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 March 31, 2008

[ ] 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, a  non-accelerated  filer, or a smaller  reporting
company.  See the definitions of "large accelerated filer,"  "accelerated filer"
and  "smaller  reporting  company"  in Rule  12b-2 of the  Exchange  Act.
         Large accelerated filer [ ]                       Accelerated filer [ ]
         Non-accelerated filer [X] (Do not check
         if a smaller reporting company)           Smaller reporting company [ ]

         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 April 30, 2008
                     -----                               -----------------

         Common Stock, $250.00 par value                      23,661



<PAGE>

<TABLE>
<CAPTION>

                                                  FIRST BANKS, INC.

                                                  TABLE OF CONTENTS





                                                                                                             Page
                                                                                                             ----

SPECIAL NOTE..............................................................................................     i

PART I.         FINANCIAL INFORMATION

  ITEM 1.       FINANCIAL STATEMENTS:

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

                CONSOLIDATED STATEMENTS OF OPERATIONS.....................................................     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 1A.      RISK FACTORS..............................................................................    20

  ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS.............................................................    20

  ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................    38

  ITEM 4.       CONTROLS AND PROCEDURES...................................................................    38

PART II.        OTHER INFORMATION

  ITEM 6.       EXHIBITS..................................................................................    40

SIGNATURES................................................................................................    41

</TABLE>



<PAGE>

                                  SPECIAL NOTE

In conjunction with this Quarterly  Report on Form 10-Q, First Banks,  Inc. (the
Company)  is filing  Amendment  No. 1 to our Annual  Report on Form 10-K for the
year ended  December 31, 2007.  This  Quarterly  Report on Form 10-Q was delayed
pending  completion of an  investigation  commissioned by the Audit Committee of
our Board of  Directors  (the Audit  Committee),  with the  assistance  of legal
counsel  and other  third  parties,  regarding  the  identification  of  certain
fraudulent  transactions in our mortgage  banking  division that were improperly
recorded in our consolidated  financial statements (the Transactions) due to the
circumvention of established internal controls.  The investigation was completed
on July 29, 2008.

On May 16, 2008, management and the Audit Committee determined that we needed to
restate our previously issued consolidated  financial  statements as of December
31, 2007 and 2006, and for the years ended December 31, 2007,  2006 and 2005 and
restate certain  financial  information as of December 31, 2005,  2004, and 2003
and for the years ended  December  31, 2004 and 2003 and each of the quarters in
2007  and  2006,  and  that  these  previously  issued  consolidated   financial
statements  should no longer be relied upon.  Accordingly,  we have restated our
previously issued  consolidated  financial  statements in Amendment No. 1 to our
Annual  Report on Form 10-K for the year ended  December 31,  2007.  We have not
amended our previously filed Annual Reports on Form 10-K or Quarterly Reports on
Form 10-Q for the periods affected by this restatement.

The  adjustments  made as a result of the restatement are discussed in Note 1 to
the accompanying  consolidated interim financial statements included in Part I -
Item 1 - Financial  Statements.  For additional  discussion of the investigation
and the restatement  adjustments,  see Part I - Item 2 - Management's Discussion
and Analysis of Financial  Condition and Results of Operations and Note 1 to the
accompanying consolidated interim financial statements. For a description of the
material weaknesses  identified by management in internal control over financial
reporting,  see Part I - Item 4 -  Controls  and  Procedures  of this  Quarterly
Report on Form 10-Q.

<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)

                                                                                        March 31,    December 31,
                                                                                          2008           2007
                                                                                          ----           ----
                                                                                      (unaudited)     (Restated)

                                                  ASSETS
                                                  ------

Cash and cash equivalents:
<S>                                                                                   <C>                <C>
     Cash and due from banks........................................................  $   219,124        217,597
     Short-term investments.........................................................       21,245         14,078
                                                                                      -----------     ----------
          Total cash and cash equivalents...........................................      240,369        231,675
                                                                                      -----------     ----------

Investment securities:
     Available for sale.............................................................      817,362      1,000,392
     Held to maturity (fair value of $18,859 and $19,078, respectively).............       18,418         18,879
                                                                                      -----------     ----------
          Total investment securities...............................................      835,780      1,019,271
                                                                                      -----------     ----------

Loans:
     Commercial, financial and agricultural.........................................    2,501,363      2,382,067
     Real estate construction and development.......................................    2,103,765      2,141,234
     Real estate mortgage...........................................................    4,252,907      4,211,285
     Consumer and installment.......................................................       98,226         97,117
     Loans held for sale............................................................       67,821         66,079
                                                                                      -----------     ----------
          Total loans...............................................................    9,024,082      8,897,782
     Unearned discount..............................................................      (11,653)       (11,598)
     Allowance for loan losses......................................................     (185,184)      (168,391)
                                                                                      -----------     ----------
          Net loans.................................................................    8,827,245      8,717,793
                                                                                      -----------     ----------

Bank premises and equipment, net....................................................      240,966        240,456
Goodwill and other intangible assets................................................      313,506        315,651
Bank-owned life insurance...........................................................      117,557        116,619
Deferred income taxes...............................................................      125,270        139,277
Other assets........................................................................      134,533        121,728
                                                                                      -----------     ----------
          Total assets..............................................................  $10,835,226     10,902,470
                                                                                      ===========     ==========

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

Deposits:
     Noninterest-bearing demand.....................................................  $ 1,263,447      1,259,123
     Interest-bearing demand........................................................      996,785        980,850
     Savings and money market.......................................................    2,789,580      2,716,726
     Time deposits of $100 or more..................................................    1,408,717      1,546,857
     Other time deposits............................................................    2,452,047      2,645,637
                                                                                      -----------     ----------
          Total deposits............................................................    8,910,576      9,149,193
Other borrowings....................................................................      544,964        409,616
Notes payable.......................................................................       58,000         39,000
Subordinated debentures.............................................................      353,771        353,752
Deferred income taxes...............................................................       42,776         48,209
Accrued expenses and other liabilities..............................................       58,516         55,079
Minority interest in subsidiary.....................................................        5,687          5,544
                                                                                      -----------     ----------
          Total liabilities.........................................................    9,974,290     10,060,393
                                                                                      -----------     ----------
<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...................................................................      819,586        818,343
Accumulated other comprehensive income (loss).......................................       12,687         (4,929)
                                                                                      -----------     ----------
          Total stockholders' equity................................................      860,936        842,077
                                                                                      -----------     ----------
          Total liabilities and stockholders' equity................................  $10,835,226     10,902,470
                                                                                      ===========     ==========

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

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                             FIRST BANKS, INC.

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

                                                                                             Three Months Ended
                                                                                                  March 31,
                                                                                         --------------------------
                                                                                            2008            2007
                                                                                            ----            ----
                                                                                                         (Restated)
Interest income:
<S>                                                                                      <C>               <C>
     Interest and fees on loans.......................................................   $ 152,722         153,010
     Investment securities............................................................      11,420          16,192
     Short-term investments...........................................................         162           1,878
                                                                                         ---------        --------
          Total interest income.......................................................     164,304         171,080
                                                                                         ---------        --------
Interest expense:
     Deposits:
       Interest-bearing demand........................................................       2,032           2,616
       Savings and money market.......................................................      17,527          18,337
       Time deposits of $100 or more..................................................      16,769          17,030
       Other time deposits............................................................      27,787          27,790
     Other borrowings.................................................................       3,928           4,418
     Notes payable....................................................................         569             908
     Subordinated debentures..........................................................       6,165           5,903
                                                                                         ---------        --------
          Total interest expense......................................................      74,777          77,002
                                                                                         ---------        --------
          Net interest income.........................................................      89,527          94,078
Provision for loan losses.............................................................      45,947           3,500
                                                                                         ---------        --------
          Net interest income after provision for loan losses.........................      43,580          90,578
                                                                                         ---------        --------
Noninterest income:
     Service charges on deposit accounts and customer service fees....................      12,102          10,608
     Gain on loans sold and held for sale.............................................       1,680           1,952
     Net gain on investment securities................................................       1,161             293
     Bank-owned life insurance investment income......................................         973             713
     Investment management income.....................................................       1,356           1,510
     Insurance fee and commission income..............................................       1,974           1,695
     Net gain on derivative instruments...............................................       3,432               2
     Gain on extinguishment of term repurchase agreement..............................       5,000              --
     Other............................................................................       5,433           5,836
                                                                                         ---------        --------
          Total noninterest income....................................................      33,111          22,609
                                                                                         ---------        --------
Noninterest expense:
     Salaries and employee benefits...................................................      40,570          45,228
     Occupancy, net of rental income..................................................       9,945           7,708
     Furniture and equipment..........................................................       5,429           4,551
     Postage, printing and supplies...................................................       1,646           1,782
     Information technology fees......................................................       9,339           9,331
     Legal, examination and professional fees.........................................       2,814           1,733
     Amortization of intangible assets................................................       2,776           2,926
     Advertising and business development.............................................       1,464           1,900
     Charitable contributions.........................................................          97           1,916
     Other............................................................................       9,344           8,913
                                                                                         ---------        --------
          Total noninterest expense...................................................      83,424          85,988
                                                                                         ---------        --------
          (Loss) income before (benefit) provision for income taxes and
             minority interest in income of subsidiary................................      (6,733)         27,199
(Benefit) provision for income taxes..................................................      (2,005)          9,746
                                                                                         ---------        --------
          (Loss) income before minority interest in income of subsidiary..............      (4,728)         17,453
Minority interest in income of subsidiary.............................................         145              70
                                                                                         ---------        --------
          Net (loss) income...........................................................      (4,873)         17,383
Preferred stock dividends.............................................................         196             196
                                                                                         ---------        --------
          Net (loss) income available to common stockholders..........................   $  (5,069)         17,187
                                                                                         =========        ========

Basic (loss) earnings per common share................................................   $ (214.26)         726.34
                                                                                         =========        ========

Diluted (loss) earnings per common share..............................................   $ (214.26)         722.43
                                                                                         =========        ========

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

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

</TABLE>


<TABLE>
<CAPTION>

                                                         FIRST BANKS, INC.

                 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME - (UNAUDITED)
                          Three Months Ended March 31, 2008 and 2007 and Nine Months Ended December 31, 2007
                                       (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
                                                           -----    -------    -----    -------    --------     ------      ------
                                                                                                  (Restated)  (Restated)  (Restated)

<S>                                                       <C>         <C>      <C>       <C>        <C>        <C>         <C>
Balances, December 31, 2006.............................  $12,822     241      5,915     9,685      767,199    (13,092)    782,770
                                                                                                                           -------
Three months ended March 31, 2007:
   Comprehensive income:
     Net income.........................................       --      --         --        --       17,383         --      17,383
     Other comprehensive income, net of tax:
       Unrealized gains on investment securities........       --      --         --        --           --      2,620       2,620
       Reclassification adjustment for investment
         securities gains included in net income........       --      --         --        --           --        (94)        (94)
       Derivative instruments:
         Current period transactions....................       --      --         --        --           --      1,722       1,722
                                                                                                                           -------
   Total comprehensive income...........................                                                                    21,631
   Cumulative effect of change in accounting principle..       --      --         --        --        2,470         --       2,470
   Class A preferred stock dividends, $0.30 per share...       --      --         --        --         (192)        --        (192)
   Class B preferred stock dividends, $0.03 per share...       --      --         --        --           (4)        --          (4)
                                                          -------     ---      -----     -----      -------     ------     -------
Balances, March 31, 2007................................   12,822     241      5,915     9,685      786,856     (8,844)    806,675
                                                                                                                           -------
Nine months ended December 31, 2007:
   Comprehensive income:
     Net income.........................................       --      --         --        --       32,077         --      32,077
     Other comprehensive income, net of tax:
       Unrealized losses on investment securities.......       --      --         --        --           --     (2,825)     (2,825)
       Reclassification adjustment for investment
         securities losses included in net income.......       --      --         --        --           --        216         216
       Derivative instruments:
         Current period transactions....................       --      --         --        --           --      7,426       7,426
                                                                                                                           -------
   Total comprehensive income...........................                                                                    36,894
   Impact of adoption of SFAS No. 158...................       --      --         --        --           --       (902)       (902)
   Class A preferred stock dividends, $0.90 per share...       --      --         --        --         (577)        --        (577)
   Class B preferred stock dividends, $0.08 per share...       --      --         --        --          (13)        --         (13)
                                                          -------     ---      -----     -----      -------     ------     -------
Balances, December 31, 2007.............................   12,822     241      5,915     9,685      818,343     (4,929)    842,077
                                                                                                                           -------
Three months ended March 31, 2008:
   Comprehensive income:
     Net loss...........................................       --      --         --        --       (4,873)        --      (4,873)
     Other comprehensive income, net of tax:
       Unrealized gains on investment securities........       --      --         --        --           --     13,050      13,050
       Reclassification adjustment for investment
         securities gains included in net loss..........       --      --         --        --           --       (754)       (754)
       Derivative instruments:
         Current period transactions....................       --      --         --        --           --      5,320       5,320
                                                                                                                           -------
   Total comprehensive income...........................                                                                    12,743
   Cumulative effect of change in accounting principle..       --      --         --        --        6,312         --       6,312
   Class A preferred stock dividends, $0.30 per share...       --      --         --        --         (192)        --        (192)
   Class B preferred stock dividends, $0.03 per share...       --      --         --        --           (4)        --          (4)
                                                          -------     ---      -----     -----      -------     ------     -------
Balances, March 31, 2008................................  $12,822     241      5,915     9,685      819,586     12,687     860,936
                                                          =======     ===      =====     =====      =======     ======     =======


