refinancing  of various
credits.  Our  acquisitions  completed in 2006 and 2007 provided  loans,  net of
unearned  discount,   of  $545.1  million  and  $175.5  million,  in  aggregate,
respectively,  as of the dates of acquisition. The increase in average loans for
the first nine  months of 2007  compared  to the same  period in 2006  primarily
resulted  from an increase in average  commercial,  financial  and  agricultural
loans of $332.8  million;  an increase in average real estate  construction  and
development  loans of $208.8  million;  and an increase  in average  real estate
mortgage loans of $88.0 million.

Interest  income on our  investment  securities,  expressed on a  tax-equivalent
basis,  increased  to $16.7  million  and $50.5  million  for the three and nine
months ended  September  30, 2007,  respectively,  compared to $14.1 million and
$44.3 million for the comparable periods in 2006. Average investment  securities
were  $1.28  billion  and $1.34  billion  for the three  and nine  months  ended
September  30, 2007,  respectively,  compared to $1.17 billion and $1.27 billion
for the comparable  periods in 2006.  The yield on our investment  portfolio was
5.16%  and  5.06%  for the  three and nine  months  ended  September  30,  2007,
respectively,  compared to 4.78% and 4.66% for the  comparable  periods in 2006.
Investment  securities  provided by our acquisitions  completed in 2006 and 2007
were $37.3 million and $4.1 million, in aggregate, respectively, as of the dates
of acquisition.  Funds  available from maturities of investment  securities were
partially utilized to reinvest in higher-yielding  available-for-sale investment
securities.  The  remaining  funds were  utilized to fund  internal loan growth,
along with funds  available from deposit growth and short-term  investments.  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  discussed under "--Interest Rate Risk Management," we
terminated $200.0 million of our term repurchase agreements during the first and
second quarters of 2006 and sold $200.0 million of available-for-sale investment
securities  associated with the  termination of the term repurchase  agreements.
During the second  quarter of 2006,  we also entered into a $100.0  million term
repurchase   agreement  and  purchased  $100.0  million  of   available-for-sale
investment securities associated with the new term repurchase agreement.

Interest expense on our interest-bearing deposits increased to $69.4 million and
$204.4  million  for the  three  and  nine  months  ended  September  30,  2007,
respectively,  compared to $57.0 million and $153.2  million for the  comparable
periods in 2006.  Average  interest-bearing  deposits increased to $7.45 billion
and $7.39  billion  for the three and nine  months  ended  September  30,  2007,
respectively, from $6.78 billion and $6.64 billion for the comparable periods in
2006. The increase in average interest-bearing deposits reflects internal growth
through  enhanced  product  campaigns,  and growth provided by our  acquisitions
completed  during 2006 and 2007,  which  provided  interest-bearing  deposits of
$405.1 million and $134.2 million, in aggregate,  respectively,  as of the dates
of  acquisition.  The  aggregate  weighted  average  rate  paid  on our  deposit
portfolio  was 3.70% for the three and nine months  ended  September  30,  2007,
compared  to 3.33% and  3.08% for the  comparable  periods  in 2006,  reflecting
increases of 37 and 62 basis points, respectively. The increase in the aggregate
weighted  average  rate paid for these  periods  is  reflective  of  competitive
pricing  conditions  within our  markets  and a change in the mix of our average
deposits to  increased  time  deposits  and savings and money  market  accounts.
Average time  deposits  were $3.82  billion and $3.84  billion for the three and
nine months ended  September 30, 2007,  respectively,  compared to $3.73 billion
and $3.57 billion for the comparable  periods in 2006. Average savings and money
market  deposits  were $2.69  billion  and $2.59  billion for the three and nine
months ended  September  30, 2007,  respectively,  compared to $2.10 billion and
$2.12  billion  for the  comparable  periods in 2006.  Average  interest-bearing
demand  deposits were $944.5  million and $962.4  million for the three and nine
months ended  September 30, 2007,  respectively,  compared to $949.2 million and
$960.0 million for the comparable periods in 2006.

Interest  expense on our other borrowings was $4.4 million and $13.7 million for
the three and nine months ended  September 30, 2007,  respectively,  compared to
$4.3 million and $12.3 million for the comparable periods in 2006. Average other
borrowings  were $374.1 million and $374.8 million for the three and nine months
ended  September 30, 2007,  respectively,  and $375.3 million and $382.3 million
for the comparable  periods in 2006. The aggregate weighted average rate paid on
our other  borrowings  was 4.62% and 4.87% for the three and nine  months  ended
September 30, 2007, respectively, compared to 4.57% and 4.29% for the comparable
periods in 2006. The increased  rates paid on our other  borrowings  reflect the
rise in short-term  interest rates during the periods.  Average other borrowings
reflect:  (a) the  termination of $200.0 million of term  repurchase  agreements
during  the  first six  months of 2006;  (b) a $100.0  million  term  repurchase
agreement  entered into during the third quarter of 2006; and (c) the subsequent
termination of the $100.0 million term  repurchase  agreement in August 2007. In
addition,  we prepaid $35.3 million of FHLB advances during 2006 that we assumed
with certain bank acquisitions.
<PAGE>

Interest  expense on our notes  payable was  $544,000  and $2.1  million for the
three and nine months ended September 30, 2007,  respectively,  compared to $1.4
million and $4.3 million for the  comparable  periods in 2006. Our notes payable
averaged  $29.1  million and $41.1  million for the three and nine months  ended
September  30, 2007,  respectively,  compared to $85.3 million and $93.4 million
for the comparable  periods in 2006. The aggregate weighted average rate paid on
our notes  payable  was 7.42%  and  6.79%  for the three and nine  months  ended
September 30, 2007, respectively, compared to 6.67% and 6.20% for the comparable
periods in 2006,  reflecting  the rise in short-term  interest  rates during the
periods.  The weighted  average rate paid on our notes payable  includes  unused
commitment,  arrangement and renewal fees. Exclusive of these fees, the weighted
average  rate  paid on our notes  payable  was 6.51% and 6.54% for the three and
nine months ended September 30, 2007, respectively,  compared to 6.36% and 6.06%
for the same  periods in 2006.  The  decrease  in our average  notes  payable is
attributable to contractual payments and additional prepayments made on our term
loan, as further described in Note 10 to our Consolidated Financial Statements.

Interest  expense on our  subordinated  debentures  was $5.9  million  and $17.7
million for the three and nine months ended  September  30, 2007,  respectively,
compared to $6.4 million and $17.8 million for the  comparable  periods in 2006.
Average  subordinated  debentures were $310.8 million and $309.8 million for the
three and nine months ended September 30, 2007, respectively, compared to $304.4
million and $270.6  million for the  comparable  periods in 2006.  The aggregate
weighted  average rate paid on our  subordinated  debentures was 7.56% and 7.63%
for the three and nine months ended September 30, 2007,  respectively,  compared
to 8.31% and 8.77% for the comparable periods in 2006. The change in volumes and
average rates paid reflects: (a) the issuance of $139.2 million of variable rate
subordinated  debentures  in private  placements  during 2006 through four newly
formed statutory  trusts,  partially offset by the repayment of $56.9 million of
9.0% fixed rate  subordinated  debentures on December 31, 2006; (b) the issuance
of $25.8 million of variable rate subordinated debentures in a private placement
through a newly formed  statutory  trust that we completed on February 23, 2007;
(c) the repayment of $25.8 million of variable rate  subordinated  debentures on
April  22,  2007;  and (d) the  issuance  of  $51.5  million  of  variable  rate
subordinated  debentures  in  private  placements  through  three  newly  formed
statutory  trusts that we completed during the third quarter of 2007, as further
described in Note 11 to our Consolidated Financial Statements.  Although we have
increased the overall level of our outstanding subordinated debentures,  we have
significantly  reduced  the  cost of  these  long-term  borrowings  through  the
refinancing of certain higher fixed and variable rate issues.



<PAGE>


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 our  interest-bearing  liabilities
and the resulting net interest income for the periods presented.
<TABLE>
<CAPTION>

                                        Three Months Ended September 30,                     Nine Months Ended September 30,
                               -------------------------------------------------- --------------------------------------------------
                                          2007                     2006                      2007                     2006
                               ------------------------- ------------------------ ------------------------- ------------------------
                                          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).......... $ 8,076,224 160,352 7.88% $7,634,494 153,540 7.98% $ 7,955,916 472,319 7.94% $7,382,161 426,877 7.73%
  Investment securities (4)...   1,284,707  16,702 5.16   1,174,077  14,134 4.78    1,336,036  50,526 5.06   1,270,896  44,279 4.66
  Short-term investments......     109,800   1,478 5.34      75,835   1,018 5.33      144,709   5,671 5.24      89,084   3,288 4.93
                               ----------- -------       ---------- -------       ----------- -------       ---------- -------
      Total interest-earning
        assets................   9,470,731 178,532 7.48   8,884,406 168,692 7.53    9,436,661 528,516 7.49   8,742,141 474,444 7.26
                                           -------                  -------                   -------                  -------
Nonearning assets.............     875,622                  776,127                   860,875                  736,317
                               -----------               ----------               -----------               ----------
      Total assets............ $10,346,353               $9,660,533               $10,297,536               $9,478,458
                               ===========               ==========               ===========               ==========

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

Interest-bearing liabilities:
  Interest-bearing deposits:
    Interest-bearing demand... $   944,542   2,242 0.94% $  949,195   2,057 0.86% $   962,396   7,171 1.00% $  959,983   5,832 0.81%
    Savings and money market..   2,687,208  21,012 3.10   2,104,323  13,491 2.54    2,587,286  59,809 3.09   2,117,601  36,929 2.33
    Time deposits of $100
      or more.................   1,462,548  18,299 4.96   1,369,503  15,902 4.61    1,455,660  53,533 4.92   1,288,897  41,716 4.33
    Other time deposits.......   2,355,710  27,881 4.70   2,356,661  25,526 4.30    2,383,236  83,851 4.70   2,276,270  68,706 4.04
                               ----------- -------       ---------- -------       ----------- -------       ---------- -------
      Total interest-bearing
        deposits..............   7,450,008  69,434 3.70   6,779,682  56,976 3.33    7,388,578 204,364 3.70   6,642,751 153,183 3.08
  Other borrowings............     374,143   4,361 4.62     375,278   4,322 4.57      374,825  13,653 4.87     382,280  12,263 4.29
  Notes payable (5)...........      29,070     544 7.42      85,315   1,434 6.67       41,089   2,088 6.79      93,417   4,331 6.20
  Subordinated debentures (3).     310,804   5,920 7.56     304,412   6,377 8.31      309,752  17,668 7.63     270,568  17,751 8.77
                               ----------- -------       ---------- -------       ----------- -------       ---------- -------
      Total interest-bearing
        liabilities...........   8,164,025  80,259 3.90   7,544,687  69,109 3.63    8,114,244 237,773 3.92   7,389,016 187,528 3.39
                                           -------                  -------                   -------                  -------
Noninterest-bearing
 liabilities:
  Demand deposits.............   1,225,157                1,257,277                 1,233,565                1,263,623
  Other liabilities...........     114,555                  123,611                   120,534                  109,743
                               -----------               ----------               -----------               ----------
      Total liabilities.......   9,503,737                8,925,575                 9,468,343                8,762,382
Stockholders' equity..........     842,616                  734,958                   829,193                  716,076
                               -----------               ----------               -----------               ----------
      Total liabilities and
        stockholders' equity.. $10,346,353               $9,660,533               $10,297,536               $9,478,458
                               ===========               ==========               ===========               ==========

Net interest income...........              98,273                   99,583                   290,743                  286,916
                                           =======                  =======                   =======                  =======
Interest rate spread..........                     3.58                     3.90                      3.57                     3.87
Net interest margin (6).......                     4.12%                    4.45%                     4.12%                    4.39%
                                                   ====                     ====                      ====                     ====
--------------------
(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
    $427,000 and $1.3 million  for  the  three  and  nine months  ended  September 30, 2007, and $399,000 and $1.2 million  for  the
    comparable periods in 2006, respectively.
(5) Interest expense on our notes payable  includes  commitment, arrangement and renewal fees. Exclusive of these fees, the interest
    rates paid were 6.51% and 6.54% for the three and nine months ended September 30, 2007, and 6.36%  and 6.06% for the  comparable
    periods in 2006, 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 $17.0
million  and $26.0  million for the three and nine months  ended  September  30,
2007, respectively, compared to $2.0 million and $8.0 million for the comparable
periods in 2006.  The increase in our  provision  for loan losses was  primarily
driven by an increase in nonperforming loans within certain segments of our loan
portfolio,  primarily our one-to-four family residential  mortgage portfolio and
real  estate  construction  and  development   portfolio,   increased  net  loan
charge-offs  and growth within our loan  portfolio,  as further  discussed under
"--Loans and Allowance for Loan Losses."

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

Noninterest  Income.  Noninterest income was $26.8 million and $75.5 million for
the three and nine months ended September 30, 2007, respectively,  in comparison
to  $30.0  million  and  $81.4  million  for the  comparable  periods  in  2006.
Noninterest income consists primarily of service charges on deposit accounts and
customer service fees, mortgage-banking revenues,  investment management income,
insurance fee and commission income and other income.

Service charges on deposit accounts and customer service fees were $12.1 million
and $34.3  million  for the three and nine  months  ended  September  30,  2007,
respectively,  in  comparison  to  $11.1  million  and  $32.4  million  for  the
comparable periods in 2006. The increase in service charges and customer service
fees was primarily attributable to increased deposit account balances associated
with internal  growth and our  acquisitions of banks completed in 2006 and 2007,
as  further  described  under  "--Financial  Condition"  and  in  Note  2 to our
Consolidated Financial Statements,  in addition to changes in the overall mix of
our deposit portfolio. The increase is also attributable to pricing increases on
certain service charges and customer  service fees instituted to reflect current
market conditions.

The gain on loans sold and held for sale was $3.5 million and $12.0  million for
the three and nine months ended September 30, 2007, respectively,  in comparison
to $4.6  million  and $17.5  million  for the  comparable  periods  in 2006.  We
primarily  attribute  the  decrease to: (a) a decrease in the volume of mortgage
loans originated and subsequently sold in the secondary market;  (b) an $851,000
gain,  before  applicable  income taxes,  recorded on the sale of  approximately
$13.4 million of certain  repurchased  and other  residential  mortgage loans in
April 2007 and a $266,000 gain, before applicable income taxes,  recorded on the
sale of  approximately  $33.2  million of certain  commercial,  commercial  real
estate  and  real  estate  construction  loans in  September  2007,  as  further
discussed  under  "--Loans and Allowance  for Loan  Losses,"  compared to a $1.7
million gain, before  applicable  income taxes,  recorded on the sale of certain
nonperforming  loans in March 2006;  and (c) the  recognition of $2.1 million of
income generated from the  capitalization of mortgage  servicing rights in March
and April 2006 pertaining to the  securitization  and transfer to our investment
portfolio of $138.9 million in aggregate of  residential  mortgage loans held in
our loan portfolio, as further described in Note 4 to our Consolidated Financial
Statements.  As further discussed under "--Loans and Allowance for Loan Losses,"
we discontinued  the  origination and sale in the secondary  market of sub-prime
loans in the first quarter of 2007,  and as such, the  discontinuation  of these
activities  has reduced the amount of gains on loans sold and held for sale,  in
comparison  to  the  level  that  we  had  historically  generated  through  the
origination   and  sale  of  these   sub-prime  loan   products.   Historically,
approximately  40% of our  origination  and sale volume was related to sub-prime
loan products.