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)
                                                                                                   Three Months Ended
                                                                                                        March 31,
                                                                                                ------------------------
                                                                                                   2008          2007
                                                                                                   ----          ----
                                                                                                              (Restated)
Cash flows from operating activities:
<S>                                                                                              <C>             <C>
     Net (loss) income........................................................................  $  (4,873)       17,383
     Adjustments to reconcile net (loss) income to net cash provided by operating activities:
       Depreciation and amortization of bank premises and equipment...........................      6,145         4,888
       Amortization of intangible assets......................................................      2,776         2,926
       Originations of loans held for sale....................................................    (58,190)     (246,173)
       Proceeds from sales of loans held for sale.............................................     55,233       250,533
       Payments received on loans held for sale...............................................      9,326         6,425
       Provision for loan losses..............................................................     45,947         3,500
       Provision for current income taxes.....................................................      3,876         9,243
       (Benefit) provision for deferred income taxes..........................................     (5,881)          503
       Decrease in accrued interest receivable................................................     11,935         6,287
       Decrease in accrued interest payable...................................................     (3,499)       (4,283)
       Proceeds from sales of trading securities..............................................         --        11,323
       Maturities of trading securities.......................................................         --           595
       Purchases of trading securities........................................................         --       (13,822)
       Gain on loans sold and held for sale...................................................     (1,680)       (1,952)
       Net gain on investment securities......................................................     (1,161)         (293)
       Net gain on derivative instruments.....................................................     (3,432)           (2)
       Changes in the fair value of servicing rights..........................................      1,759            --
       Gain on extinguishment of term repurchase agreement....................................     (5,000)           --
       Other operating activities, net........................................................      5,471         8,317
       Minority interest in income of subsidiary..............................................        145            70
                                                                                                ---------      --------
          Net cash provided by operating activities...........................................     58,897        55,468
                                                                                                ---------      --------
Cash flows from investing activities:
     Cash paid for acquired entities, net of cash and cash equivalents received...............         --       (14,719)
     Proceeds from sales of investment securities available for sale..........................     82,377           487
     Maturities of investment securities available for sale...................................    138,190       242,548
     Maturities of investment securities held to maturity.....................................        453           524
     Purchases of investment securities available for sale....................................    (14,362)      (34,219)
     Net increase in loans....................................................................   (173,896)     (112,534)
     Recoveries of loans previously charged-off...............................................      2,185         1,709
     Purchases of bank premises and equipment.................................................     (7,106)       (9,568)
     Other investing activities, net..........................................................      1,124           946
                                                                                                ---------      --------
          Net cash provided by investing activities...........................................     28,965        75,174
                                                                                                ---------      --------
Cash flows from financing activities:
     Increase in demand, savings and money market deposits....................................     93,113       165,830
     Decrease in time deposits................................................................   (330,440)      (67,644)
     Increase (decrease) in Federal Home Loan Bank advances...................................    199,957       (33,241)
     Decrease in federal funds purchased......................................................    (69,500)           --
     Increase in securities sold under agreements to repurchase...............................      8,898         2,722
     Advances drawn on notes payable..........................................................     25,000            --
     Repayments of notes payable..............................................................     (6,000)      (25,000)
     Proceeds from issuance of subordinated debentures........................................         --        25,774
     Repayments of subordinated debentures....................................................         --       (56,907)
     Payment of preferred stock dividends.....................................................       (196)         (196)
                                                                                                ---------      --------
          Net cash (used in) provided by financing activities.................................    (79,168)       11,338
                                                                                                ---------      --------
          Net increase in cash and cash equivalents...........................................      8,694       141,980
Cash and cash equivalents, beginning of period................................................    231,675       369,557
                                                                                                ---------      --------
Cash and cash equivalents, end of period......................................................  $ 240,369       511,537
                                                                                                =========      ========

Supplemental disclosures of cash flow information:
     Cash paid (received) during the period for:
        Interest on liabilities...............................................................  $  79,469        81,596
        Income taxes..........................................................................     (4,013)      (14,572)
                                                                                                =========      ========
     Noncash investing and financing activities:
        Cumulative effect of change in accounting principle...................................  $   6,312         2,470
        Loans held for sale transferred to loan portfolio.....................................         --         2,434
        Loans transferred to other real estate................................................      4,733         3,067
                                                                                                =========      ========
     Business combinations:
        Fair value of tangible assets acquired (noncash)......................................  $      --       189,300
        Goodwill and other intangible assets recorded with net assets acquired................         --        27,081
        Liabilities assumed...................................................................         --      (201,662)
                                                                                                =========      ========

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 Amendment No. 1 to the
2007 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  months ended March 31, 2008 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2008.

The consolidated financial statements include the accounts of the parent company
and its  subsidiaries,  giving  effect to the minority  interest,  as more fully
described  below, and in Note 5 to the consolidated  financial  statements.  All
significant intercompany accounts and transactions have been eliminated. Certain
reclassifications  of 2007  amounts  have  been  made  to  conform  to the  2008
presentation.

First Banks operates  through its wholly owned  subsidiary bank holding company,
The San Francisco Company (SFC),  headquartered in St. Louis,  Missouri, and its
wholly owned subsidiary, Coast Financial Holdings, Inc. (CFHI), headquartered in
Bradenton, Florida.

Prior to First Banks'  acquisition  of CFHI on November  30,  2007,  First Bank,
headquartered in St. Louis,  Missouri,  was a wholly owned banking subsidiary of
SFC. On November 30, 2007, First Banks completed its acquisition of CFHI and its
wholly owned banking subsidiary,  Coast Bank of Florida (Coast Bank). The issued
and  outstanding  shares of common stock of Coast Bank were  exchanged for newly
issued and outstanding shares of non-voting Series B common stock of First Bank,
and Coast Bank was  merged  with and into First  Bank.  As a result,  SFC is the
owner of 100% of the voting Series A outstanding shares of common stock of First
Bank and CFHI is the owner of 100% of the non-voting Series B outstanding shares
of common stock of First Bank. Thus, First Bank is 96.82% owned by SFC and 3.18%
owned by CFHI.

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 for
SBLS LLC,  which is 76.0% owned by First Bank and 24.0%  owned by First  Capital
America,  Inc.  (FCA),  as  further  described  in  Note 5 to  the  consolidated
financial statements.

Restatement of Previously Issued Consolidated Interim Financial Statements.

As  discussed  in Amendment  No. 1 to our 2007 Annual  Report on Form 10-K,  the
Audit  Committee  of the Board of  Directors  (the  Audit  Committee),  with the
assistance  of  legal  counsel  and  other  third   parties,   commissioned   an
investigation  into the  circumstances and possible  irregularities  that led to
certain fraudulent transactions in the Company's mortgage banking division being
improperly  recorded in the Company's  consolidated  financial  statements  (the
Transactions) due to the  circumvention of established  internal  controls.  The
investigation was completed on July 29, 2008.

On May 16, 2008,  management and the Audit Committee determined that the Company
needed to restate its previously issued consolidated  financial statements as of
December 31, 2007 and 2006, and for the years ended December 31, 2007,  2006 and
2005 and each of the quarters in 2007 and 2006, and that these previously issued
consolidated financial statements should no longer be relied upon.  Accordingly,
the Company has restated its previously issued consolidated financial statements
in Amendment No. 1 to its Annual Report on Form 10-K for the year ended December
31, 2007.  The Company has not amended its  previously  filed Annual  Reports on
Form 10-K or  Quarterly  Reports on Form 10-Q for the  periods  affected by this
restatement.

<PAGE>

The following tables present the effects of the adjustments made to First Banks'
previously reported  consolidated  statements of operations for the three months
ended March 31, 2007:

<TABLE>
<CAPTION>

                                                                 As Previously
                                                                    Reported      Adjustments    As Restated
                                                                    --------      -----------    -----------
                                                           (dollars in thousands, except share and per share data)

<S>                                                                <C>               <C>          <C>
         Interest and fees on loans............................... $ 153,757         (747)        $153,010
         Total interest income....................................   171,827         (747)         171,080
         Interest expense on other borrowings.....................     4,351           67            4,418
         Interest expense on subordinated debentures..............     5,934          (31)           5,903
         Total interest expense...................................    76,966           36           77,002
         Net interest income......................................    94,861         (783)          94,078
         Net interest income after provision for loan losses......    91,361         (783)          90,578
         Gain on loans sold and held for sale.....................     3,926       (1,974)           1,952
         Total noninterest income.................................    24,583       (1,974)          22,609
         Occupancy expense, net of rental income..................     7,421          287            7,708
         Total noninterest expense................................    85,701          287           85,988
         Income before provision for income taxes and
             minority interest in income of subsidiary............    30,243       (3,044)          27,199
         Provision for income taxes...............................    10,950       (1,204)           9,746
         Income before minority interest in income of subsidiary..    19,293       (1,840)          17,453
         Net income...............................................    19,223       (1,840)          17,383
         Net income available to common stockholders..............    19,027       (1,840)          17,187
         Basic earnings per common share..........................    804.12       (77.78)          726.34
         Diluted earnings per common share........................    799.23       (76.80)          722.43

</TABLE>

Significant  Accounting  Policies.  On  January 1, 2008,  First  Banks  opted to
measure  servicing  rights at fair value as  permitted by Statement of Financial
Accounting  Standards  (SFAS) No. 156 -  Accounting  for  Servicing of Financial
Assets.  The election of this option resulted in the recognition of a cumulative
effect of change in accounting principle of $6.3 million,  which was recorded as
an increase to beginning  retained  earnings,  as further described in Note 3 to
the  consolidated  financial  statements.  As such,  effective  January 1, 2008,
changes in the fair value of mortgage and SBA servicing rights are recognized in
earnings in the period in which the change occurs.

On  January  1,  2008,  First  Banks  implemented  SFAS  No.  157 -  Fair  Value
Measurements for financial and nonfinancial assets and liabilities recognized or
disclosed at fair value in the  financial  statements  on a recurring  basis and
financial  assets  recognized  on a  nonrecurring  basis,  which  did not have a
material  impact on First Banks'  financial  condition or results of  operations
other than certain additional disclosure requirements. 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,  for financial
assets and liabilities and nonfinancial assets and nonfinancial liabilities that
are  recognized  or disclosed  at fair value in the  financial  statements  on a
recurring  basis  (at  least  annually).  Implementation  is  deferred  for  all
nonfinancial  assets  and  nonfinancial   liabilities  that  are  recognized  or
disclosed at fair value in the financial  statements on a nonrecurring  basis to
fiscal years  beginning  after November 15, 2008. For additional  information on
the fair value of financial  assets,  see Note 12 to the consolidated  financial
statements.
<PAGE>

(2)      GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets, net of amortization, were comprised of the
following at March 31, 2008 and December 31, 2007:
<TABLE>
<CAPTION>

                                                            March 31, 2008              December 31, 2007
                                                       ------------------------      -----------------------
                                                         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................  $  53,916     (26,217)          53,916     (23,873)
             Customer list intangibles...............     23,320      (2,782)          23,320      (2,408)
             Other intangibles.......................      2,385      (1,495)           2,386      (1,437)
                                                       ---------    --------         --------    --------
                 Total...............................  $  79,621     (30,494)          79,622     (27,718)
                                                       =========    ========         ========    ========

         Unamortized intangible assets:
             Goodwill associated with
                 stock purchases.....................  $ 264,379                      263,747
                                                       =========                     ========
</TABLE>

Amortization  of  intangible  assets was $2.8  million and $2.9  million for the
three  months  ended  March 31,  2008 and 2007,  respectively.  Amortization  of
intangible assets, including amortization of core deposit intangibles,  customer
list  intangibles  and other  intangibles  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>                                                                      <C>
             2008 remaining.........................................................  $  8,355
             2009...................................................................     9,280
             2010...................................................................     8,852
             2011...................................................................     6,674
             2012...................................................................     2,459
             2013...................................................................     1,524
             Thereafter.............................................................    11,983
                                                                                      --------
                 Total..............................................................  $ 49,127
                                                                                      ========
</TABLE>

Changes in the carrying  amount of goodwill for the three months ended March 31,
2008 and 2007 were as follows:
<TABLE>
<CAPTION>

                                                                                 Three Months Ended
                                                                                      March 31,
                                                                               ----------------------
                                                                                  2008         2007
                                                                                  ----         ----
                                                                          (dollars expressed in thousands)

<S>                                                                             <C>           <C>
         Balance, beginning of period........................................  $ 263,747      230,036
         Goodwill acquired during the period.................................         --       23,183
         Acquisition-related adjustments (1).................................        632         (602)
                                                                               ---------     --------
         Balance, end of period..............................................  $ 264,379      252,617
                                                                               =========     ========
         ---------------------
         (1)  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  2008 pertain to the
              acquisition of CFHI in November 2007; and acquisition-related  adjustments recorded in 2007 pertain
              to the acquisition of San Diego Community Bank in August 2006.

</TABLE>



<PAGE>


(3)      SERVICING RIGHTS

On January 1, 2008, First Banks opted to measure  servicing rights at fair value
as  permitted  by SFAS No. 156.  The  election  of this  option  resulted in the
recognition  of a cumulative  effect of change in  accounting  principle of $6.3
million,  net of tax,  which was recorded as an increase to  beginning  retained
earnings,  as  further  described  in  Note  1  to  the  consolidated  financial
statements.

Mortgage  Banking  Activities.  At March 31, 2008 and December  31, 2007,  First
Banks  serviced  mortgage  loans for others  totaling  $1.05  billion  and $1.10
billion, respectively. Changes in mortgage servicing rights for the three months
ended March 31, 2008 and 2007 were as follows:
<TABLE>
<CAPTION>


                                                                                 Three Months Ended
                                                                                      March 31,
                                                                               ----------------------
                                                                                  2008         2007
                                                                                  ----         ----
                                                                          (dollars expressed in thousands)

<S>                                                                             <C>            <C>
         Balance, beginning of period........................................   $ 5,290        5,867
         Re-measurement to fair value upon election to measure servicing
             rights at fair value under SFAS No. 156.........................     9,538           --
         Originated mortgage servicing rights................................       675          333
         Change in fair value resulting from changes in valuation inputs or
             assumptions used in valuation model (1).........................      (684)          --
         Other changes in fair value (2).....................................      (650)          --
         Amortization........................................................        --         (793)
                                                                                -------       ------
         Balance, end of period..............................................   $14,169        5,407
                                                                                =======       ======
         --------------------
         (1)  The change in fair value resulting from changes in valuation inputs or assumptions used in valuation
              model primarily reflects the change in discount rates and prepayment speed  assumptions,   primarily
              due to changes in interest rates.
         (2)  Other changes in fair value reflect changes due to the collection/realization of expected cash flows
              over time.
</TABLE>

First Banks did not incur any impairment of mortgage servicing rights during the
three months ended March 31, 2007.

Other Servicing Activities. At March 31, 2008 and December 31, 2007, First Banks
serviced  United  States Small  Business  Administration  (SBA) loans for others
totaling  $202.2  million  and  $149.9  million,  respectively.  Changes  in SBA
servicing  rights for the three  months  ended  March 31,  2008 and 2007 were as
follows:

<TABLE>
<CAPTION>



                                                                                 Three Months Ended
                                                                                      March 31,
                                                                               ----------------------
                                                                                  2008         2007
                                                                                  ----         ----
                                                                          (dollars expressed in thousands)

<S>                                                                              <C>           <C>
         Balance, beginning of period........................................    $7,468        8,064
         Re-measurement to fair value upon election to measure servicing
             rights at fair value under SFAS No. 156.........................       905           --
         Originated SBA servicing rights.....................................     1,362          467
         Change in fair value resulting from changes in valuation inputs or
             assumptions used in valuation model (1).........................      (119)          --
         Other changes in fair value (2).....................................      (306)          --
         Amortization........................................................        --         (413)
         Impairment..........................................................        --         (323)
                                                                                 ------       ------
         Balance, end of period..............................................    $9,310        7,795
                                                                                 ======       ======
         -------------------
         (1)  The change in fair value resulting from changes in valuation inputs or assumptions used in valuation
              model primarily reflects the change in discount rates and prepayment speed  assumptions,   primarily
              due to changes in interest rates.
         (2)  Other changes in fair value reflect changes due to the collection/realization of expected cash flows
              over time.
</TABLE>


<PAGE>


(4)      EARNINGS (LOSS) PER COMMON SHARE

The following is a reconciliation of basic and diluted earnings (loss) per share
(EPS) for the three months ended March 31, 2008 and 2007:
<TABLE>
<CAPTION>

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

     Three months ended March 31, 2008:
<S>                                                                  <C>              <C>          <C>
         Basic EPS - loss to common stockholders..................   $(5,069)         23,661       $ (214.26)
         Effect of dilutive securities:
           Class A convertible preferred stock....................        --              --              --
                                                                     -------         -------       ---------
         Diluted EPS - loss to common stockholders................   $(5,069)         23,661       $ (214.26)
                                                                     =======         =======       =========

                                                                    (Restated)      (Restated)     (Restated)
     Three months ended March 31, 2007:
         Basic EPS - income available to common stockholders......   $17,187          23,661       $  726.34
         Effect of dilutive securities:
           Class A convertible preferred stock....................       192             394           (3.91)
                                                                     -------         -------       ---------
         Diluted EPS - income available to common stockholders....   $17,379          24,055       $  722.43
                                                                     =======         =======       =========

</TABLE>

(5)      TRANSACTIONS WITH RELATED PARTIES

First Services, L.P. (First Services), 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 were $8.6
million  and $8.9  million for the three  months  ended March 31, 2008 and 2007,
respectively.  First Services leases information  technology and other equipment
from First Bank.  During the three months  ended March 31, 2008 and 2007,  First
Services  paid  First  Bank  $1.1  million  in  rental  fees for the use of that
equipment. In addition,  First Services paid approximately $464,000 and $441,000
for the three  months  ended  March 31, 2008 and 2007,  respectively,  in rental
payments for occupancy of certain  First Bank  premises  from which  business is
conducted.