We recorded a net loss on investment  securities of $74,000 and $1.3 million for
the three and nine months ended September 30, 2007, respectively,  in comparison
to a net  gain on  investment  securities  of  $1.6  million  and a net  loss on
investment  securities of $2.4 million for the comparable periods in 2006. These
amounts  reflect a net loss of $74,000  and $1.5  million for the three and nine
months ended  September 30, 2007,  respectively,  compared to a net gain of $1.2
million and a net loss of $96,000 for the comparable periods in 2006, related to
changes  in the fair  value of  securities  held in our  trading  portfolio.  We
liquidated  our  trading  portfolio  in July  2007.  The net loss on  investment
securities for the nine months ended  September 30, 2006 also includes a gain of
$389,000  recognized in August 2006 on the redemption of common stock held as an
available-for-sale  investment  security  and a net  loss  of  $2.7  million  in
aggregate  on the  sale  of  certain  available-for-sale  investment  securities
associated with the termination of $200.0 million of term repurchase  agreements
during  the first and  second  quarters  of 2006,  as  further  described  under
"--Interest Rate Risk Management."

Bank-owned  life insurance  investment  income was $1.1 million and $2.8 million
for the three  and nine  months  ended  September  30,  2007,  respectively,  in
comparison  to $665,000  and $2.4  million for the  comparable  periods in 2006,
reflecting changes in the performance of the underlying investments  surrounding
the insurance  contracts  attributable  to the portfolio mix of investments  and
overall market conditions during the respective periods.

Investment   management  income  generated  by  MVP,  our  institutional   money
management subsidiary,  was $1.4 million and $4.5 million for the three and nine
months ended September 30, 2007, respectively, in comparison to $2.0 million and
$6.6 million for the comparable periods in 2006,  reflecting decreased portfolio
management  fee income  associated  with  changes  in the level of assets  under
management.
<PAGE>

Insurance fee and  commission  income  generated by Adrian Baker,  our insurance
brokerage  agency  acquired in March 2006, was $1.8 million and $5.3 million for
the three and nine months ended September 30, 2007, respectively,  in comparison
to $1.5 million and $3.3 million for the comparable periods in 2006,  reflecting
increased   customer  volumes,   partially  offset  by  reductions  in  premiums
attributable to current market conditions within the insurance industry.

Other  income was $7.0  million and $17.8  million for the three and nine months
ended September 30, 2007, respectively,  in comparison to $8.5 million and $21.5
million for the comparable  periods in 2006. We primarily  attribute the decline
in other income to:

     >>   a  decrease  of $2.8  million  in gains  on  sales  of  other  assets,
          attributable  to a $2.8 million gain  recognized in September  2006 on
          the sale of stock that was  acquired as  settlement  in full of a loan
          previously charged-off;

     >>   a decrease  of $1.9  million  in gains on sales of other real  estate,
          primarily  attributable  to a gain of $1.5 million  recognized  on the
          sale of a parcel of other real estate in January 2006; and

     >>   a release fee of $938,000 received during the first quarter of 2006 on
          funds  collected from a loan  previously  sold 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; partially offset by

     >>   a pre-tax  gain of $1.0  million  recorded in July 2007 on the sale of
          our two  banking  offices  located in Denton and  Garland,  Texas,  as
          further described in Note 2 to our Consolidated Financial Statements.


Noninterest  Expense.  Noninterest  expense was $84.5 million and $254.7 million
for the three  and nine  months  ended  September  30,  2007,  respectively,  in
comparison to $80.5  million and $236.3  million for the  comparable  periods in
2006. Our  efficiency  ratio was 67.79% and 69.78% for the three and nine months
ended September 30, 2007,  respectively,  in comparison to 62.30% and 64.38% for
the  comparable  periods  in 2006.  The  increase  in  noninterest  expense  was
primarily  attributable  to our de novo  branch  openings  and our  acquisitions
completed in 2006 and 2007, which contributed to increased salaries and employee
benefits expense, occupancy and furniture and equipment expense and amortization
of intangible assets, as well as increases in other expense.

Salaries and employee  benefits expense was $43.1 million and $132.1 million for
the three and nine months ended September 30, 2007, respectively,  in comparison
to $42.5  million and $124.6  million  for the  comparable  periods in 2006.  We
attribute the overall increase to higher salaries and employee benefits expenses
associated  with an aggregate of 18 additional  branch offices  acquired in 2006
and 2007, our  acquisitions of Adrian Baker and UPAC in 2006, six de novo branch
offices  opened in 2007 and generally  higher salary and employee  benefit costs
associated  with employing and retaining  qualified  personnel.  These increases
were partially  offset by a decrease in salaries and employee  benefits  expense
associated with our mortgage banking  division as a result of expense  reduction
measures taken by management in light of the  discontinuation of the origination
and sale in the secondary market of sub-prime loans, as further  discussed under
"--Loans and  Allowance for Loan Losses." We continue our efforts to monitor and
reduce our noninterest expense levels with the implementation of these and other
employee related expense reduction measures.

Occupancy,  net of rental income,  and furniture and equipment expense was $13.3
million  and $37.7  million for the three and nine months  ended  September  30,
2007,  respectively,  in  comparison  to $11.2 million and $31.9 million for the
comparable  periods in 2006.  The  increase  reflects  higher  levels of expense
resulting from our de novo branch openings and acquisitions in 2006 and 2007, as
discussed  above,  as  well  as  increased  technology  equipment  expenditures,
continued  expansion  and  renovation of certain  corporate and branch  offices,
increased expenses  associated with the purchase and/or lease of properties that
will be utilized for future branch office locations,  and increased depreciation
expense associated with acquisitions and capital expenditures.

Information  technology  and item  processing  fees were $9.0  million and $27.5
million for the three and nine months ended September 30, 2007, respectively, in
comparison to $9.4 million and $27.6 million for the comparable periods in 2006.
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
banking and trust  divisions,  and Adrian  Baker,  MVP,  SBLS LLC and UPAC.  The
relatively  stable level to moderate  decrease of these fees in 2007  reflects a
reduction in the number of acquisitions  completed  during 2007 compared to 2006
and enhanced  automation of certain services,  including remote deposit,  branch
capture, and electronic image exchange,  which has significantly  contributed to
reduced  manual  processes and reduced  costs  associated  with these  services,
partially   offset  by   depreciation   associated   with  the  related  capital
expenditures  necessary  to  support  the  enhanced  delivery  channels  and the
addition of de novo branch offices.
<PAGE>

Legal,  examination and professional fees were $2.5 million and $6.9 million for
the three and nine months ended September 30, 2007, respectively,  in comparison
to $2.1  million  and $6.6  million  for the  comparable  periods  in 2006.  The
continued expansion of overall corporate  activities,  the ongoing  professional
services  utilized by certain of our acquired  entities,  and the level of legal
fees  associated  with certain  litigation  matters have all  contributed to the
overall expense levels in 2006 and 2007.

Amortization  of  intangible  assets was $3.1  million and $9.3  million for the
three and nine months ended September 30, 2007,  respectively,  in comparison to
$2.2 million and $5.4  million for the  comparable  periods in 2006,  as further
described in Note 3 to our Consolidated  Financial Statements.  The increase was
attributable  to core  deposit  intangibles  associated  with  our  acquisitions
completed  in 2006 and  2007,  in  addition  to the  customer  list  intangibles
associated with our  acquisitions of Adrian Baker and UPAC in March 2006 and May
2006, respectively.

Charitable contributions expense was $1.7 million and $5.0 million for the three
and nine months ended  September 30, 2007,  respectively,  in comparison to $1.6
million and $4.9  million for the  comparable  periods in 2006.  Our  charitable
contribution   expense   levels  are   primarily   attributable   to  charitable
contributions  made to the  Dierberg  Operating  Foundation,  Inc., a charitable
foundation  established by our Chairman and members of his immediate  family, as
further described in Note 6 to our Consolidated Financial Statements.