First Brokerage America,  L.L.C. (First Brokerage),  a limited liability company
indirectly  owned by First Banks' Chairman and members of his immediate  family,
received  approximately  $1.7  million and  $913,000  for the three months ended
March 31, 2008 and 2007, respectively, 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 paid approximately  $45,000 and $33,000
for the three  months  ended  March 31, 2008 and 2007,  respectively,  in rental
payments  for  occupancy of certain  First Bank  premises  from which  brokerage
business is conducted.

In January 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.,  a charitable  foundation
established  by First Banks'  Chairman and members of his immediate  family.  In
conjunction with this transaction,  First Banks recorded charitable contribution
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. There
were no  charitable  contributions  made to this  organization  during the three
months ended March 31, 2008.

First Bank leases certain of its in-store  branch  offices and automated  teller
machine  (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 for the
three months ended March 31, 2008 and 2007.

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. In January 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%.  In June 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%.
<PAGE>

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 warehouse line of credit
for loan funding purposes. During the first and third quarters of 2007, SBLS LLC
modified the structure of the Agreement with First Bank. In September  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  London  Interbank  Offered  Rate,  or LIBOR,  plus 40 basis
points. The balance of advances  outstanding under the Promissory Note was $52.7
million and $52.3 million at March 31, 2008 and December 31, 2007, respectively.
Interest  expense  recorded by SBLS LLC under the Promissory  Note and Agreement
was  $561,000  and  $934,000 for the three months ended March 31, 2008 and 2007,
respectively.  The balance of the  advances  under the  Promissory  Note and the
related interest  expense  recognized by SBLS LLC are 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
collectability or present other unfavorable features. Loans to directors,  their
affiliates and executive officers of First Banks, Inc. were approximately  $41.1
million and $57.7 million at March 31, 2008 and December 31, 2007, 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.

(6)      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
March 31, 2008,  First Bank was well  capitalized and First Banks was adequately
capitalized.  As of March 31,  2008,  the most  recent  notification  from First
Banks' primary  regulator  categorized  First Bank as well capitalized and First
Banks as  adequately  capitalized  under the  regulatory  framework  for  prompt
corrective  action.  To  be  categorized  as  well  capitalized  and  adequately
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 March 31, 2008 and December 31, 2007,  First Banks' and First Bank's required
and actual capital ratios were as follows:

<TABLE>
<CAPTION>

                                                            Actual
                                          ------------------------------------------      For          To be Well
                                             March 31, 2008      December 31, 2007      Capital     Capitalized Under
                                          -------------------- ---------------------    Adequacy    Prompt Corrective
                                            Amount      Ratio     Amount      Ratio     Purposes    Action Provisions
                                            ------      -----     ------      -----     --------    -----------------
                                                                (Restated)  (Restated)
                                               (dollars expressed in thousands)

Total capital (to risk-weighted assets):
<S>                                       <C>            <C>    <C>            <C>         <C>            <C>
    First Banks.......................... $1,011,491     9.89%  $1,008,253     9.84%       8.0%           10.0%
    First Bank...........................  1,026,513    10.06    1,023,990    10.01        8.0            10.0

Tier 1 capital (to risk-weighted assets):
    First Banks..........................    815,028     7.97      811,432     7.92        4.0             6.0
    First Bank...........................    898,222     8.80      895,571     8.75        4.0             6.0

Tier 1 capital (to average assets):
    First Banks..........................    815,028     7.74      811,432     7.99        3.0             5.0
    First Bank...........................    898,222     8.55      895,571     8.85        3.0             5.0
</TABLE>


<PAGE>

In March 2005,  the Board of Governors of the Federal  Reserve  System  (Federal
Reserve) adopted a final rule,  Risk-Based  Capital  Standards:  Trust Preferred
Securities and the Definition of Capital, which allows for the continued limited
inclusion of trust preferred securities in Tier 1 capital. The Federal Reserve's
final rule limits restricted core capital elements to 25% of the sum of all core
capital elements,  including  restricted core capital elements,  net of goodwill
less any associated  deferred tax liability.  Amounts of restricted core capital
elements in excess of these limits may  generally be included in Tier 2 capital.
Specifically,  amounts of qualifying  trust preferred  securities and cumulative
perpetual  preferred  stock in excess of the 25% limit may be included in Tier 2
capital,  but will be limited,  together with subordinated debt and limited-life
preferred stock, to 50% of Tier 1 capital. In addition,  the final rule provides
that in the last five years before the maturity of the  underlying  subordinated
note, the outstanding amount of the associated trust preferred  securities is to
be  excluded  from Tier 1 capital  and  included  in Tier 2 capital,  subject to
one-fifth  amortization  per  year.  The final  rule  provides  for a  five-year
transition   period,   ending  March  31,  2009,  for  the  application  of  the
quantitative  limits.  Until March 31, 2009, the aggregate  amount of qualifying
cumulative  perpetual preferred stock and qualifying trust preferred  securities
that may be  included  in Tier 1  capital  is  limited  to 25% of the sum of the
following  core  capital  elements:   qualifying  common  stockholders'  equity,
qualifying  noncumulative and cumulative  perpetual preferred stock,  qualifying
minority  interest  in the equity  accounts  of  consolidated  subsidiaries  and
qualifying  trust  preferred  securities.  First Banks has  determined  that the
Federal  Reserve's  final  rules  that  will be  effective  in  March  2009,  if
implemented as of March 31, 2008, would have reduced First Banks' Tier 1 capital
(to  risk-weighted  assets) and Tier 1 capital (to average  assets) to 7.11% and
6.90%,  respectively,  and  would  not  have an  impact  on  total  capital  (to
risk-weighted assets).

(7)      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, ATMs, 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,  Houston and
Dallas, Texas and Florida's Manatee, Pinellas,  Hillsborough and Pasco counties.
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>
<PAGE>

                                                                             Corporate, Other
                                                                             and Intercompany
                                                 First Bank                  Reclassifications              Consolidated Totals
                                        ----------------------------   -----------------------------   -----------------------------
                                          March 31,     December 31,     March 31,     December 31,      March 31,     December 31,
                                            2008            2007           2008            2007            2008            2007
                                            ----            ----           ----            ----            ----            ----
                                                         (Restated)                     (Restated)                      (Restated)
                                                                      (dollars expressed in thousands)

Balance sheet information:

<S>                                      <C>                <C>             <C>             <C>            <C>           <C>
Investment securities.................. $   813,920         997,486         21,860          21,785         835,780       1,019,271
Loans, net of unearned discount........   9,012,429       8,886,184             --              --       9,012,429       8,886,184
Goodwill and other intangible assets...     313,506         315,651             --              --         313,506         315,651
Total assets...........................  10,806,329      10,872,602         28,897          29,868      10,835,226      10,902,470
Deposits...............................   8,941,626       9,164,868        (31,050)        (15,675)      8,910,576       9,149,193
Other borrowings.......................     544,964         409,616             --              --         544,964         409,616
Notes payable..........................          --              --         58,000          39,000          58,000          39,000
Subordinated debentures................          --              --        353,771         353,752         353,771         353,752
Stockholders' equity...................   1,223,118       1,203,008       (362,182)       (360,931)        860,936         842,077
                                        ===========      ==========      =========       =========      ==========      ==========

                                                                             Corporate, Other
                                                                             and Intercompany
                                                 First Bank                  Reclassifications              Consolidated Totals
                                        ----------------------------   -----------------------------   -----------------------------
                                             Three Months Ended              Three Months Ended              Three Months Ended
                                                 March 31,                       March 31,                       March 31,
                                        ----------------------------   -----------------------------   -----------------------------
                                            2008            2007            2008           2007            2008            2007
                                            ----            ----            ----           ----            ----            ----
                                                         (Restated)                     (Restated)                      (Restated)
                                                                      (dollars expressed in thousands)

Income statement information:

Interest income........................ $   164,048         170,822            256             258         164,304         171,080
Interest expense.......................      68,060          70,268          6,717           6,734          74,777          77,002
                                        -----------      ----------      ---------       ---------      ----------      ----------
   Net interest income.................      95,988         100,554         (6,461)         (6,476)         89,527          94,078
Provision for loan losses..............      45,947           3,500             --              --          45,947           3,500
                                        -----------      ----------      ---------       ---------      ----------      ----------
   Net interest income after provision
      for loan losses..................      50,041          97,054         (6,461)         (6,476)         43,580          90,578
                                        -----------      ----------      ---------       ---------      ----------      ----------
Noninterest income.....................      33,297          22,642           (186)            (33)         33,111          22,609
Amortization of intangible assets......       2,776           2,926             --              --           2,776           2,926
Other noninterest expense..............      78,491          80,177          2,157           2,885          80,648          83,062
                                        -----------      ----------      ---------       ---------      ----------      ----------
   Income (loss) before provision
      (benefit) for income taxes
      and minority interest in
      income of subsidiary.............       2,071          36,593         (8,804)         (9,394)         (6,733)         27,199
Provision (benefit) for income taxes...       1,087          13,411         (3,092)         (3,665)         (2,005)          9,746
                                        -----------      ----------      ---------       ---------      ----------      ----------
   Income (loss) before minority
      interest in income of
      subsidiary.......................         984          23,182         (5,712)         (5,729)         (4,728)         17,453
Minority interest in income
      of subsidiary....................         145              70             --              --             145              70
                                        -----------      ----------      ---------       ---------      ----------      ----------
   Net income (loss)................... $       839          23,112         (5,712)         (5,729)         (4,873)         17,383
                                        ===========      ==========      =========       =========      ==========      ==========
</TABLE>
<PAGE>
(8)      OTHER BORROWINGS

Other  borrowings were comprised of the following at March 31, 2008 and December
31, 2007:
<TABLE>
<CAPTION>
                                                                               March 31,     December 31,
                                                                                 2008            2007
                                                                                 ----            ----
                                                                                              (Restated)
                                                                            (dollars expressed in thousands)

         Securities sold under agreements to repurchase:
<S>                                                                           <C>               <C>
              Daily.........................................................  $ 182,490         198,766
              Monthly.......................................................     34,660          33,493
              Term..........................................................    120,000         100,000
         Federal funds purchased............................................      7,000          76,500
         Federal Home Loan Bank (FHLB) advances (1).........................    200,814             857
                                                                              ---------       ---------
                  Total.....................................................  $ 544,964         409,616
                                                                              =========       =========
         ---------------------
         (1)  In January 2008, First Bank entered into two $100.0 million FHLB advances that mature in January 2009
              and July 2009 at fixed interest rates of 3.16% and 2.53%, respectively.
</TABLE>


The maturity  dates,  par amounts,  interest rate and interest rate floor strike
prices on First  Bank's  term  repurchase  agreements  as of March 31,  2008 and
December 31, 2007 were as follows:
<TABLE>
<CAPTION>

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

         March 31, 2008:
<S>                                                         <C>                    <C>              <C>
             April 12, 2012 (1)...........................  $ 120,000              3.36%              --
                                                            =========

         December 31, 2007:
             October 12, 2010 (1).........................  $ 100,000        LIBOR - 0.5100%(2)     4.50%(2)
                                                            =========
         ----------------------
         (1)  On March 31, 2008, First Bank restructured its $100.0 million term  repurchase agreement.  The primary
              modifications were to: (a) increase the borrowing amount  to $120.0 million; (b) extend  the  maturity
              date from October 12, 2010 to April 12, 2012; (c) convert the interest rate from a  variable rate to a
              fixed rate of 3.36%, with interest to be paid quarterly beginning on April 12, 2008; and (d) terminate
              the  embedded  interest  rate  floor  agreements contained within the term repurchase agreement. These
              modifications resulted in a pre-tax gain of $5.0 million, which  was recorded as noninterest income in
              the consolidated statements of operations.
         (2)  The interest rate paid on the term repurchase agreement was based  on  the  three-month LIBOR plus 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 fell below the
              strike price associated with the interest rate floor agreement.
</TABLE>

(9)      NOTES PAYABLE

On February 12, 2008,  First Banks  entered into First and Second  Amendments to
its  existing  $125.0  million   Secured  Credit   Agreement  with  a  group  of
unaffiliated financial institutions dated August 8, 2007 (Amended Secured Credit
Agreement).  The primary  modifications  include  changes to the borrower pledge
agreement,  the termination date of the revolving  credit facility,  and certain
financial  covenants.  The Amended Secured Credit  Agreement is secured by First
Banks'  ownership  interest in the capital stock of both SFC and CFHI, which was
acquired by First Banks on November  30, 2007,  and all of the capital  stock of
First Bank owned by SFC and CFHI. The termination  date of the revolving  credit
facility was extended  from August 7, 2008 to September 1, 2008.  The  financial
covenants  of  the  Amended  Secured  Credit  Agreement  include   modifications
applicable to certain  quarterly periods for the minimum return on assets ratio,
the maximum  nonperforming  asset ratio and the minimum  allowance  for loan and
lease loss ratio, as well as an additional covenant regarding minimum net income
for First Banks. The Amended Secured Credit Agreement also requires  maintenance
of certain  minimum  capital  ratios for First Banks and First Bank and contains
additional covenants, including a limitation on the amount of dividends on First
Banks' common stock that may be paid to stockholders.

First Banks was not in compliance with all  restrictions and requirements of the
Amended  Secured  Credit  Agreement at March 31, 2008 and December 31, 2007 as a
result of the  restatement  described  in Note 1 to the  consolidated  financial
statements.  However,  First Banks  subsequently  terminated the Amended Secured
Credit  Agreement  on May  19,  2008,  as  further  discussed  in Note 14 to the
consolidated financial statements.

<PAGE>

Notes payable were comprised of the following at March 31, 2008 and December 31,
2007:
<TABLE>
<CAPTION>
                                                                                    March 31,    December 31,
                                                                                      2008           2007
                                                                                      ----           ----
                                                                                (dollars expressed in thousands)

<S>                                                                                 <C>             <C>
         Term loans...............................................................  $ 13,000         19,000
         Revolving credit.........................................................    45,000         20,000
                                                                                    --------       --------
                  Total...........................................................  $ 58,000         39,000
                                                                                    ========       ========
</TABLE>

During the three months ended March 31, 2008,  First Banks made payments of $6.0
million  on the  outstanding  principal  balance of the term loans and had drawn
advances of $25.0 million on the revolving  credit  sub-facility  portion of the
Amended Secured Credit Agreement. Letters of credit issued to unaffiliated third
parties on behalf of First Banks under the standby letter of credit sub-facility
portion of the Amended Secured Credit  Agreement were $200,000 at March 31, 2008
and December 31, 2007, and had not been drawn on by the counterparties.



(10)     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 IV, which was issued in an underwritten public offering.
First Banks owns all of the common securities of the Trusts.  The gross proceeds
of the offerings were used by the Trusts to purchase variable rate or fixed 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 $6.1 million and $5.9
million for the three  months ended March 31, 2008 and 2007,  respectively,  and
are included in interest expense in the  consolidated  statements of operations.
The  structure  of  the  trust  preferred  securities  currently  satisfies  the
regulatory requirements for inclusion,  subject to certain limitations, in First
Banks' capital base.

<PAGE>

A summary of the  subordinated  debentures  issued to the Trusts in  conjunction
with the trust preferred securities offerings at March 31, 2008 and December 31,
2007 were as follows:
<TABLE>
<CAPTION>

                                                                                                                    Subordinated
                                                                                                                     Debentures
                                                                                                                --------------------
                                                                                                       Trust     March     December
                                                       Maturity             Call          Interest   Preferred     31,        31,
       Name of Trust              Issuance Date          Date               Date(1)        Rate(2)   Securities   2008       2007
       -------------              -------------          ----               ----           ----      ----------   ----       ----
Variable Rate
-------------
<S>                               <C>             <C>                 <C>                 <C>          <C>       <C>         <C>
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         October 2004     January 7, 2035     January 7, 2010   + 240.0 bp    4,000      4,124      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 (3a)                   June 2006       July 7, 2036        July 7, 2011      + 165.0 bp   25,000     25,774     25,774
First Bank Statutory
    Trust VII (3b)                December 2006   December 15, 2036   December 15, 2011   + 185.0 bp   50,000     51,547     51,547
First Bank Statutory
    Trust VIII (3c)               February 2007     March 30, 2037      March 30, 2012    + 161.0 bp   25,000     25,774     25,774
First Bank Statutory
    Trust X                        August 2007    September 15, 2037  September 15, 2012  + 230.0 bp   15,000     15,464     15,464
First Bank Statutory
    Trust IX (3d)                 September 2007  December 15, 2037   December 15, 2012   + 225.0 bp   25,000     25,774     25,774
First Bank Statutory
    Trust XI                      September 2007  December 15, 2037   December 15, 2012   + 285.0 bp   10,000     10,310     10,310

Fixed Rate
----------
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 variable rate or a fixed rate. The variable
     rate for the outstanding subordinated debentures is based on the three-month LIBOR plus the basis point spread shown.
(3)  In March 2008, First Banks executed four interest rate swap agreements, which  have  been  designated  as  cash flow hedges, to
     effectively convert the interest payments on these subordinated  debentures from variable  rate to fixed rate to the respective
     call dates as follows:
     (a) $25.0 million notional amount with a maturity date of July 7, 2011 that  converts the interest rate from a variable rate of
         LIBOR plus 165 basis points to a fixed rate of 4.40%;
     (b) $50.0 million notional amount with a maturity date of December 15, 2011 that  converts  the  interest  rate from a variable
         rate of LIBOR plus 185 basis points to a fixed rate of 4.905%;
     (c) $25.0 million notional amount with a maturity date of March 30, 2012  that converts  the interest rate from a variable rate
         of LIBOR plus 161 basis points to a fixed rate of 4.71%; and
     (d) $25.0 million notional amount with a maturity date of December 15, 2012  that  converts  the  interest rate from a variable
         rate of LIBOR plus 225 basis points to a fixed rate of 5.565%.
</TABLE>


(11)     INCOME TAXES

On January 1, 2007, First Banks implemented Financial Accounting Standards Board
Interpretation  No.  48 --  Accounting  for  Uncertainty  in  Income  Taxes,  an
Interpretation  of SFAS No. 109 --  Accounting  for Income  Taxes (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.

At March 31, 2008 and December 31, 2007,  First Banks'  liability  for uncertain
tax positions,  excluding  interest and  penalties,  was $12.5 million and $12.2
million,  respectively. The total amount of unrecognized tax benefits that would
affect the  effective  tax rate were $1.8  million and $1.7 million at March 31,
2008 and December 31,  2007,  respectively.  During the three months ended March
31, 2008,  First Banks recorded  additional  liabilities  for  unrecognized  tax
benefits of $554,000  that,  if  recognized,  would  decrease the  provision for
income taxes by $61,000, net of the federal tax benefit. During the three months
ended March 31, 2008,  First Banks reduced its liability  for  unrecognized  tax
benefits by $346,000 as a result of the receipt of a no change letter  following
the close of an examination of the 2004 federal return.

<PAGE>

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 March 31, 2008 and December 31, 2007, interest accrued
for unrecognized tax positions was $1.6 million and $1.4 million,  respectively.
The amount of interest  expense  recognized  during the three months ended March
31,  2008  and 2007 was  $151,000  and  $189,000,  respectively.  There  were no
penalties for unrecognized tax positions  accrued at March 31, 2008 and December
31, 2007,  nor did First Banks  recognize any expense for  penalties  during the
three months ended March 31, 2008 and 2007.

First Banks continually  evaluates the unrecognized tax benefits associated with
its  uncertain  tax  positions.   It  is  reasonably  possible  that  the  total
unrecognized  tax benefits as of March 31, 2008 could decrease by  approximately
$1.7  million  during  the  remainder  of the year,  as a result of the lapse of
statutes of  limitations  and potential  settlements  with the federal and state
taxing  authorities,  of which the impact to the  provision  for income taxes is
estimated to be approximately $537,000. It is also reasonably possible that this
decrease could be  substantially  offset by new matters  arising during the same
period.

First  Banks  files  consolidated  and  separate  income tax returns in the U.S.
federal  jurisdiction  and in various state  jurisdictions.  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' federal returns through 2004
have been  examined  by the  Internal  Revenue  Service.  First  Banks'  current
estimate of the resolution of various state examinations is reflected in accrued
income taxes; however,  final settlement of the examinations or changes in First
Banks' estimate may result in future income tax expense or benefit.

(12)     FAIR VALUE DISCLOSURES

On January 1, 2008,  First  Banks  implemented  SFAS No. 157 for  financial  and
nonfinancial  assets and  liabilities  that are  recognized or disclosed at fair
value in the  consolidated  financial  statements on a recurring basis (at least
annually).   Implementation  was  deferred  for  all  nonfinancial   assets  and
nonfinancial  liabilities  that are recognized or disclosed at fair value in the
consolidated  financial  statements  on a  nonrecurring  basis to  fiscal  years
beginning after November 15, 2008.  First Banks applied the deferral to goodwill
and other intangible assets and other real estate owned.

In accordance with SFAS No. 157, financial assets and financial liabilities that
are measured at fair value  subsequent to initial  recognition  are grouped into
three  levels of inputs or  assumptions  that market  participants  would use in
pricing  the  asset  or  liability,  including  assumptions  about  risk and the
reliability of assumptions  used to determine fair value. The three input levels
are as follows:

     Level 1 Inputs - Valuation is based on  quoted prices in active markets for
                      identical instruments in active markets.

     Level 2 Inputs - Valuation  is  based  on   quoted   prices   for   similar
                      instruments in active markets; quoted prices for identical
                      or similar instruments in markets that are not active; and
                      model-derived  valuations  whose  inputs are observable or
                      whose significant value drivers are observable.

     Level 3 Inputs - Valuation is generated  from  model-based  techniques that
                      use at least one significant assumption  not observable in
                      the  market.  These   unobservable   assumptions   reflect
                      estimates  of  assumptions  that market participants would
                      use  in   pricing  the  asset   or  liability.   Valuation
                      techniques   include    use   of  option  pricing  models,
                      discounted cash flow models and similar techniques.

The following describes valuation methodologies used to measure different assets
and liabilities at fair value.

Available-for-sale   investment   securities.    Available-for-sale   investment
securities are recorded at fair value on a recurring  basis.  Available-for-sale
investment securities included in Level 1 are valued using quoted market prices.
Where quoted market prices are  unavailable,  the fair value included in Level 2
is based on  quoted  market  prices  of  comparable  instruments  obtained  from
independent  pricing vendors based on recent trading activity and other relevant
information.

Loans  held for sale.  Loans  held for sale are  carried at the lower of cost or
market value, which is determined on an individual loan basis. The fair value is
based on the prices  secondary  markets are offering for portfolios with similar
characteristics.  The  Company  classifies  loans  held  for sale  subjected  to
nonrecurring fair value adjustments as nonrecurring Level 2.

Loans.  The Company  does not record  loans at fair value on a recurring  basis.
However,  from time to time, a loan is considered  impaired and an allowance for
loan losses is  established.  A loan is considered  impaired when it is probable
that payment of principal and interest  will not be made in accordance  with the
contractual terms of the loan agreement.  Once a loan is identified as impaired,
management  measures  impairment in accordance with SFAS No. 114 - Accounting by
Creditors for  Impairment of a Loan.  When  measuring  impairment,  the expected
future cash flows of an impaired  loan are  discounted  at the loan's  effective
interest  rate.  Additionally,   impairment  is  measured  by  reference  to  an
observable  market price, if one exists, or the fair value of the collateral for
a  collateral-dependent  loan.  Regardless of the historical  measurement method
used, First Banks measures  impairment based on the fair value of the collateral
when foreclosure is probable. Additionally, impairment of a restructured loan is
measured  by  discounting  the total  expected  future  cash flows at the loan's
effective  rate of  interest  as  stated  in the  original  loan  agreement.  In
accordance with Statement of Position 03-3, Accounting for Certain Loans or Debt
Securities  Acquired in a Transfer,  acquired  impaired  loans are classified as
nonaccrual  loans and are  initially  measured  at fair value with no  allocated
allowance  for loan  losses.  An  allowance  for loan  losses is recorded to the
extent there is further credit deterioration  subsequent to acquisition date. In
accordance  with SFAS No. 157,  impaired loans where an allowance is established
based on the fair value of collateral  require  classification in the fair value
hierarchy.  When the  fair  value of the  collateral  is based on an  observable
market price or a current  appraised value, the Company  classifies the impaired
loan as  nonrecurring  Level 2.  When an  appraised  value is not  available  or
management determines the fair value of the collateral is further impaired below
the  appraised  value and  there is no  observable  market  price,  the  Company
classifies the impaired loan as nonrecurring Level 3.

Derivative instruments. Substantially all derivative instruments utilized by the
Company are traded in  over-the-counter  markets  where quoted market prices are
not readily available.  Derivative  instruments  utilized by the Company include
interest rate swap agreements,  interest rate floor and cap agreements, interest
rate  lock   commitments  and  forward   commitments  to  sell   mortgage-backed
securities.  For these  derivative  instruments,  fair  value is based on market
observable  inputs  utilizing  pricing systems and valuation  models,  and where
applicable,   the  values  are   compared  to  the  market   values   calculated
independently  by the  respective  counterparties.  The Company  classifies  its
derivative instruments as Level 2.

Servicing  rights.  Servicing  rights are valued based on valuation  models that
utilize  assumptions  based  on  the  predominant  risk  characteristics  of the
underlying loans,  including principal balance,  interest rate, weighted average
life,  cost to service and estimated  prepayment  speeds.  The valuation  models
estimate the present value of estimated future net servicing income. The Company
classifies its servicing rights as Level 3.

Nonqualified  Deferred  Compensation Plan. The Company's  nonqualified  deferred
compensation  plan is recorded at fair value on a recurring  basis. The unfunded
plan  allows   participants  to  hypothetically   invest  in  various  specified
investment  options such as equity  funds,  international  stock funds,  capital
appreciation  funds,  money market  funds,  bond funds,  mid-cap value funds and
growth funds. The nonqualified  deferred  compensation  plan liability is valued
based on  quoted  market  prices  of the  underlying  investments.  The  Company
classifies its nonqualified deferred compensation plan liability as Level 1.
<PAGE>

Assets and  liabilities  measured at fair value on a recurring basis as of March
31, 2008 are reflected in the following table:
<TABLE>
<CAPTION>
                                                                          Fair Value Measurements
                                                          -------------------------------------------------------
                                                                               March 31, 2008
                                                          -------------------------------------------------------

                                                           Level 1         Level 2       Level 3      Fair Value
                                                           -------         -------       -------      ----------
                                                                     (dollars expressed in thousands)

         Assets:
<S>                                                       <C>               <C>               <C>        <C>
             Available-for-sale investment securities...  $  13,359         804,003            --        817,362
             Derivative instruments.....................         --          25,282            --         25,282
             Servicing rights...........................         --              --        23,479         23,479
                                                          ---------       ---------     ---------      ---------
                Total...................................  $  13,359         829,285        23,479        866,123
                                                          =========       =========     =========      =========
         Liabilities:
             Nonqualified deferred compensation plan....  $   8,765              --            --          8,765
                                                          =========       =========     =========      =========

</TABLE>

The  following  table  presents  the  changes  in Level 3 assets  measured  on a
recurring basis for the three months ended March 31, 2008:

<TABLE>
<CAPTION>
                                                                           Servicing Rights
                                                                           ----------------
                                                                   (dollars expressed in thousands)

<S>                                                                           <C>
         Balance, beginning of period............................             $  12,758
              Impact of election to measure servicing
                  rights at fair value under SFAS No. 156........                10,443
              Total gains or losses (realized/unrealized):
                  Included in earnings (1).......................                (1,759)
                  Included in other comprehensive income.........                    --
              Purchases, issuances and settlements...............                 2,037
              Transfers in and/or out of level 3.................                    --
                                                                              ---------
         Balance, end of period..................................             $  23,479
                                                                              =========
         -------------------
         (1) Gains or losses (realized/unrealized) are included in other income in the consolidated statements
             of operations.
</TABLE>


From time to time,  First  Banks  measures  certain  assets  at fair  value on a
nonrecurring  basis. These include assets that are measured at the lower of cost
or market value that were  recognized at fair value below cost at the end of the
period.  Assets  measured at fair value on a nonrecurring  basis as of March 31,
2008 are reflected in the following table:
<TABLE>
<CAPTION>

                                                                          Fair Value Measurements
                                                          -------------------------------------------------------
                                                                               March 31, 2008
                                                          -------------------------------------------------------

                                                           Level 1         Level 2       Level 3      Fair Value
                                                           -------         -------       -------      ----------
                                                                     (dollars expressed in thousands)

         Assets:
<S>                                                       <C>                <C>              <C>         <C>
             Loans held for sale........................  $      --          67,821            --         67,821
             Loans......................................         --         222,295        14,510        236,805
                                                          ---------       ---------      --------      ---------
                Total...................................  $      --         290,116        14,510        304,626
                                                          =========       =========      ========      =========
</TABLE>
<PAGE>

(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 March  31,  2008 and  December  31,  2007,  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.