Other  expense was $8.6 million and $26.0  million for the three and nine months
ended September 30, 2007, respectively,  in comparison to $8.2 million and $24.7
million for the comparable periods in 2006. Other expense  encompasses  numerous
general and administrative expenses including communications, 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
increase in other expense was primarily attributable to:

     >>   expenses associated with continued growth and expansion of our banking
          franchise,  including our de novo branch offices and our  acquisitions
          completed during 2006 and 2007; partially offset by

     >>   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
          in conjunction with the acquisition of a bank in late 2004; and

     >>   a $470,000 loss recognized on a liquidation  sale of residential  real
          estate and personal property of an SBA guaranteed loan in June 2006.

We  continue  to  closely  monitor  our  noninterest  expense  levels,  and have
implemented  certain  expense  reduction  measures  and are  further  evaluating
additional  expense  reduction  measures in an effort to reduce our  noninterest
expenses levels in future periods.

Provision for Income Taxes.  The provision for income taxes was $8.1 million and
$30.1 million, representing an effective income tax rate of 34.9% and 35.8%, for
the three and nine months ended September 30, 2007, respectively,  in comparison
to $17.2 million and $42.5 million, representing an effective income tax rate of
36.9% and 34.6%, respectively,  for the comparable periods in 2006. The decrease
in our provision for income taxes primarily  reflects our reduced earnings.  The
increase in the effective tax rate for the nine months ended  September 30, 2007
compared  to the same  period  in 2006 is  primarily  due to the  reversal  of a
federal tax  reserve of $2.5  million and a state tax reserve of $748,000 in the
first  quarter  of 2006,  as they were no  longer  deemed  necessary  due to the
resolution of a potential tax liability.



<PAGE>


                          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  September  30,  2007  and  December  31,  2006  are
summarized as follows:
<TABLE>
<CAPTION>

                                                          September 30, 2007            December 31, 2006
                                                       ------------------------      -----------------------
                                                         Notional      Credit          Notional     Credit
                                                          Amount      Exposure          Amount     Exposure
                                                          ------      --------          ------     --------
                                                                  (dollars expressed in thousands)

<S>                                                     <C>               <C>          <C>          <C>
         Cash flow hedges.............................  $ 400,000         45           600,000      4,369
         Interest rate floor agreements...............    300,000        679           300,000        376
         Interest rate cap agreements.................    400,000         98           400,000        139
         Interest rate lock commitments...............      6,300         --             5,900         --
         Forward commitments to sell
           mortgage-backed securities.................     50,000         --            54,000         --
                                                        =========      =====          ========      =====
</TABLE>

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.

For the three and nine months ended September 30, 2007, we realized net interest
expense of $652,000 and $3.5 million,  respectively, on our derivative financial
instruments,  in  comparison  to net  interest  expense of $1.2 million and $3.6
million for the comparable  periods in 2006. We recorded net gains on derivative
instruments,  which are  included  in  noninterest  income  in the  consolidated
statements  of income,  of $603,000  and  $261,000 for the three and nine months
ended  September 30, 2007,  respectively,  in comparison to net gains of $10,000
and net  losses of $59,000  for the  comparable  periods in 2006.  The net gains
recorded  for the three and nine  months  ended  September  30, 2007 and the net
gains and net losses  recorded for the three and nine months ended September 30,
2006,  respectively,  reflect  changes in the value of our  interest  rate floor
agreements  entered into in September  2005 and August 2006,  and changes in the
value of our interest rate cap agreements entered into in September 2006.

Cash Flow Hedges.  We entered into the following  interest rate swap agreements,
which have been  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:

     >>   In July 2003, we entered into an interest rate swap  agreement  with a
          $200.0 million  notional  amount.  The  underlying  hedged assets were
          certain variable rate loans within our commercial loan portfolio.  The
          swap agreement provided for us to receive a fixed rate of interest and
          pay an adjustable rate of interest  equivalent to the weighted average
          prime  lending  rate  minus  2.85%.  The  terms of the swap  agreement
          provided for us to pay and receive  interest on a quarterly basis. The
          interest rate swap agreement matured on July 31, 2007.

     >>   In September  2006, we entered into a $200.0 million  notional  amount
          three-year  interest rate swap agreement and a $200.0 million notional
          amount four-year  interest rate swap agreement.  The underlying hedged
          assets are certain  variable  rate loans  within our  commercial  loan
          portfolio.  The swap agreements provide for us to receive a fixed rate
          of interest and pay an adjustable  rate of interest  equivalent to the
          weighted average prime lending rate minus 2.86%. The terms of the swap
          agreements  provide for us to pay and receive  interest on a quarterly
          basis.

The amount  receivable  by us under the swap  agreements  was  $752,000 and $7.0
million at  September  30, 2007 and December  31,  2006,  respectively,  and the
amount payable by us under the swap  agreements was $706,000 and $2.7 million at
September 30, 2007 and December 31, 2006, respectively.



<PAGE>


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
September 30, 2007 and December 31, 2006 were as follows:
<TABLE>
<CAPTION>

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

         September 30, 2007:
<S>                                                    <C>              <C>            <C>         <C>
             September 18, 2009......................  $ 200,000        4.89%          5.20%      $  2,528
             September 20, 2010......................    200,000        4.89           5.20          3,088
                                                       ---------                                  --------
                                                       $ 400,000        4.89           5.20       $  5,616
                                                       =========       =====          =====       ========

         December 31, 2006:
             July 31, 2007...........................  $ 200,000        5.40%          3.08%      $ (2,705)
             September 18, 2009......................    200,000        5.39           5.20             98
             September 20, 2010......................    200,000        5.39           5.20            449
                                                       ---------                                  --------
                                                       $ 600,000        5.39           4.49       $ (2,158)
                                                       =========       =====          =====       ========
</TABLE>

Interest  Rate Floor  Agreements.  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  London Interbank  Offered Rate, or LIBOR,  equal or fall
below the  strike  price of 2.00%.  In August  2006,  we  entered  into a $200.0
million notional amount three-year  interest rate floor agreement in conjunction
with the restructuring of one of our $100.0 million term repurchase  agreements,
as further  described  below,  to further  stabilize net interest  income in the
event of a declining rate scenario.  The interest rate floor agreement  provides
for us to receive a  quarterly  adjustable  rate of interest  equivalent  to the
differential  between the strike price of 4.00% and the three-month LIBOR should
the  three-month  LIBOR equal or fall below the strike price.  The fair value of
the  interest  rate floor  agreements,  which is included in other assets in our
consolidated balance sheets, was $679,000 and $376,000 at September 30, 2007 and
December 31, 2006, respectively.

Interest Rate Floor Agreements Embedded in Term Repurchase  Agreements.  We have
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 the first and second  quarters of 2006, we terminated  $200.0  million of the
$300.0 million of term  repurchase  agreements  outstanding at December 31 2005,
resulting  in 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 these term repurchase agreements.  Additionally,  in August
2006, we restructured the remaining $100.0 million term repurchase  agreement to
extend  the  maturity  date to  October  12,  2010  and to  modify  the  pricing
structure,  including the interest rate floor strike price. We did not incur any
costs associated with the restructuring of the agreement.

In July  2006,  we  entered  into a $100.0  million  four-year  term  repurchase
agreement under a master repurchase  agreement with an unaffiliated third party.
On August 7, 2007, we terminated this $100.0 million term  repurchase  agreement
with a maturity  date of July 19, 2010,  and  incurred a  prepayment  penalty of
$330,000  in  conjunction  with the  early  termination  of the term  repurchase
agreement,  as  further  described  in  Note  9 to  our  Consolidated  Financial
Statements.