CFHI  Securities  Litigation.  Prior to  acquisition  by First  Banks,  CFHI and
certain of its present and former  officers  were named as  defendants  in three
purported class action  complaints filed in the United States District Court for
the Middle District of Florida, Tampa Division (the "Court") alleging violations
of the federal  securities  laws, the first of which was filed with the Court on
March 20, 2007 (the "Securities  Actions").  On June 22, 2007, the Court entered
an order pursuant to which the Court (i)  consolidated  the Securities  Actions,
with the matter  proceeding  under the docket for Grand Lodge of Pennsylvania v.
Brian P. Peters, et al., Case No.  8:07-cv-429-T-26-EAJ  and (ii) appointed Troy
Ratcliff  and  Daniel  Altenburg  (the  "Lead  Plaintiffs")  as lead  plaintiffs
pursuant to the provisions of the Private  Securities  Litigation  Reform Act of
1995.

Subsequently,  on or  about  August  24,  2007,  the  Lead  Plaintiffs  filed  a
consolidated  amended  class action  complaint  (the "Amended  Complaint").  The
Amended  Complaint  added as defendants  (i) the then current  members of CFHI's
Board of Directors,  (ii) one former member of CFHI's Board of Directors,  (iii)
the  underwriters of CFHI's October 5, 2005 public offering of common stock, and
(iv) CFHI's external auditors.

The Amended Complaint was brought on behalf of a putative class of purchasers of
CFHI's common stock  between  January 21, 2005 and January 22, 2007. In general,
the Amended  Complaint alleges that CFHI's United States Securities and Exchange
Commission  (SEC)  filings and public  statements  contained  misstatements  and
omissions regarding its residential construction-to-permanent lending operations
and, more  specifically,  regarding a home builder and its  affiliates  and that
CFHI's  financial   statements   violated  U.S.  generally  accepted  accounting
principles. The Amended Complaint asserts claims under Sections 11 and 15 of the
Securities Act of 1933 and Sections  10(b) and 20(a) of the Securities  Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder.  On August 30, 2007, the Lead
Plaintiffs  filed a notice with the Court  voluntarily  dismissing  their claims
against Anne V. Lee and Justin D. Locke without prejudice.

Other.  In the  ordinary  course of business,  First Banks and its  subsidiaries
become  involved  in  legal   proceedings  other  than  those  discussed  above.
Management, in consultation with legal counsel, believes the ultimate resolution
of these  proceedings  will not have a material  adverse effect on the financial
condition or results of operations of First Banks and/or its subsidiaries.

(14)     SUBSEQUENT EVENTS

On May 14,  2008,  First  Banks  formed FB  Holdings,  LLC, a limited  liability
company  organized in the state of Missouri (FB Holdings).  FB Holdings operates
as a  majority-owned  subsidiary  of First Bank and was  formed for the  primary
purpose of holding and managing certain  nonperforming loans and assets to allow
the liquidation of such assets at a time that is more economically  advantageous
to First  Bank.  During the  second  quarter  of 2008,  First  Bank  contributed
nonperforming  loans and assets with a fair value of approximately $88.6 million
and FCA, a corporation  owned by First Banks'  Chairman of the Board and members
of his immediate  family,  contributed cash of $85.0 million to FB Holdings.  In
July 2008, First Bank contributed cash of $9.0 million and  nonperforming  loans
with a fair value of  approximately  $6.5  million and FCA  contributed  cash of
$15.0 million to FB Holdings.  As a result,  First Bank owns 51.01% and FCA owns
the  remaining  48.99%  of FB  Holdings.  The  contribution  of  cash  by FCA is
reflected  as  minority  interest  in  the  Company's   consolidated   financial
statements and,  consequently,  increased the Company's total risk-based capital
ratio.

On May 15, 2008,  First Banks  entered into a Revolving  Credit Note and a Stock
Pledge  Agreement (the New Credit  Agreement)  with Investors of America Limited
Partnership  (Investors of America,  LP).  Investors of America,  LP is a Nevada
limited  partnership  that was  created by and for the  benefit of Mr.  James F.
Dierberg,  First  Banks'  Chairman of the Board,  and  members of his  immediate
family.

The New Credit Agreement  provides for a $30.0 million secured revolving line of
credit to be utilized for general working capital needs and capital  investments
in  subsidiaries.  Advances  outstanding  under the New  Credit  Agreement  bear
interest at the three-month LIBOR plus 300 basis points.  Interest is payable on
outstanding  advances  on the  first  day of each  month  (in  arrears)  and the
aggregate principal balance of all outstanding advances and any accrued interest
thereon is due and payable in full on June 30, 2009,  the  maturity  date of the
New Credit  Agreement.  The  maturity  date of the New Credit  Agreement  may be
accelerated  at the option of  Investors  of America,  LP if an event of default
under  the New  Credit  Agreement  has  occurred  and has not been  cured to the
satisfaction  of  Investors  of America  LP. The default  provisions  of the New
Credit  Agreement are normal and customary for  agreements of this type. In this
situation,  the aggregate principal balance of all outstanding  advances and any
accrued  interest  thereon will become  immediately due and payable in full. The
New Credit Agreement is secured by First Banks' ownership interest in all of the
capital stock of both SFC and CFHI.

First Banks advanced the entire $30.0 million under the New Credit  Agreement on
May 15, 2008 and utilized the proceeds of the advance to terminate  and repay in
full all of the obligations under its existing Amended Secured Credit Agreement.
In July 2008,  First Banks repaid in full its outstanding  balance under the New
Credit Agreement in the aggregate amount of $30.0 million, including the accrued
interest thereon.

On May 19, 2008, First Banks entered into a Termination  Agreement regarding its
Amended Secured Credit Agreement. In accordance with the terms and conditions of
the  Termination  Agreement,  First  Banks  repaid  in full all of its  existing
obligations  associated  with  the  Amended  Secured  Credit  Agreement  in  the
aggregate  amount of $58.1  million,  including  the accrued  interest  and fees
thereon.  First Banks repaid in full its  obligations  under the Amended Secured
Credit  Agreement  with existing cash  reserves,  dividends from First Bank, and
advances  under  the  New  Credit  Agreement.  First  Banks  did not  incur  any
significant  or  unusual  early  termination   penalties  under  the  terms  and
conditions  of the  Termination  Agreement  or  recognize  any gain or loss upon
termination.

On June 30, 2008, First Banks recognized other-than-temporary impairment of $6.4
million on an equity  investment in the common stock of a single  company in the
financial services industry.  The other-than-temporary  impairment was primarily
caused by economic events affecting the financial  services industry as a whole.
The $6.4 million  represented the difference between the cost basis and the fair
value of the equity investment as of June 30, 2008.

<PAGE>

ITEM 1A. RISK FACTORS

In addition  to the risk  factors  described  in  Amendment  No. 1 to our Annual
Report on Form 10-K, we have identified three additional risk factors, described
below,  that readers of this  Quarterly  Report on Form 10-Q should  consider in
conjunction with the other information included in this Quarterly Report on Form
10-Q, including Management's  Discussion and Analysis of Financial Condition and
Results of Operations and our consolidated  financial statements and the related
notes thereto.

Our information systems could suffer an interruption or breach in security.  Our
operations are heavily reliant upon our communication and information systems. A
failure,  interruption  or breach in security of these  systems  could result in
failures or disruptions in our customer relationship management, general ledger,
deposits, loan and other systems. While we have policies and procedures designed
to prevent or limit the impact of any such  failure,  interruption  or  security
breach,  there  can be no  assurance  that any  such  failure,  interruption  or
security breach will not occur.  Any such failure,  interruption or breach could
adversely  affect our operations and financial  condition  including a resulting
loss in customer  business,  damage to our reputation,  and possible exposure to
regulatory  scrutiny and litigation,  any of which could have a material adverse
affect on our financial condition and results of operations.

Severe weather, natural disasters,  acts of war or terrorism, and other external
events  could  significantly  impact  our  business.   Severe  weather,  natural
disasters,  acts of war or terrorism,  and other adverse  external  events could
have a significant impact on our ability to conduct business.  Such events could
affect the  stability  of our deposit  base,  impair the ability of borrowers to
repay outstanding  loans,  impair the value of collateral  securing loans, cause
significant property damage, result in loss of revenue, and/or cause us to incur
additional  expenses.  Although  we have  established  policies  and  procedures
addressing these types of events,  the occurrence of any such event could have a
material adverse effect on our business and operations.

We have identified  material  weaknesses in our internal  control over financial
reporting,  and  concluded  that our  internal  control was not  effective as of
December  31,  2007.  We have  identified  material  weaknesses  in our internal
control over  financial  reporting  and, as a result,  have  concluded  that our
internal  control  over  financial  reporting  as of  December  31, 2007 was not
effective. Although we are in the process of implementing several changes in our
internal  controls,  there can be no assurance that our remedial efforts will be
effective,  nor can there be any assurances that we will not incur losses due to
internal  or  external  acts  intended to  defraud,  misappropriate  assets,  or
circumvent  applicable law or our system of internal controls.  The inability to
maintain  effective  internal  controls could adversely affect our operations or
financial results. See Item 4 -- "Controls and Procedures."

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
Amendment  No. 1 to our 2007  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,
headquartered  in St.  Louis,  Missouri;  our wholly  owned  subsidiary  holding
company,  Coast Financial Holdings,  Inc., or CFHI,  headquartered in Bradenton,
Florida;   and  SFC's   majority-owned   subsidiary   bank,   First  Bank,  also
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.

     >>   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 March 31,  2008,  we had assets of $10.84  billion,  loans,  net of  unearned
discount,  of $9.01 billion,  deposits of $8.91 billion and stockholders' equity
of $860.9  million,  and we  currently  operate  217 branch  banking  offices in
California, Florida, 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
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,  Houston and Dallas,  Texas,  and  Florida's  Manatee,
Pinellas,  Hillsborough  and Pasco  counties.  Certain loan products,  including
small  business  loans and  insurance  premium  financing  loans,  are available
nationwide through SBLS LLC and UPAC, respectively.

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.

   Restatement of Previously Issued Consolidated Interim Financial Statements

As  discussed  in Amendment  No. 1 to our 2007 Annual  Report on Form 10-K,  the
Audit  Committee  of our Board of  Directors  (the  Audit  Committee),  with the
assistance  of  legal  counsel  and  other  third   parties,   commissioned   an
investigation  into the  circumstances and possible  irregularities  that led to
certain   fraudulent   transactions  in  our  mortgage  banking  division  being
improperly  recorded  in  our  consolidated  financial  statements  due  to  the
circumvention of established internal controls.  The investigation was completed
on July 29, 2008.

On May 16, 2008, management and the Audit Committee determined that we needed to
restate our previously issued consolidated  financial  statements as of December
31, 2007 and 2006, and for the years ended December 31, 2007,  2006 and 2005 and
restate  certain  financial  information as of December 31, 2005, 2004 and 2003,
and for the years ended  December  31, 2004 and 2003 and each of the quarters in
2007  and  2006,  and  that  these  previously  issued  consolidated   financial
statements  should no longer be relied upon.  Accordingly,  we have restated our
previously issued  consolidated  financial  statements in Amendment No. 1 to our
Annual  Report on Form 10-K for the year ended  December 31,  2007.  We have not
amended our previously filed Annual Reports on Form 10-K or Quarterly Reports on
Form  10-Q  for  the  periods  affected  by  this  restatement.   The  financial
information  presented  herein as of December  31, 2007 and for the three months
ended March 31, 2007 has been  restated as set forth in  Amendment  No. 1 to our
2007 Annual Report on Form 10-K.

                               Financial Condition

Total assets were $10.84  billion at March 31, 2008,  compared to $10.90 billion
at  December  31,  2007.   The  decrease  in  our  total  assets  was  primarily
attributable  to a decrease  in our  available-for-sale  investment  securities,
partially offset by organic loan growth.

Loans,  net of unearned  discount,  increased $126.2 million to $9.01 billion at
March 31, 2008,  from $8.89  billion at December 31,  2007,  reflecting  organic
growth,  partially  offset by net loan charge-offs and the sale of approximately
$10.8 million of our small  business loans in March 2008. The loan growth during
the quarter was primarily  associated  with our commercial  and industrial  loan
portfolio commensurate with our strategy of reducing our exposure to real estate
transactions in light of current market  conditions,  as further discussed under
"--Loans and Allowance for Loan Losses."

Investment  securities  decreased  $183.5 million to $835.8 million at March 31,
2008, from $1.02 billion at December 31, 2007.  Funds provided by maturities and
sales of investment  securities  were  primarily  utilized to fund internal loan
growth. The decrease reflects  maturities and/or calls of investment  securities
of $138.6  million and sales of  investment  securities of $82.4 million for the
three months ended March 31, 2008.

Other assets  increased  $12.8 million to $134.5 million at March 31, 2008, from
$121.7 million at December 31, 2007.  The increase  resulted from an increase in
the fair value of servicing rights and derivative instruments,  partially offset
by a decrease in accrued interest receivable.

Deposits decreased $238.6 million to $8.91 billion at March 31, 2008, from $9.15
billion at December  31,  2007.  During the first  quarter of 2008,  we achieved
organic growth in savings and money market deposits and demand  deposits,  which
increased  $72.9 million and $20.3  million,  respectively,  through our deposit
development  programs,  including enhanced product and service offerings coupled
with  marketing   campaigns.   However,   anticipated  run-off  of  higher  rate
certificates  of  deposit,  primarily  in  the  Florida  region,  resulted  in a
significant  decrease in our time  deposits of $331.7  million  during the first
quarter of 2008. The Florida region accounted for $167.5 million of the decrease
in certificates of deposit.  Deposit growth, which is our primary funding source
for loans, was temporarily replaced with other borrowings.

Other  borrowings,  which are comprised of securities  sold under  agreements to
repurchase,  Federal  Home Loan  Bank,  or FHLB,  advances,  and  federal  funds
purchased,  increased  $135.3  million  to $545.0  million  at March  31,  2008,
compared to $409.6  million at December 31, 2007.  In light of uncertain  market
conditions,  increased  loan  funding  needs  and  current  deposit  trends,  we
implemented  several  strategies during the first quarter of 2008 to improve our
liquidity  position,  including  increasing our  outstanding  FHLB borrowings by
$200.0 million,  as further discussed under  "--Liquidity."  Our term repurchase
agreements  increased $20.0 million as a result of the  restructuring  of a term
repurchase  agreement,  as  further  described  in  Note 8 to  our  consolidated
financial statements.

Our notes  payable  were $58.0  million and $39.0  million at March 31, 2008 and
December 31, 2007,  respectively.  During the first quarter of 2008, we borrowed
$25.0  million on our revolving  credit  facility and made  scheduled  quarterly
principal  payments of $6.0 million on our  outstanding  term loans,  as further
described  in  Note 9 to our  consolidated  financial  statements.  Subordinated
debentures were $353.8 million at March 31, 2008 and December 31, 2007.