Interest  Rate Cap  Agreements.  In  September  2006,  we entered  into a $200.0
million  notional  amount  three-year  interest  rate cap agreement and a $200.0

<PAGE>

million  notional  amount  four-year  interest rate cap agreement in conjunction
with the interest  rate swap  agreements  designated as cash flow hedges that we
entered  into in  September  2006,  as  previously  described,  to limit the net
interest expense  associated with our interest rate swap agreements in the event
of a rising  rate  scenario.  The  $200.0  million  notional  amount  three-year
interest  rate cap agreement  provides for us to receive a quarterly  adjustable
rate of interest  equivalent to the differential  between the three-month  LIBOR
and the strike  price of 7.00%  should the  three-month  LIBOR exceed the strike
price. The $200.0 million notional amount four-year  interest rate cap agreement
provides for us to receive a quarterly adjustable rate of interest equivalent to
the  differential  between the  three-month  LIBOR and the strike price of 7.50%
should the  three-month  LIBOR  exceed the strike  price.  The fair value of the
interest  rate  cap  agreements,  which  is  included  in  other  assets  in our
consolidated  balance sheets, was $98,000 and $139,000 at September 30, 2007 and
December 31, 2006, respectively.

Pledged Collateral. At September 30, 2007 and December 31, 2006, we had accepted
cash of $7.0 million and $4.2 million, respectively, 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 fair value of these interest
rate lock  commitments  was  $142,000 and  ($17,000)  at September  30, 2007 and
December 31, 2006, respectively. The fair value of the forward contracts to sell
mortgage-backed  securities was ($273,000) and $86,000 at September 30, 2007 and
December 31, 2006, respectively.

                       Loans and Allowance for Loan Losses

Interest earned on First Bank's loan portfolio  represents the principal  source
of our income.  Interest and fees on loans  represented 89.9% and 89.5% of total
interest  income  for the  three  and nine  months  ended  September  30,  2007,
respectively,  in  comparison to 91.1% and 90.1% for the  comparable  periods in
2006.  Loans,  net of  unearned  discount,  increased  $466.3  million  to $8.13
billion,  or 79.2% of assets, at September 30, 2007,  compared to $7.67 billion,
or 75.5% of assets,  at December 31, 2006.  The following  table  summarizes the
composition of our loan portfolio at September 30, 2007 and December 31, 2006:
<TABLE>
<CAPTION>

                                                                            September 30,    December 31,
                                                                                2007            2006
                                                                                ----            ----
                                                                         (dollars expressed in thousands)

<S>                                                                           <C>             <C>
         Commercial, financial and agricultural............................  $2,181,136       1,934,912
         Real estate construction and development..........................   2,001,226       1,832,504
         Real estate mortgage:
             One-to-four family residential loans..........................   1,356,513       1,270,158
             Multi-family residential loans................................     154,393         141,341
             Commercial real estate loans..................................   2,262,897       2,203,649
         Consumer and installment, net of unearned discount................      77,138          67,590
         Loans held for sale...............................................      99,470         216,327
                                                                             ----------      ----------
             Total loans, net of unearned discount.........................  $8,132,773       7,666,481
                                                                             ==========      ==========
</TABLE>

We primarily  attribute the net increase in our loan portfolio  during the first
nine months of 2007 to:

     >>   an  increase  of  $246.2  million  in our  commercial,  financial  and
          agricultural  portfolio  due to  continued  internal  loan  production
          growth and $45.1 million of loans provided by our acquisition of Royal
          Oaks;

     >>   an increase  of $168.7  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 $54.8 million of loans  provided by our  acquisition  of Royal
          Oaks; and

     >>   an increase of $158.7 million in our real estate  mortgage  portfolio,
          primarily attributable to loans totaling $70.6 million provided by our
          acquisition of Royal Oaks, and internal loan growth;  partially offset
          by

     >>   a decrease  of $116.9  million  in our loans held for sale  portfolio,
          reflecting  the   discontinuation  of  the  origination  and  sale  of
          sub-prime  loan  products in early 2007 which has led to a significant
          decrease in loan production  volume of real estate mortgage loans that
          are subsequently sold in the secondary mortgage market, and the timing
          of loan  originations and subsequent  sales in the secondary  mortgage
          market.
<PAGE>

In addition to internal  loan growth of $341.3  million and our  acquisition  of
Royal Oaks, which provided loans, net of unearned  discount,  of $175.5 million,
the overall increase in loans, net of unearned  discount was partially offset by
the sale of  approximately  $13.4  million  of  certain  repurchased  and  other
residential  mortgage loans and $33.2 million of certain commercial,  commercial
real estate and real estate construction loans, as further discussed below.

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 September 30, 2007 and December 31, 2006:
<TABLE>
<CAPTION>

                                                                             September 30,  December 31,
                                                                                 2007           2006
                                                                                 ----           ----
                                                                          (dollars expressed in thousands)

         Commercial, financial and agricultural:
<S>                                                                          <C>                 <C>
              Nonaccrual...................................................  $    5,749          9,879
         Real estate construction and development:
              Nonaccrual...................................................      42,291         13,344
         Real estate mortgage:
              One-to-four family residential:
                  Nonaccrual...............................................      38,081         18,885
                  Restructured.............................................           7              9
              Multi-family residential loans:
                  Nonaccrual...............................................         336            272
              Commercial real estate loans:
                  Nonaccrual...............................................       8,131          6,260
         Consumer and installment:
              Nonaccrual...................................................         201             81
                                                                             ----------      ---------
                    Total nonperforming loans..............................      94,796         48,730
         Other real estate.................................................       7,854          6,433
                                                                             ----------      ---------
                    Total nonperforming assets.............................  $  102,650         55,163
                                                                             ==========      =========

         Loans, net of unearned discount...................................  $8,132,773      7,666,481
                                                                             ==========      =========

         Loans past due 90 days or more and still accruing.................  $    7,555          5,653
                                                                             ==========      =========

         Ratio of:
           Allowance for loan losses to loans..............................        1.72%          1.90%
           Nonperforming loans to loans....................................        1.17           0.64
           Allowance for loan losses to nonperforming loans................      147.86         299.05
           Nonperforming assets to loans and other real estate.............        1.26           0.72
                                                                             ==========      =========
</TABLE>

Nonperforming  loans,  consisting of loans on nonaccrual status and restructured
loans,  were $94.8 million at September  30, 2007,  compared to $63.5 million at
June 30, 2007, $48.7 million at December 31, 2006 and $79.1 million at September
30, 2006.  Nonperforming loans were 1.17% of loans, net of unearned discount, at
September 30, 2007, compared to 0.79%, 0.64% and 1.02% of loans, net of unearned
discount,  at  June  30,  2007,  December  31,  2006  and  September  30,  2006,
respectively.  Other real estate  owned was $7.9  million,  $8.0  million,  $6.4
million and $6.9 million at September 30, 2007, June 30, 2007, December 31, 2006
and September 30, 2006,  respectively.  Our nonperforming assets,  consisting of
nonperforming  loans and  other  real  estate  owned,  were  $102.7  million  at
September 30, 2007,  compared to $71.5 million,  $55.2 million and $86.0 million
at June 30, 2007,  December 31, 2006 and September 30, 2006,  respectively.  Our
loans past due 90 days or more and still  accruing  interest  were $7.6 million,
$4.4  million,  $5.7 million and $6.4 million at  September  30, 2007,  June 30,
2007, December 31, 2006 and September 30, 2006, respectively.

Nonperforming  loans at September 30, 2007 increased  $31.3  million,  or 49.4%,
from  nonperforming  loans at June 30,  2007,  $46.1  million,  or  94.5%,  from
nonperforming  loans at December 31, 2006,  and $15.7  million,  or 19.9%,  from
nonperforming  loans at September 30, 2006. The increase in the overall level of
our nonperforming  loans during the first nine months of 2007 primarily resulted
from an increase in nonperforming  loans within our real estate construction and
development  loan portfolio and within our one-to-four  family  residential loan
portfolio. This increase was partially offset by the sale of approximately $19.2
million of certain  nonperforming  loans,  in aggregate,  during the nine months
ended September 30, 2007, as further discussed below.

The amount of  nonperforming  loans  within  our real  estate  construction  and
development loan portfolio increased $21.3 million to $42.3 million at September
30, 2007,  from $21.0 at June 30, 2007,  and increased  $29.0 million from $13.3
million at December  31,  2006.  The  increase in the third  quarter of 2007 was
primarily  attributable to two significant  credits placed on nonaccrual  status

<PAGE>

with a total combined  principal  balance of $32.9 million,  partially offset by
the payoff of a single nonperforming loan of $4.6 million and loan sales of $2.8
million.   The  increase  for  the  first  nine  months  of  2007  is  primarily
attributable to the third quarter events in addition to two significant  credits
with a combined  principal  balance of $10.2  million being placed on nonaccrual
status early in 2007, of which one credit in the amount of $4.6 million was paid
off in the third quarter of 2007. The increase in nonperforming loans within our
real estate construction and development  portfolio reflects a continued decline
in market conditions,  resulting in increased developer inventories,  slower lot
and home sales, and declining real estate market values in many of our markets.

The increase in nonperforming loans is also attributable to an increase of $10.9
million in our one-to-four family  residential  mortgage loan portfolio to $38.1
million at September 30, 2007,  compared to $27.2 million at June 30, 2007,  and
an increase  of 19.2  million  from $18.9  million at December  31,  2006.  This
increase  was  driven by  current  market  conditions,  repurchases  of  certain
sub-prime residential mortgage loans sold with recourse,  primarily due to early
payment default,  that were placed back into our one-to-four  family residential
mortgage loan portfolio,  and the overall deterioration of sub-prime residential
mortgage loan products experienced throughout the mortgage banking industry. Our
involvement  in the  sub-prime  market had been limited to the  origination  and
subsequent  sale of  these  loans  in the  secondary  market,  and  historically
represented  approximately 40% of our mortgage banking loan origination and sale
volumes.  During the first quarter of 2007, we discontinued loan originations of
this product following a decline in bid prices and in market liquidity for these
loan products.

During the nine months ended September 30, 2007, we placed  approximately  $63.5
million of one-to-four  family  residential  mortgage loans  associated with our
mortgage  banking  division on  nonaccrual  status.  This increase in nonaccrual
loans was partially offset by net loan charge-offs of $20.4 million,  loan sales
resulting  in a decrease  in  nonperforming  loans of $11.5  million,  and other
payment   activity.   Of  the  $63.5  million   placed  on  nonaccrual   status,
approximately  $27.8 million  represented  repurchases of  residential  mortgage
loans sold with  recourse.  Repurchases  of  mortgage  loans sold with  recourse
declined  to $6.3  million  for the third  quarter  of 2007,  compared  to $17.2
million for the second quarter of 2007. The reduced level of repurchase activity
is reflective of our exit from the sub-prime  market in early 2007.  Our primary
recourse risk,  attributable to early payment  default on sub-prime  residential
mortgage loan products that we previously sold in the secondary market,  expires
throughout the remainder of 2007 and the first quarter of 2008.

We have taken measures  throughout 2007 to reduce the level of our nonperforming
loans through the sale of certain  loans.  The sales  resulted in a reduction in
nonperforming  loans of approximately $19.2 million during the nine months ended
September 30, 2007, as described below:

     >>   In  March  2007,   we  entered  into  a  commitment  to  sell  certain
          repurchased  and other  residential  mortgage  loans that were  either
          nonperforming  loans  or  were  deemed  by  management  to be  problem
          credits.  Subsequent  to recording  loan  charge-offs  to reduce these
          loans to the  lower  of cost or  estimated  fair  value at the time of
          transfer,  as further  discussed  below, we transferred  approximately
          $17.5 million of certain  repurchased and other  residential  mortgage
          loans to our held for sale loan portfolio. In April 2007, we completed
          the sale of  approximately  $13.4  million  of these  loans,  received
          payoffs on a portion  of the loans held for sale at March 31,  2007 of
          approximately $1.1 million, and transferred approximately $2.6 million
          of loans that were not  ultimately  included in the sale back into our
          residential mortgage loan portfolio.  These transactions resulted in a
          decrease in  nonperforming  loans of approximately  $11.5 million,  in
          aggregate; and

     >>   During the third quarter of 2007, we entered into a commitment to sell
          certain   commercial,   commercial   real   estate  and  real   estate
          construction loans that were either nonperforming loans or were deemed
          by management  to be problem  credits.  Subsequent  to recording  loan
          charge-offs  to reduce  these loans to the lower of cost or  estimated
          fair value at the time of transfer,  as further  discussed  below,  we
          transferred approximately $36.5 million of these loans to our held for
          sale loan  portfolio.  We completed  the sale of  approximately  $33.2
          million of these loans in September 2007,  resulting in a pre-tax gain
          of $266,000  and a decrease in  nonperforming  loans of  approximately
          $7.7 million, in aggregate. At September 30, 2007,  approximately $3.3
          million of these loans remain in our held for sale portfolio.

Also in the third  quarter of 2007, we entered into a commitment to sell certain
repurchased and other residential  mortgage loans that were either nonperforming
loans  or were  deemed  by  management  to be  problem  credits.  Subsequent  to
recording  loan  charge-offs  to  reduce  these  loans  to the  lower of cost or
estimated fair value at the time of transfer,  as further  discussed  below,  we
transferred  approximately  $10.5  million  of  certain  repurchased  and  other
residential mortgage loans to our held for sale loan portfolio. In October 2007,
we completed the sale of approximately  $9.4 million of these loans and received
payoffs on the remaining portion of the loans held for sale. We did not record a
gain or loss on the  sale of  these  loans.  These  transactions  resulted  in a
decrease in nonperforming loans of approximately $8.6 million, in aggregate,  as
further described in Note 14 to our Consolidated Financial Statements.
<PAGE>

We expect  the  declining  market  conditions  associated  with our real  estate
construction and development and one-to-four  family  residential  mortgage loan
portfolios to continue in the near term,  which could increase the amount of our
nonperforming loans.

Changes in the  allowance  for loan losses for the three and nine  months  ended
September 30, 2007 and 2006 were as follows:
<TABLE>
<CAPTION>

                                                             Three Months Ended         Nine Months Ended
                                                                September 30,             September 30,
                                                            --------------------       -------------------
                                                               2007       2006           2007       2006
                                                               ----       ----           ----       ----
                                                                   (dollars expressed in thousands)

<S>                                                         <C>          <C>            <C>        <C>
         Balance, beginning of period....................   $ 142,922    147,383        145,729    135,330
         Acquired allowances for loan losses.............          --      1,264          2,925      5,208
                                                            ---------   --------       --------   --------
                                                              142,922    148,647        148,654    140,538
                                                            ---------   --------       --------   --------
         Loans charged-off...............................     (22,571)    (5,292)       (40,849)   (11,633)
         Recoveries of loans previously charged-off......       2,814      3,955          6,360     12,405
                                                            ---------   --------       --------   --------
           Net loan (charge-offs) recoveries.............     (19,757)    (1,337)       (34,489)       772
                                                            ---------   --------       --------   --------
         Provision for loan losses.......................      17,000      2,000         26,000      8,000
                                                            ---------   --------       --------   --------
         Balance, end of period .........................   $ 140,165    149,310        140,165    149,310
                                                            =========   ========       ========   ========

</TABLE>


Our allowance for loan losses was $140.2 million at September 30, 2007, compared
to $142.9 million,  $145.7 million and $149.3 million at June 30, 2007, December
31, 2006 and September 30, 2006, respectively,  representing 1.72%, 1.79%, 1.90%
and 1.93% of loans, net of unearned  discount,  respectively.  Our allowance for
loan losses as a percentage of nonperforming  loans was 147.86% at September 30,
2007,  compared to 225.19%,  299.05% and 188.79% at June 30, 2007,  December 31,
2006 and September 30, 2006, respectively.