Stockholders' equity was $860.9 million and $842.1 million at March 31, 2008 and
December 31, 2007, respectively,  reflecting an increase of $18.8 million during
the first  quarter of 2008.  The increase was primarily  attributable  to: (a) a
$17.6 million increase in accumulated other comprehensive  income,  comprised of
$12.3  million  associated  with changes in  unrealized  gains and losses on our
available-for-sale  investment  securities portfolio and $5.3 million associated
with changes in the fair value of our derivative  financial  instruments;  (b) a
$6.3 million  cumulative effect  adjustment of a change in accounting  principle
recorded in conjunction  with our election to measure  servicing  rights at fair
value as permitted by Statement of Financial Accounting Standards,  or SFAS, No.
156 -- Accounting  for Servicing of Financial  Assets,  as further  discussed in
Note 1 and Note 3 to our consolidated financial statements;  partially offset by
(c) a net loss of $4.9  million  and  dividends  paid on our Class A and Class B
preferred stock.


                              Results of Operations

Net Income.  We recorded a net loss of $4.9  million for the three  months ended
March 31,  2008,  compared to net income of $17.4  million for the three  months
ended March 31,  2007.  The  decrease in our earnings for the three months ended
March  31,  2008 as  compared  to the three  months  ended  March  31,  2007 was
primarily driven by the following:

     >>   An increase in the  provision for loan losses to $45.9 million for the
          three months  ended March 31,  2008,  compared to $3.5 million for the
          three months ended March 31, 2007; and

     >>   A decline  in net  interest  income and net  interest  margin to $89.5
          million  and  3.65%  for  the  three  months  ended  March  31,  2008,
          respectively, compared to $94.1 million and 4.12% for the three months
          ended March 31, 2007; partially offset by

     >>   An  increase  in  noninterest  income to $33.1  million  for the three
          months ended March 31, 2008,  compared to $22.6  million for the three
          months ended March 31, 2007;

     >>   A decline in noninterest expense to $83.4 million for the three months
          ended March 31, 2008,  compared to $86.0  million for the three months
          ended March 31, 2007; and

     >>   A benefit for income  taxes of $2.0 million for the three months ended
          March 31,  2008,  compared  to a  provision  for income  taxes of $9.7
          million for the three months ended March 31, 2007.

The increase in the provision for loan losses was primarily  driven by increased
net loan  charge-offs  and a decline in asset quality related to 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."

The decline in our net interest income and our net interest margin was primarily
attributable to the 300 basis point decrease, in aggregate, in the prime lending
rate,  from the third  quarter of 2007 through the first quarter of 2008. We are
currently in an asset-sensitive position, and as such, interest rate cuts by the
Board of Governors of the Federal Reserve System,  or Federal  Reserve,  have an
immediate short-term negative effect on our net interest income and net interest
margin  until we can fully  re-price  our  deposits  to reflect  current  market
interest rates. See further discussion under "--Net Interest Income."

The increase in our  noninterest  income for the first quarter of 2008 primarily
resulted from a pre-tax gain of $5.0 million recorded on the extinguishment of a
term repurchase agreement, net gains on investment securities sales and calls of
$1.2 million and a net gain of $3.4 million on our derivative  instruments.  See
further discussion under "--Noninterest Income."

The decrease in  noninterest  expense  primarily  resulted  from  reductions  in
salaries and employee benefits expense attributable to decreased staffing levels
in our mortgage  banking  division  and the  completion  of certain  other staff
reductions  in 2007 and the first  quarter of 2008.  This decrease was partially
offset by an increase in occupancy and furniture  and  equipment  expenses.  See
further discussion under "--Noninterest Expense."

The change in the (benefit)  provision for income taxes primarily  resulted from
decreased earnings, as further discussed under "--Provision for Income Taxes."

Net Interest Income. Net interest income,  expressed on a tax-equivalent  basis,
decreased to $89.9  million for the three months ended March 31, 2008,  compared
to $94.5  million for the  comparable  period in 2007.  Our net interest  margin
declined  to 3.65% for the three  months  ended  March 31,  2008,  reflecting  a
decrease  of 47 basis  points  from 4.12% for the three  months  ended March 31,
2007.  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 decline in our net  interest  margin and net  interest  income is  primarily
attributable  to the decrease in the prime  lending rate that began in September
2007 and continued  through  March 2008.  During 2007 and the three months ended
March 31, 2008, the Federal  Reserve  decreased the targeted  federal funds rate
six times,  resulting in six  reductions  in the prime lending rate totaling 300
basis points in aggregate.  Our balance sheet is currently asset sensitive,  and
as such, our net interest margin is negatively  impacted with each interest rate
cut as our loan portfolio re-prices on an immediate basis; whereas we are unable
to immediately  re-price our deposit portfolio to current market interest rates,
thereby resulting in a compression of our net interest margin. The average rates
paid on our interest-bearing deposits decreased 36 basis points to 3.32% for the
three  months  ended  March 31,  2008,  compared to 3.68% for the same period in
2007, while the average yield earned on our interest-earning assets decreased 80
basis points to 6.68% for the three  months  ended March 31,  2008,  compared to
7.48% for the same period in 2007,  resulting in a reduction of our net interest
margin.  Average  interest-earning  assets  increased  $609.9  million  to $9.91
billion for the three months ended March 31,  2008,  from $9.30  billion for the
comparable  period in 2007. The increase is primarily  attributable  to internal
loan growth and interest-earning  assets provided by our acquisitions  completed
in 2007. Average interest-bearing  liabilities increased $685.9 million to $8.69
billion for the three months ended March 31,  2008,  from $8.00  billion for the
comparable period in 2007.

Interest  income on our loan  portfolio,  expressed on a  tax-equivalent  basis,
decreased to $152.9 million for the three months ended March 31, 2008,  compared
to $153.2  million for the  comparable  period in 2007.  Average  loans,  net of
unearned discount, increased $1.13 billion to $8.95 billion for the three months
ended March 31, 2008, from $7.82 billion for the comparable  period in 2007. The
yield on our loan  portfolio  decreased  107 basis points to 6.87% for the three
months  ended March 31,  2008,  compared to 7.94% for the  comparable  period in
2007,  reflecting decreases in the prime lending rate throughout the latter part
of 2007 and the first  quarter of 2008,  competitive  pressures  on loan  yields
within  our  markets  and a  significant  increase  in  the  average  amount  of
nonaccrual loans during the respective periods,  partially offset by an increase
in interest income associated with our interest rate swap agreements.  The prime
lending rate decreased 100 basis points during 2007,  from 8.25% at December 31,
2006 to 7.25% at December 31, 2007, and decreased an additional 200 basis points
during the first  quarter of 2008 to 5.25% at March 31, 2008.  Our interest rate
swap  agreements  contributed  to an  increase  in  interest  income on our loan
portfolio of $1.8 million for the three months ended March 31, 2008, in contrast
to a decrease in interest  income on our loan  portfolio of $1.4 million for the
comparable  period in 2007.  The increase in average  loans  primarily  reflects
internal growth and our acquisitions completed in 2007.

Interest  income on our  investment  securities,  expressed on a  tax-equivalent
basis,  was $11.6 million and $16.4 million for the three months ended March 31,
2008 and 2007,  respectively.  Average investment securities were $942.4 million
and  $1.33  billion  for the  three  months  ended  March  31,  2008  and  2007,
respectively,  and the yield earned on our  investment  portfolio  was 4.95% and
5.01% for the three months ended March 31, 2008 and 2007, respectively.

Interest  expense on our  interest-bearing  deposits was $64.1 million and $65.8
million  for the  three  months  ended  March 31,  2008 and 2007,  respectively.
Average  interest-bearing  deposits  increased  to $7.77  billion  for the three
months ended March 31, 2008, compared to $7.24 billion for the comparable period
in 2007.  The increase in average  interest-bearing  deposits  reflects  organic
growth through  enhanced  product  marketing  campaigns  during the period,  and
growth  provided  by our  acquisitions  completed  during  2007.  The  aggregate
weighted  average  rate paid on our  deposit  portfolio  was 3.32% for the three
months  ended March 31,  2008,  compared to 3.68% for the  comparable  period in
2007. The decrease in the aggregate weighted average rate paid for these periods
is  primarily   reflective   of  the  declining   interest   rate   environment.
Specifically,  the  weighted  average  rate paid on our time  deposit  portfolio
declined to 4.42% for the three  months  ended March 31, 2008 from 4.75% for the
comparable  period in 2007.  We expect  the  weighted  average  rate paid on our
deposit  portfolio to further  decline as we continue to reduce overall  deposit
rates to reflect  current market  conditions and as our time deposits mature and
re-price at current market rates.

Interest  expense on our other  borrowings was $3.9 million and $4.4 million for
the three  months  ended March 31, 2008 and 2007,  respectively.  Average  other
borrowings  were $531.2  million and $393.3  million for the three  months ended
March 31, 2008 and 2007, respectively.  The aggregate weighted average rate paid
on our other borrowings was 2.97% and 4.56% for the three months ended March 31,
2008 and 2007,  respectively.  The decrease in the weighted average rate paid on
our other borrowings  reflects the reduction in short-term interest rates during
the periods.  The increase in average  other  borrowings  reflects an additional
$200.0  million of FHLB  advances  entered  into  during  January  2008,  and an
increase in our term repurchase agreement of $20.0 million,  partially offset by
the termination of a $100.0 million term repurchase agreement in August 2007, as
further discussed under "--Liquidity."

Interest  expense on our notes  payable was  $569,000 and $908,000 for the three
months ended March 31, 2008 and 2007,  respectively.  Our notes payable averaged
$39.5  million and $56.6  million for the three  months ended March 31, 2008 and
2007,  respectively.  The  aggregate  weighted  average  rate  paid on our notes
payable was 5.80% and 6.51% for the three  months ended March 31, 2008 and 2007,
respectively,  reflecting the reduction in short-term  interest rates during the
periods,  partially offset by an increase in fees paid on our notes payable. 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 4.67% and 6.46% for the three  months ended March
31, 2008 and 2007,  respectively.  The decrease in our average  notes payable is
primarily  attributable to contractual payments and additional  prepayments made
on our term loan, as further  described in Note 9 to our consolidated  financial
statements.

Interest  expense  on our  subordinated  debentures  was $6.2  million  and $5.9
million  for the  three  months  ended  March 31,  2008 and 2007,  respectively.
Average  subordinated  debentures were $353.8 million and $310.1 million for the
three months ended March 31, 2008 and 2007, respectively. The aggregate weighted
average  rate paid on our  subordinated  debentures  was 7.01% and 7.72% for the
three  months  ended  March 31,  2008 and  2007,  respectively,  reflecting  the
reduction in short-term  interest rates during the periods as $282.5 million, or
79.4% of our subordinated debentures are variable rate. The change in volume and
average  rates paid  reflects  the  issuance of $77.3  million of variable  rate
subordinated  debentures during 2007 through four newly formed statutory trusts,
partially offset by the repayment of $25.8 million of variable rate subordinated
debentures  in April 2007, as further  described in Note 10 to our  consolidated
financial statements.  In addition, in March 2008, we entered into four interest
rate swap agreements  designated as cash flow hedges to effectively  convert the
interest rate on $125.0 million of our variable rate subordinated  debentures to
a blended fixed rate of interest of  approximately  4.90%, as further  discussed
under  "--Interest  Rate  Risk  Management"  and in Note 10 to our  consolidated
financial statements.


<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
our   interest-earning   assets,  the  average  cost  of  our   interest-bearing
liabilities  and the  resulting  net interest  income for the three months ended
March 31, 2008 and 2007.
<TABLE>
<CAPTION>



                                                                        Three Months Ended March 31,
                                                        -----------------------------------------------------------
                                                                     2008                          2007
                                                        ----------------------------- -----------------------------
                                                                     Interest                      Interest
                                                           Average    Income/  Yield/    Average    Income/  Yield/
                                                           Balance    Expense   Rate     Balance    Expense   Rate
                                                           -------    -------   ----     -------    -------   ----
                                                                                                (Restated)
                                                                     (dollars expressed in thousands)
                        ASSETS
                        ------

Interest-earning assets:
<S>                                                     <C>           <C>       <C>   <C>           <C>       <C>
    Loans (1)(2)(3)(4)................................  $ 8,950,752   152,892   6.87% $ 7,822,656   153,179   7.94%
    Investment securities (4).........................      942,408    11,602   4.95    1,329,215    16,424   5.01
    Short-term investments............................       18,210       162   3.58      149,604     1,878   5.09
                                                        -----------   -------         -----------   -------
          Total interest-earning assets...............    9,911,370   164,656   6.68    9,301,475   171,481   7.48
                                                                      -------                       -------
Nonearning assets.....................................      932,839                       835,818
                                                        -----------                   -----------
          Total assets................................  $10,844,209                   $10,137,293
                                                        ===========                   ===========


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

Interest-bearing liabilities:
    Interest-bearing deposits:
       Interest-bearing demand........................  $   998,996     2,032   0.82% $   983,776     2,616   1.08%
       Savings and money market.......................    2,709,104    17,527   2.60    2,437,295    18,337   3.05
       Time deposits of $100 or more..................    1,498,582    16,769   4.50    1,425,704    17,030   4.84
       Other time deposits............................    2,559,345    27,787   4.37    2,397,926    27,790   4.70
                                                        -----------   -------         -----------   -------
          Total interest-bearing deposits.............    7,766,027    64,115   3.32    7,244,701    65,773   3.68
    Other borrowings..................................      531,213     3,928   2.97      393,271     4,418   4.56
    Notes payable (5).................................       39,472       569   5.80       56,594       908   6.51
    Subordinated debentures...........................      353,761     6,165   7.01      310,056     5,903   7.72
                                                        -----------   -------         -----------   -------
          Total interest-bearing liabilities..........    8,690,473    74,777   3.46    8,004,622    77,002   3.90
                                                                      -------                       -------
Noninterest-bearing liabilities:
    Demand deposits...................................    1,195,776                     1,224,318
    Other liabilities.................................      112,837                       123,129
                                                        -----------                   -----------
          Total liabilities...........................    9,999,086                     9,352,069
Stockholders' equity..................................      845,123                       785,224
                                                        -----------                   -----------
          Total liabilities and stockholders' equity..  $10,844,209                   $10,137,293
                                                        ===========                   ===========
Net interest income...................................                 89,879                        94,479
                                                                      =======                       =======
Interest rate spread..................................                          3.22                          3.58
Net interest margin (6)...............................                          3.65%                         4.12%
                                                                                ====                          ====
------------------
(1)  For purposes of these calculations, nonaccrual loans are included in average loan amounts.
(2)  Interest income on loans includes loan fees.
(3)  Interest income includes 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 $352,000 and $401,000 for the three months ended March 31, 2008 and 2007, respectively.
(5)  Interest expense on our notes payable includes commitment, arrangement and renewal fees.  Exclusive of these fees,
     the interest rates paid  were 4.67% and 6.46% for  the  three months  ended March 31, 2008 and 2007, 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>


The following table indicates, on a tax-equivalent basis, the change in interest
income and interest expense that is attributable to the change in average volume
and  change in average  rates,  for the three  months  ended  March 31,  2008 as
compared to the three months ended March 31, 2007. The change in interest due to
the combined  rate/volume variance has been allocated to rate and volume changes
in proportion to the dollar amounts of the change in each.