We recorded  net loan  charge-offs  of $19.8  million and $34.5  million for the
three and nine months ended  September 30, 2007,  respectively,  compared to net
loan  charge-offs  of $1.3 million and net loan  recoveries  of $772,000 for the
comparable periods in 2006. The increased level of net loan charge-offs recorded
for the  nine  months  ended  September  30,  2007  reflects  $20.4  million  of
charge-offs  associated with our one-to-four  family residential  portfolio,  of
which  $4.3  million  and $4.6  million  were  recorded  in the  first and third
quarters of 2007,  respectively,  in  conjunction  with the  transfer of certain
repurchased  and other  residential  mortgage  loans to our loans  held for sale
portfolio,  and  subsequent  sale in April 2007 and October  2007, as previously
discussed. Furthermore, net loan charge-offs include $9.3 million of charge-offs
recorded  in the third  quarter  of 2007 in  conjunction  with the  transfer  of
approximately  $36.5  million of certain  nonperforming  and problem  commercial
credits to our loans held for sale  portfolio,  of which $33.2 million were sold
in September 2007, as previously  discussed.  Net loan charge-offs for the first
nine months of 2007 also include a charge-off  of $2.5 million on a  residential
development and construction  credit  relationship and a $1.5 million charge-off
on a commercial credit  relationship.  Net loan recoveries recorded for the nine
months ended  September  30, 2006 reflect a loan recovery of $5.0 million on the
payoff of a single nonperforming loan in the first quarter of 2006. Our net loan
charge-offs  as a  percentage  of average  loans were 0.43% for the nine  months
ended  September  30, 2007,  compared to net loan  recoveries as a percentage of
average loans of 0.01% for the same period in 2006.

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
our loan 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 an  appropriate  level.  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 changes 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.
<PAGE>

We  continue  to closely  monitor  our loan  portfolio  and  address the ongoing
challenges  posed by the current  economic  environment  and market  conditions,
including  reduced loan demand,  highly  competitive  markets and pricing within
certain sectors of our loan  portfolio.  We also continue to closely monitor our
level of  nonperforming  loans in an effort to  continue  to reduce the  overall
level of nonperforming loans in our loan portfolio. We consider these factors in
our overall assessment of the adequacy of the allowance for loan losses.

                                    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
$1.80  billion and $1.86  billion at  September  30, 2007 and December 31, 2006,
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 September 30, 2007:
<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.............................  $  546,216           214,872           761,088
         Over three months through six months.............     377,261             5,000           382,261
         Over six months through twelve months............     402,583               107           402,690
         Over twelve months...............................     152,099           100,793           252,892
                                                            ----------          --------        ----------
              Total.......................................  $1,478,159           320,772         1,798,931
                                                            ==========          ========        ==========
</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 September
30, 2007 and December  31,  2006,  First  Bank's  borrowing  capacity  under the
agreement was approximately $553.8 million and $639.1 million,  respectively. In
addition, First Bank's borrowing capacity through its relationship with the FHLB
was  approximately  $745.8  million and $666.0 million at September 30, 2007 and
December  31,  2006,  respectively.  We had FHLB  advances  outstanding  of $3.9
million  and  $4.0  million  at  September  30,  2007  and  December  31,  2006,
respectively,  all of which  represent  advances  assumed  in  conjunction  with
various acquisitions.

In addition to our owned  banking  facilities,  we have entered  into  long-term
leasing  arrangements to support our ongoing  activities.  The required payments
under such  commitments  and other  obligations  at  September  30, 2007 were as
follows:
<TABLE>
<CAPTION>

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

<S>                                                <C>            <C>        <C>        <C>        <C>
         Operating leases........................  $   15,892     27,318     15,776     45,631     104,617
         Certificates of deposit (2).............   3,342,686    398,764     76,349     10,905   3,828,704
         Other borrowings (2)....................     209,872        107    100,793         --     310,772
         Notes payable (2).......................      10,000         --         --         --      10,000
         Subordinated debentures (2).............          --         --         --    353,733     353,733
         Other contractual obligations...........         560        177        136         94         967
                                                   ----------   --------   --------   --------  ----------
              Total..............................  $3,579,010    426,366    193,054    410,363   4,608,793
                                                   ==========   ========   ========   ========  ==========
         ---------------
         (1)  Amounts  exclude  FIN 48  unrecognized  tax  liabilities  of $11.7 million and related accrued
              interest expense of $1.4 million for which the timing of payment of such liabilities cannot be
              reasonably estimated as of September 30, 2007.
         (2)  Amounts exclude the related interest expense accrued on these  obligations as of September 30,
              2007.
</TABLE>
<PAGE>

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.

                       Effects of New Accounting Standards

In February 2006, the FASB issued Statement of Financial  Accounting  Standards,
or SFAS,  No. 155 -- Accounting  For Certain Hybrid  Financial  Instruments,  an
amendment of SFAS No. 133 -- Accounting For Derivative  Instruments  and Hedging
Activities  and SFAS No. 140. SFAS No. 155 allows  entities to remeasure at fair
value a hybrid  financial  instrument that contains an embedded  derivative that
otherwise  would require  bifurcation  from the host  instrument,  if the holder
irrevocably  elects to account for the whole  instrument  on a fair value basis.
Subsequent  changes in the fair value of the  instrument  would be recognized in
earnings.  In January 2007, the FASB posted to its website  revisions to certain
SFAS No. 133  implementation  issues that were  affected by the issuance of SFAS
No. 155 and SFAS No. 156 (discussed  below).  These  revisions  provide a narrow
scope exception for securitized  interests in prepayable  financial  assets that
only contain an embedded  derivative that results from the embedded call options
in the underlying  prepayable financial assets if certain criteria are met. SFAS
No. 155 is effective for financial instruments acquired, issued, or subject to a
remeasurement  event occurring after the beginning of the first fiscal year that
begins after September 15, 2006. Early adoption is permitted as of the beginning
of the  fiscal  year  unless the entity has  already  issued  interim  financial
statements  during that fiscal year. We  implemented  SFAS No. 155 on January 1,
2007, which did not have a material impact 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,  addresses the recognition and measurement of separately recognized
servicing  assets and  liabilities  and  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 an entity's  fiscal year unless the entity has
already  issued  interim  financial  statements  during  that  fiscal  year.  We
implemented  SFAS No.  156 on  January  1,  2007,  which did not have a material
impact on our financial condition or results of operations.

In June 2006,  the FASB issued FIN 48 -- Accounting  for  Uncertainty  in Income
Taxes, an  Interpretation of SFAS No. 109 -- Accounting for Income Taxes. FIN 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. FIN 48 also provides guidance on derecognition,  classification, interest
and penalties,  accounting in interim periods, disclosure and transition. FIN 48
is effective for fiscal years  beginning after December 15, 2006. We implemented
FIN 48 on  January 1, 2007,  as further  described  in Note 1 and Note 12 to our
Consolidated Financial Statements.

In September 2006, the FASB issued SFAS No. 157 - Fair Value Measurements.  SFAS
No. 157 defines fair value,  establishes a framework for measuring fair value in
U.S. generally accepted  accounting  principles,  and expands  disclosures about
fair  value   measurements.   SFAS  No.  157  applies  under  other   accounting
pronouncements  that  require or permit  fair value  measurements,  and does not
require any new fair value  measurements.  SFAS No. 157 is effective  for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years.  Early  adoption is permitted as of the  beginning of an entity's  fiscal
year unless the entity has already issued interim  financial  statements  during
that fiscal year. We are currently  evaluating the  requirements of SFAS No. 157
to determine their impact on our financial condition and results of operations.

In  February  2007,  the FASB  issued  SFAS No. 159 - The Fair Value  Option for
Financial Assets and Financial  Liabilities,  including an amendment of SFAS No.
115. SFAS No. 159 provides entities with an option to report selected  financial
assets and  liabilities at fair value in an effort to reduce both  complexity in
accounting for financial  instruments  and the volatility in earnings  caused by
measuring related assets and liabilities differently.  SFAS No. 159 is effective
for fiscal years beginning after November 15, 2007. Retrospective application is
not allowed.  Early  adoption is  permitted  as of the  beginning of an entity's
fiscal year that begins on or before November 15, 2007, provided the entity also
elects  to adopt all of the  provisions  of SFAS No.  157 at the early  adoption
date. We are currently  evaluating the requirements of SFAS No. 159 to determine
their impact on our financial condition and results of operations.





<PAGE>


       ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


At December 31, 2006, our risk management program's simulation model indicated a
loss of projected net interest  income should  interest  rates  decline.  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  3.7% of net interest  income,  based on assets and liabilities at
December 31,  2006.  At September  30, 2007,  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 reduced 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 nine  months  ended
September  30,  2007 as compared  to the  comparable  period in 2006 and further
discussed under "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations."

During  the  first  quarter  of 2007,  we  discontinued  our  activities  in the
sub-prime  residential  mortgage  market in  response to  increased  market risk
experienced  within the industry  associated with these product lines.  While we
continue to be susceptible to the risk of future repurchases of loans associated
with the sales of these loans,  such risk has declined  throughout the remainder
of 2007 as we initially  expected.  Our  repurchases of mortgage loans sold with
recourse has declined to $6.3 million for the third quarter of 2007, compared to
$17.2  million  for the second  quarter  of 2007,  as  further  discussed  under
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  -- Loans and  Allowance  for Loan  Losses."  Our reduced  activities
within the  sub-prime  market  have  resulted  in a decline  in our  noninterest
income,  as further  discussed  under  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations."

During the three and nine months ended  September 30, 2007, our  asset-sensitive
position and overall susceptibility to market risks have not changed materially.



                        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 internal control over financial reporting.



<PAGE>


                           PART II - OTHER INFORMATION


                                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 Company,  and
                         LaSalle Bank National Association,  as Trustee,   dated
                         as of August 31, 2007 - filed herewith.

               4.2       Amended and Restated Declaration of Trust of First Bank
                         Statutory Trust X by and among LaSalle  National  Trust
                         Delaware, as Delaware Trustee,  LaSalle  Bank  National
                         Association,  as  Institutional  Trustee,  First Banks,
                         Inc., as  Sponsor,  and  Peter D.  Wimmer  and  Lisa K.
                         Vansickle, as Administrators, dated as  of  August  31,
                         2007 - filed herewith.

               4.3       Guarantee  Agreement by  and between  First Banks, Inc.
                         and LaSalle  Bank  National  Association,  dated  as of
                         August 31, 2007 - filed herewith.

               4.4       Placement  Agreement by and among First Bank  Statutory
                         Trust X, as Issuer, First Banks, Inc., as Sponsor,  and
                         Cohen & Company, as Placement Agent, dated as of August
                         29, 2007 - filed herewith.

               4.5       Junior  Subordinated  Debt Security due  2037 of  First
                         Banks,   Inc., dated  as  of  August 31,   2007 - filed
                         herewith.

               4.6       Debenture Subscription Agreement by and  between  First
                         Banks,  Inc.  and First Bank  Statutory  Trust X, dated
                         as of August 31, 2007 - filed herewith.

               4.7       Capital  Securities  Certificate  P-001  of  First Bank
                         Statutory  Trust X, dated as of August 31, 2007 - filed
                         herewith.

               4.8       Indenture  between  First  Banks,   Inc.,   as  Issuer,
                         and  Wilmington Trust Company, as Trustee,  dated as of
                         September 20, 2007 - filed herewith.

               4.9       Amended  and  Restated  Declaration  of  Trust of First
                         Bank  Statutory Trust IX by and among Wilmington  Trust
                         Company, as Delaware Trustee and Institutional Trustee,
                         First   Banks,  Inc., as  Sponsor,  and    Terrance  M.
                         McCarthy,  Peter D. Wimmer and  Lisa  K.  Vansickle, as
                         Administrators,  dated as of September 20, 2007 - filed
                         herewith.

               4.10      Guarantee  Agreement by and between  First  Banks, Inc.
                         and Wilmington Trust Company, dated as of September 20,
                         2007 - filed herewith.

               4.11      Placement  Agreement by  and  among First Banks,  Inc.,
                         First Bank Statutory Trust IX and FTN Financial Capital
                         Markets and Keefe, Bruyette & Woods, Inc., as Placement
                         Agents,    dated   as   of   September 13, 2007 - filed
                         herewith.

               4.12      Floating Rate Junior Subordinated  Deferrable  Interest
                         Debenture of First Banks,  Inc.,  dated as of September
                         20,  2007 - filed herewith.

               4.13      Capital Securities Subscription Agreement by and  among
                         First Bank  Statutory  Trust IX, First Banks,  Inc. and
                         Preferred   Term  Securities  XXVII,  Ltd., dated as of
                         September 20, 2007 - filed herewith.

               4.14      Capital Securities Subscription Agreement by and  among
                         First  Bank  Statutory  Trust  IX,  First  Banks,  Inc.
                         and  First Tennessee Bank National  Association,  dated
                         as of September 20, 2007 - filed herewith.
<PAGE>

               4.15      Capital  Securities  Certificate   P-1  of   First Bank
                         Statutory  Trust IX,  dated  as of September 20, 2007 -
                         filed herewith.

               4.16      Capital  Securities  Certificate P-2   of   First  Bank
                         Statutory  Trust  IX,  dated as of September 20, 2007 -
                         filed herewith.

               4.17      Indenture  between First Banks, Inc.,  as  Issuer,  and
                         Wilmington   Trust   Company,  as Trustee,  dated as of
                         September 28, 2007 - filed herewith.

               4.18      Amended  and  Restated  Declaration  of Trust of  First
                         Bank  Statutory Trust XI by and among Wilmington  Trust
                         Company, as Delaware Trustee and Institutional Trustee,
                         First  Banks,  Inc.,   as   Sponsor,   and  Terrance M.
                         McCarthy,  Peter D. Wimmer and Lisa  K.  Vansickle,  as
                         Administrators,  dated as of September 28, 2007 - filed
                         herewith.

               4.19      Guarantee  Agreement by and between  First  Banks, Inc.
                         and Wilmington Trust Company, dated as of September 28,
                         2007 - filed herewith.

               4.20      Placement  Agreement by and  among  First Banks,  Inc.,
                         First Bank Statutory Trust XI and FTN Financial Capital
                         Markets   and   Keefe,   Bruyette & Woods,  Inc.,    as
                         Placement  Agents,  dated  as  of  September 27, 2007 -
                         filed herewith.

               4.21      Floating Rate Junior Subordinated  Deferrable  Interest
                         Debenture of First Banks,  Inc.,  dated as of September
                         28, 2007 - filed herewith.

               4.22      Capital Securities Subscription Agreement by and  among
                         First  Bank  Statutory  Trust  XI,  First  Banks,  Inc.
                         and  First Tennessee Bank National  Association,  dated
                         as of September 28, 2007 - filed herewith.

               4.23      Capital  Securities   Certificate P-1   of  First  Bank
                         Statutory  Trust XI, dated  as  of September 28, 2007 -
                         filed herewith.

                10       Secured Credit   Agreement  ($125.0  million  Revolving
                         Credit Facility, Including $10.0 million Swingline Sub-
                         Facility  and   $5.0  million  Letter  of  Credit  Sub-
                         Facility),  dated as of   August 8, 2007,  by and among
                         First  Banks,  Inc.  and   Wells  Fargo Bank,  National
                         Association,  as  Agent,  JP Morgan Chase   Bank, N.A.,
                         LaSalle Bank National Association,  The Northern  Trust
                         Company,  Union Bank of California,  N.A., Fifth  Third
                         Bank  (Chicago) and  U.S.  Bank National  Association -
                         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:  November 14, 2007

                                 FIRST BANKS, INC.


                                 By:  /s/  Terrance M. McCarthy
                                     -------------------------------------------
                                           Terrance M. McCarthy
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)


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