<TABLE>
<CAPTION>

                                                         Increase (Decrease) Attributable to Change in:
                                                         ----------------------------------------------
                                                                Three Months Ended March 31, 2008
                                                                        Compared to 2007
                                                         ----------------------------------------------
                                                                                                Net
                                                           Volume             Rate            Change
                                                           ------             ----            ------
                                                                (dollars expressed in thousands)

         Interest earned on:
           Loans: (1)(2)(3)
<S>                                                       <C>                <C>                 <C>
              Taxable................................     $ 21,126           (21,415)            (289)
              Tax-exempt (4).........................           52               (50)               2
           Investment securities:
              Taxable................................       (4,464)             (215)          (4,679)
              Tax-exempt (4).........................         (158)               15             (143)
           Short-term investments....................       (1,283)             (433)          (1,716)
                                                          --------         ---------         --------
                Total interest income................       15,273           (22,098)          (6,825)
                                                          --------         ---------         --------
         Interest paid on:
           Interest-bearing demand deposits..........           41              (625)            (584)
           Savings and money market deposits.........        1,980            (2,790)            (810)
           Time deposits.............................        2,792            (3,056)            (264)
           Other borrowings..........................        1,301            (1,791)            (490)
           Notes payable (5).........................         (249)              (90)            (339)
           Subordinated debentures...................          816              (554)             262
                                                          --------         ---------         --------
                Total interest expense...............        6,681            (8,906)          (2,225)
                                                          --------         ---------         --------
                Net interest income..................     $  8,592           (13,192)          (4,600)
                                                          ========         =========         ========
         -------------------------
         (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 includes the effect of interest rate swap agreements.
         (4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%.
         (5) Interest expense on our notes payable includes commitment, arrangement and renewal fees.
</TABLE>


Provision  for Loan  Losses.  We recorded a  provision  for loan losses of $45.9
million for the three months ended March 31, 2008,  compared to $3.5 million for
the three months ended March 31, 2007.  The increase in our  provision  for loan
losses for the first three months of 2008 was primarily  driven by increased net
loan charge-offs,  an increase in nonperforming  loans, higher levels of problem
loans in our one-to-four  family  residential  real estate and  construction and
land  development  loan  portfolios,  and growth within our loan  portfolio,  as
further  discussed  under "--Loans and Allowance for Loan Losses." We expect the
provision  for loan  losses to  remain  at  higher  levels in the near term as a
result of continued  distress in our one-to-four  family residential real estate
and construction and land development loan portfolios.

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

Noninterest  Income.  Noninterest income was $33.1 million and $22.6 million for
the three months ended March 31, 2008 and 2007, respectively. 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,   net  gains  on  investment   securities   and  derivative
instruments, and other income.

Service charges on deposit accounts and customer service fees were $12.1 million
and  $10.6  million  for the  three  months  ended  March  31,  2008  and  2007,
respectively.  The  increase in service  charges and  customer  service  fees is
primarily  attributable  to: (a) higher deposit levels  associated with internal
growth and our  acquisitions  of banks  completed in 2007, as further  described
under  "--Financial  Condition,"  as well as changes in the  overall  mix of our
deposit portfolio;  (b) increased cardholder interchange income primarily due to
an increase in debit card usage by our customer  base;  (c) increased fee income
from customer service charges for non-sufficient  funds and returned checks from
our  commercial  deposit base resulting from our efforts to control fee waivers;
and (d) pricing  increases on certain service charges and customer  service fees
instituted to reflect current market conditions.
<PAGE>

Gain on loans sold and held for sale decreased to $1.7 million from $2.0 million
for the three months ended March 31, 2008 and 2007,  respectively.  The decrease
in 2008 is  primarily  attributable  to a decline in loan  origination  and sale
volume in our mortgage banking division, primarily resulting from current market
conditions,  partially  offset by a pre-tax gain of $504,000  recognized  on the
sale of  approximately  $10.8 million of our small  business  loans  recorded in
March 2008.

We recorded a net gain on investment securities of $1.2 million and $293,000 for
the three months ended March 31, 2008 and 2007, respectively.  In March 2008, we
sold   approximately   $81.5  million  of   mortgage-backed   available-for-sale
investment securities resulting in a pre-tax gain of approximately $867,000.

Bank-owned  life insurance  investment  income was $973,000 and $713,000 for the
three  months  ended  March  31,  2008 and  2007,  respectively,  reflecting  an
increased  return on the performance of the underlying  investments  surrounding
the insurance contracts, which is primarily attributable to the portfolio mix of
investments and overall market conditions.

Investment   management  income  generated  by  MVP,  our  institutional   money
management  subsidiary,  was $1.4  million for the three  months ended March 31,
2008,  in  comparison to $1.5 million for the three months ended March 31, 2007,
reflecting  decreased portfolio management fee income associated with changes in
the level of assets under management and current market conditions.

Insurance fee and  commission  income  generated by Adrian Baker,  our insurance
brokerage  agency,  was $2.0 million and $1.7 million for the three months ended
March 31, 2008 and 2007,  respectively,  primarily reflecting increased customer
volumes.

We recorded a net gain on derivative  instruments of $3.4 million and $2,000 for
the three  months ended March 31, 2008 and 2007,  respectively.  The net gain in
2008 is primarily attributable to the increase in the fair value of our interest
rate floor agreements as a result of the decline in forward rates resulting from
the  Federal  Reserve  interest  rate cuts  during the first  quarter of 2008 as
further  discussed under  "--Interest  Rate Risk  Management." Our interest rate
floor agreements increase in value as interest rates decline.

We recorded a gain of $5.0 million on the  extinguishment of our term repurchase
agreement  for the  three  months  ended  March  31,  2008.  In March  2008,  we
restructured our $100.0 million term repurchase agreement,  as further discussed
in Note 8 to our consolidated  financial  statements.  The primary modifications
were to: (a) increase the  borrowing  amount to $120.0  million;  (b) extend the
maturity date from October 12, 2010 to April 12, 2012;  (c) convert the interest
rate from a  variable  rate to a fixed  rate of  3.36%;  and (d)  terminate  the
embedded  interest rate floor  agreements  contained  within the term repurchase
agreement. These modifications resulted in a pre-tax gain of $5.0 million.

Other  income was $5.4 million and $5.8 million for the three months ended March
31, 2008 and 2007,  respectively.  The decrease is primarily  attributable  to a
decrease in net loan servicing fees of $271,000 and other items partially offset
by a gain  recognized in March 2008 on the Visa,  Inc., or Visa,  initial public
offering of $743,000,  representing  the cash payment received in exchange for a
portion of our membership  interest in Visa as a result of Visa's initial public
offering.

Noninterest Expense. Noninterest expense was $83.4 million and $86.0 million for
the three months  ended March 31, 2008 and 2007,  respectively.  Our  efficiency
ratio was 68.02% for the three months  ended March 31, 2008,  compared to 73.69%
for the  comparable  period in 2007.  The  decrease in  noninterest  expense and
related  improvement  in the  efficiency  ratio was  primarily  attributable  to
certain profit improvement  initiatives that we implemented  throughout 2007 and
the first quarter of 2008.

Salaries and employee  benefits  expense was $40.6 million and $45.2 million for
the three months ended March 31, 2008 and 2007,  respectively.  We attribute the
overall  decrease in salaries and employee  benefits expense to reduced staffing
levels within our mortgage  banking division and the completion of certain other
staff  reductions  in 2007 and the first  quarter of 2008.  Our total  full-time
equivalent  employees (FTEs) decreased to approximately 2,390 at March 31, 2008,
from 2,720 at March 31, 2007, representing a decrease of approximately 12.1%. We
reduced our FTEs by 12.1% despite  adding an aggregate of 26  additional  branch
offices  through  acquisitions in 2007 and an aggregate of nine de novo branches
opened in 2007 and 2008. The decrease in salaries and employee  benefits expense
also related to a decrease in incentive  compensation expense resulting from the
decline in our earnings between the comparable periods.

Occupancy,  net of rental income,  and furniture and equipment expense was $15.4
million and $12.3  million for the three  months  ended March 31, 2008 and 2007,
respectively.  The increase reflects higher levels of expense resulting from our
de novo  activities and  acquisitions  in 2007 and 2008, as discussed  above, as
well as increased  technology  equipment  expenditures,  continued expansion and
renovation of certain branch  offices,  increased  expenses  associated with the
purchase  and/or lease of  properties  that will be utilized  for future  branch
office  locations,  and depreciation  expense  associated with  acquisitions and
capital expenditures.
<PAGE>

Information  technology and item processing fees were $9.3 million for the three
months ended March 31, 2008 and 2007.  As more fully  described in Note 5 to our
consolidated financial statements,  First Services,  L.P., a limited partnership
indirectly owned by our Chairman and members of his immediate  family,  provides
information   technology  and  various   operational  support  services  to  our
subsidiaries  and us.  Information  technology  fees also  include  fees paid to
outside servicers associated with our mortgage lending and trust divisions,  our
small business  lending and  institutional  money management  subsidiaries,  and
Adrian Baker and UPAC.

Legal,  examination and professional fees were $2.8 million and $1.7 million for
the  three  months  ended  March  31,  2008 and  2007,  respectively,  primarily
reflecting  an increase  in the level of loan fees  related to  foreclosure  and
collection  fees.  In addition,  the  continued  expansion of overall  corporate
activities  and the  level of legal  fees  associated  with  certain  litigation
matters, including those assumed in conjunction with our acquisition of CFHI and
Coast Bank of Florida in November 2007, have  contributed to the overall expense
levels in 2007 and 2008.

Advertising and business  development  expense was $1.5 million and $1.9 million
for the three months ended March 31, 2008 and 2007, respectively, reflecting our
efforts to control these expenses as a result of the decrease in our earnings.

Charitable  contributions  expense was  $97,000  and $1.9  million for the three
months  ended March 31, 2008 and 2007,  respectively,  reflecting  a decrease in
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 5 to our consolidated financial statements.

Other expense was $9.3 million and $8.9 million for the three months ended March
31, 2008 and 2007, respectively.  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 an increase in expenses  associated
with continued growth and expansion of our banking  franchise,  partially offset
by a credit recorded to other expense of $350,000 resulting from the reversal of
a portion  of a  previously  recorded  litigation  reserve  related  to the Visa
initial public offering.

Provision for Income Taxes. The provision (benefit) for income taxes reflects an
income tax benefit of $2.0  million for the three  months  ended March 31, 2008,
compared to income tax expense of $9.7  million for the three months ended March
31, 2007. The decrease in income taxes is primarily  attributable to our reduced
level of earnings.

                          Interest Rate Risk Management

We utilize  derivative  financial  instruments  to assist in our  management  of
interest  rate  sensitivity  by modifying  the  re-pricing,  maturity and option
characteristics  of certain assets and  liabilities.  The  derivative  financial
instruments we held as of March 31, 2008 and December 31, 2007 are summarized as
follows:
<TABLE>
<CAPTION>


                                                            March 31, 2008            December 31, 2007
                                                       ------------------------    -----------------------
                                                         Notional     Credit         Notional     Credit
                                                          Amount     Exposure         Amount     Exposure
                                                          ------     --------         ------     --------
                                                                  (dollars expressed in thousands)

<S>                                                     <C>              <C>          <C>          <C>
         Cash flow hedges - loans.....................  $ 400,000        371          400,000      5,271
         Cash flow hedges - subordinated debentures...    125,000         --               --         --
         Interest rate floor agreements...............    300,000      5,172          300,000      1,699
         Interest rate cap agreements.................    400,000          9          400,000         50
         Interest rate lock commitments...............     18,000        151            3,000         23
         Forward commitments to sell
           mortgage-backed securities.................     99,000         --           55,000         40
                                                        =========     ======         ========     ======
</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 months ended March 31,  2008,  we realized net interest  income of
$1.8  million on our  derivative  financial  instruments,  whereas for the three
months ended March 31, 2007, we realized net interest expense of $1.4 million on
our derivative financial instruments.  The $3.2 million increase in net interest
income is primarily attributable to the decline in the prime lending rate, which
has  significantly  reduced  our cost  associated  with  these  instruments.  We

<PAGE>

recorded net gains on derivative instruments,  which are included in noninterest
income in the consolidated statements of operations,  of $3.4 million and $2,000
for the three months ended March 31, 2008 and 2007, respectively.  The net gains
on our derivative  instruments reflect changes in the fair value of our interest
rate floor and interest rate cap agreements, as further discussed below.

Our asset-sensitive position, coupled with the effect of recent cuts in interest
rates in late 2007 and in the first three months of 2008,  as further  discussed
under "-- Results of  Operations,"  has  negatively  impacted  our net  interest
income and will  continue  to impact the level of our net  interest  income over
time,  as reflected in our net interest  margin for the three months ended March
31, 2008 as compared to the comparable period in 2007.

Cash Flow  Hedges - Loans.  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 of our loans 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 these swap  agreements  was $752,000 and $6.0
million at March 31, 2008 and December 31,  2007,  respectively,  and the amount
payable by us under these swap agreements was $380,000 and $683,000 at March 31,
2008 and December 31, 2007, respectively.

The maturity dates, notional amounts,  interest rates paid and received and fair
value of our interest  rate swap  agreements  designated  as cash flow hedges on
certain loans as of March 31, 2008 and December 31, 2007 were as follows:
<TABLE>
<CAPTION>

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

         March 31, 2008:
<S>                                                    <C>               <C>           <C>         <C>
             September 18, 2009......................  $ 200,000         2.39%          5.20%       $  7,828
             September 20, 2010......................    200,000         2.39           5.20          12,676
                                                       ---------                                    --------
                                                       $ 400,000         2.39           5.20        $ 20,504
                                                       =========        =====          =====        ========

         December 31, 2007:
             September 18, 2009......................  $ 200,000         4.39%          5.20%       $  4,585
             September 20, 2010......................    200,000         4.39           5.20           7,331
                                                       ---------                                    --------
                                                       $ 400,000         4.39           5.20        $ 11,916
                                                       =========        =====          =====        ========
</TABLE>

Cash Flow  Hedges -  Subordinated  Debentures.  We  entered  into the  following
interest rate swap  agreements,  which have been designated as cash flow hedges,
with the objective of  stabilizing  our long-term cost of capital and cash flow,
and  accordingly,  net interest  income on our  subordinated  debentures  to the
respective call dates of certain subordinated debentures:

         >>    In March 2008, we entered into the  following  four interest rate
               swap  agreements  totaling  $125.0 million  notional  amount,  in
               aggregate,  to  effectively  convert the interest  rate on $125.0
               million of our subordinated  debentures from a variable rate to a
               blended fixed rate of interest of approximately  4.90%: (a) $25.0
               million notional amount with a maturity date of July 7, 2011; (b)
               $50.0  million  notional  amount with a maturity date of December
               15, 2011; (c) $25.0 million  notional amount with a maturity date
               of March 30, 2012; and (d) $25.0 million  notional  amount with a
               maturity date of December 15, 2012. These swap agreements provide
               for us to receive an  adjustable  rate of interest  equivalent to
               the three-month  London  Interbank  Offered Rate, or LIBOR,  plus

<PAGE>

               1.65%, 1.85%, 1.61% and 2.25%, respectively, and pay a fixed rate
               of interest.  The terms of the swap agreements  provide for us to
               pay and receive interest on a quarterly basis.

The amount  receivable by us under these swap  agreements  was $198,000 at March
31, 2008, and the amount payable by us under these swap  agreements was $209,000
at March 31, 2008.

The maturity dates, notional amounts,  interest rates paid and received and fair
value of our interest  rate swap  agreements  designated  as cash flow hedges on
certain subordinated debentures as of March 31, 2008 were as follows:
<TABLE>
<CAPTION>

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

<S>                                                    <C>               <C>           <C>         <C>
         July 7, 2011................................  $  25,000         4.40%         4.41%       $   42
         December 15, 2011...........................     50,000         4.91          4.65          (222)
         March 30, 2012..............................     25,000         4.71          4.31           (84)
         December 15, 2012...........................     25,000         5.57          5.05          (139)
                                                       ---------                                   ------
                                                       $ 125,000         4.90          4.61        $ (403)
                                                       =========        =====         =====        ======
</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  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 $5.0  million and $1.7  million at March 31, 2008 and  December 31,
2007,  respectively.  On May 9, 2008,  we  terminated  our  interest  rate floor
agreements to modify our overall hedge position in accordance  with our interest
rate risk management program.

Interest Rate Floor Agreements Embedded in Term Repurchase Agreements. We have a
term  repurchase   agreement  under  a  master  repurchase   agreement  with  an
unaffiliated  third party,  as further  described in Note 8 to our  consolidated
financial  statements.  The  underlying  securities  associated  with  the  term
repurchase agreement are agency  collateralized  mortgage obligation  securities
and are held by other financial institutions under safekeeping  agreements.  The
term repurchase agreement was 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.  At
December 31,  2007,  the term  repurchase  agreement  had a borrowing  amount of
$100.0  million,  a maturity  date of October 12, 2010,  and interest rate floor
agreements  included within the term  repurchase  agreement,  which  represented
embedded  derivative  instruments  that, in accordance with existing  accounting
literature governing derivative  instruments,  were not required to be separated
from the term repurchase  agreement and accounted for separately as a derivative
financial  instrument.  On March 31, 2008, we  restructured  our existing $100.0
million  term  repurchase  agreement.  The  primary  modifications  were to: (a)
increase the borrowing amount from $100.0 million to $120.0 million;  (b) extend
the  maturity  date from  October  12, 2010 to April 12,  2012;  (c) convert the
interest rate from a variable  rate tied to LIBOR to a fixed rate of 3.36%;  and
(d) terminate the embedded  interest rate floor agreements  contained within the
term repurchase  agreement.  These  modifications  resulted in a pre-tax gain of
$5.0  million,  which is reflected  in  noninterest  income in our  consolidated
statements of operations.  The term  repurchase  agreement is 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 operations.

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
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  $9,000 and  $50,000  at March 31,  2008 and
December 31, 2007, respectively.

Pledged  Collateral.  At March 31, 2008 and December  31, 2007,  we had accepted
cash of  $26.0  million  and  $21.4  million,  respectively,  as  collateral  in
connection  with our interest  rate swap  agreements.  At March 31, 2008, we had
pledged cash of $1.1 million as collateral in connection  with our interest rate
swap agreements.

Interest Rate Lock  Commitments / Forward  Commitments  to Sell  Mortgage-Backed
Securities.  Derivative  financial  instruments issued by us consist of interest
rate lock commitments to originate  fixed-rate loans to be sold.  Commitments to
originate  fixed-rate loans consist  primarily of residential real estate loans.
These net loan  commitments  and loans  held for sale are  hedged  with  forward
contracts to sell  mortgage-backed  securities,  which expire in June 2008.  The
fair value of the  interest  rate lock  commitments,  which is included in other
assets in our consolidated balance sheets, was $151,000 and $23,000 at March 31,
2008  and  December  31,  2007,  respectively.  The fair  value  of the  forward
contracts to sell  mortgage-backed  securities,  which is included in loans held
for sale in our consolidated balance sheets, was ($424,000) and $40,000 at March
31, 2008 and December 31, 2007, respectively.

                       Loans and Allowance for Loan Losses

Interest earned on our loan portfolio  represents the principal source of income
for First  Bank.  Interest  and fees on loans were  93.0% of our total  interest
income for the three months ended March 31, 2008, in comparison to 89.4% for the
comparable period in 2007. Loans, net of unearned  discount,  increased to $9.01
billion,  or 83.2% of our assets, at March 31, 2008,  compared to $8.89 billion,
or 81.5% of our assets, at December 31, 2007. The following table summarizes the
composition of our loan portfolio at March 31, 2008 and December 31, 2007:
<TABLE>
<CAPTION>

                                                                               March 31,     December 31,
                                                                                 2008            2007
                                                                                 ----            ----
                                                                                              (Restated)
                                                                         (dollars expressed in thousands)

<S>                                                                           <C>             <C>
         Commercial, financial and agricultural............................   $2,501,363      2,382,067
         Real estate construction and development..........................    2,103,765      2,141,234
         Real estate mortgage:
             One-to-four family residential................................    1,614,231      1,602,575
             Multi-family residential......................................      206,163        177,246
             Commercial real estate........................................    2,432,513      2,431,464
         Consumer and installment, net of unearned discount................       86,573         85,519
         Loans held for sale...............................................       67,821         66,079
                                                                              ----------     ----------
             Loans, net of unearned discount...............................   $9,012,429      8,886,184
                                                                              ==========     ==========
</TABLE>

The  overall  increase  in loans,  net of  unearned  discount,  during the first
quarter of 2008 is primarily attributable to the following:

         >>    An increase of $119.3  million in our  commercial,  financial and
               agricultural  portfolio  attributable to internal loan production
               growth, partially offset by the sale of the guaranteed portion of
               approximately  $10.8 million of our small business loans in March
               2008, which resulted in a pre-tax gain of $504,000;

         >>    An  increase  of  $11.7   million  in  our   one-to-four   family
               residential   real   estate   mortgage    portfolio,    primarily
               attributable to internal loan production growth, partially offset
               by increased  charge-offs  recorded on certain existing loans, as
               further discussed below. Our one-to-four  family residential loan
               portfolio included  approximately $50.8 million and $54.8 million
               of  sub-prime  mortgage  loans at March 31, 2008 and December 31,
               2007, respectively, representing 3.1% and 3.4% of our one-to-four
               family residential real estate loan portfolio, respectively; and

         >>    An increase of $28.9 million in our multi-family residential real
               estate   mortgage   portfolio   attributable   to  internal  loan
               production growth; partially offset by

         >>    A decrease of $37.5 million in our real estate  construction  and
               development   portfolio   attributable  to  internal  efforts  to
               decrease our exposure to real estate construction and development
               loans,  and increased  charge-offs  recorded on certain  existing
               loans, as further discussed below.



<PAGE>


Nonperforming assets include nonaccrual loans, restructured loans and other real
estate. The following table presents the categories of nonperforming  assets and
certain ratios as of March 31, 2008 and December 31, 2007:
<TABLE>
<CAPTION>

                                                                                March 31,   December 31,
                                                                                  2008          2007
                                                                                  ----          ----
                                                                                             (Restated)
                                                                           (dollars expressed in thousands)
         Commercial, financial and agricultural:
<S>                                                                          <C>                <C>
              Nonaccrual...................................................  $     8,186        5,916
         Real estate construction and development:
              Nonaccrual...................................................      162,443      151,812
         Real estate mortgage:
              One-to-four family residential:
                  Nonaccrual...............................................       46,882       32,931
                  Restructured.............................................        6,140            7
              Multi-family residential:
                  Nonaccrual...............................................           61           --
              Commercial real estate:
                  Nonaccrual...............................................       12,909       11,294
         Consumer and installment:
              Nonaccrual...................................................          184          263
                                                                             -----------    ---------
                    Total nonperforming loans..............................      236,805      202,223
         Other real estate.................................................       13,157       11,225
                                                                             -----------    ---------
                    Total nonperforming assets.............................  $   249,962      213,448
                                                                             ===========    =========

         Loans, net of unearned discount...................................  $ 9,012,429    8,886,184
                                                                             ===========    =========

         Loans past due 90 days or more and still accruing.................  $    23,553       26,753
                                                                             ===========    =========

         Ratio of:
           Allowance for loan losses to loans..............................         2.05%        1.89%
           Nonperforming loans to loans....................................         2.63         2.28
           Allowance for loan losses to nonperforming loans................        78.20        83.27
           Nonperforming assets to loans and other real estate.............         2.77         2.40
                                                                             ===========    =========
</TABLE>

Nonperforming  loans,  consisting of loans on nonaccrual status and restructured
loans,  were $236.8  million at March 31,  2008,  compared to $202.2  million at
December 31, 2007 and $62.5 million at March 31, 2007.  Nonperforming loans were
2.63% of loans, net of unearned discount,  at March 31, 2008,  compared to 2.28%
and 0.79% of loans, net of unearned discount, at December 31, 2007 and March 31,
2007, respectively. Other real estate owned was $13.2 million, $11.2 million and
$8.5  million  at March  31,  2008,  December  31,  2007  and  March  31,  2007,
respectively.  Nonperforming assets, consisting of nonperforming loans and other
real estate  owned,  were $250.0  million at March 31, 2008,  compared to $213.4
million at December 31, 2007 and $71.0 million at March 31, 2007. Loans past due
90 days or more and still  accruing  interest  were  $23.6  million at March 31,
2008,  compared to $26.8 million and $4.2 million at December 31, 2007 and March
31, 2007, respectively.

Nonperforming  loans at March 31, 2008 increased $34.6 million,  or 17.1%,  from
nonperforming  loans at December  31,  2007.  We  attribute  the increase in our
nonperforming loans to the following:

         >>    An increase in one-to-four family residential nonaccrual loans of
               $14.0 million, primarily comprised of an increase in our mortgage
               banking division of $10.7 million,  to $38.5 million at March 31,
               2008 from $27.7  million at December 31,  2007.  During the first
               three months of 2008,  we placed  approximately  $26.1 million of
               one-to-four   family   residential   mortgage  loans,   including
               sub-prime loans, associated with our mortgage banking division on
               nonaccrual  status.  The increase in these  nonaccrual  loans was
               partially  offset  by  net  loan  charge-offs  of  $9.7  million,
               transfers  to  other  real  estate  and  payment  activity.   Our
               one-to-four  family   residential   mortgage  portfolio  included
               approximately  $50.8  million  and  $54.8  million  of  sub-prime
               mortgage  loans,  or  3.1%  and  3.4% of our  one-to-four  family
               residential  mortgage  portfolio,  at March 31, 2008 and December
               31, 2007, respectively,  of which approximately $11.0 million and
               $6.6  million were  nonperforming  at March 31, 2008 and December
               31, 2007,  respectively.  Of the $26.1 million of loans that were
               placed on nonaccrual  status in the first  quarter of 2008,  $1.7
               million represented residential mortgage loans sold with recourse
               that we were  required  to  repurchase  based on the terms of the
               underlying  sales  contracts,  and $5.8  million  related  to our
               Florida region;
<PAGE>

         >>    An increase in one-to-four  family  restructured loans during the
               first three months of 2008 of $6.1 million.  Our mortgage banking
               division  restructured  approximately $6.1 million of one-to-four
               family   residential   mortgage  loans,   primarily   located  in
               California and Florida, whereby the contractual interest rate was
               reduced  over  a  certain  time  period.   At  the  time  of  the
               restructures, the loans were in full compliance with the terms of
               the respective loan contracts and none of the restructured  loans
               were delinquent under the modified loan contracts as of March 31,
               2008; and

         >>    An  increase  in  real  estate   construction   and   development
               nonaccrual loans of $10.6 million, primarily resulting from a net
               increase in certain  nonaccrual  credits of  approximately  $27.9
               million,  of which  $13.8  million  resulted  from  the  Northern
               California  region;  partially offset by net charge-offs of $17.3
               million,  of which  $15.9  million  resulted  from  the  Northern
               California region.

Nonperforming  loans in our Northern California real estate portfolio were $97.2
million and $99.2 million,  or 41.0% and 49.1%, of our total nonperforming loans
at March 31, 2008 and December 31, 2007,  respectively.  Nonperforming  loans in
our Florida region were $61.4 million and $45.1 million,  or 25.9% and 22.3%, of
our  total  nonperforming  loans  at  March  31,  2008 and  December  31,  2007,
respectively.  We expect the declining and unstable market conditions associated
with our  one-to-four  family  residential  mortgage loan portfolio and our real
estate  construction  and  development   portfolio,   particularly  in  Northern
California and Florida,  to continue in the near term,  which could increase the
amount of our  nonperforming  loans,  loan  charge-offs  and  provision for loan
losses.

The  outstanding  balance  and  carrying  amount of impaired  loans  acquired in
acquisitions  was $79.5 million and $42.1  million,  respectively,  at March 31,
2008, and $84.9 million and $46.0 million,  respectively,  at December 31, 2007.
We  recorded  impaired  loans  acquired  in  acquisitions  during the year ended
December  31,  2007 of $45.7  million at the time of  acquisition.  There was no
allowance for loan losses  related to these loans at March 31, 2008 and December
31,  2007.  As the loans  were  classified  as  nonaccrual  loans,  there was no
accretable yield related to these loans at March 31, 2008 and December 31, 2007.
Transfers to other real estate,  charge-offs and payments of $2.3 million,  $1.4
million and  $225,000,  respectively,  were  recorded on these loans  during the
three months ended March 31, 2008.

Changes in the  allowance  for loan losses for the three  months ended March 31,
2008 and 2007 were as follows:
<TABLE>
<CAPTION>

                                                                                      Three Months Ended
                                                                                           March 31,
                                                                                    -----------------------
                                                                                       2008         2007
                                                                                       ----         ----
                                                                               (dollars expressed in thousands)

<S>                                                                                 <C>            <C>
         Balance, beginning of period.............................................  $ 168,391      145,729
         Acquired allowance for loan losses.......................................         --        2,925
                                                                                    ---------     --------
                                                                                      168,391      148,654
                                                                                    ---------      -------
         Loans charged-off........................................................    (31,339)     (11,715)
         Recoveries of loans previously charged-off...............................      2,185        1,709
                                                                                    ---------     --------
              Net loan charge-offs................................................    (29,154)     (10,006)
                                                                                    ---------     --------
         Provision for loan losses................................................     45,947        3,500
                                                                                    ---------     --------
         Balance, end of period...................................................  $ 185,184      142,148
                                                                                    =========     ========
</TABLE>

We recorded  net loan  charge-offs  of $29.2  million for the three months ended
March 31, 2008,  compared to $10.0  million for the three months ended March 31,
2007.  Net loan  charge-offs  recorded for the three months ended March 31, 2008
included  $15.9  million of net loan  charge-offs  associated  with our Northern
California real estate construction and development portfolio,  compared to $2.5
million for the  comparable  period in 2007. We continue to experience  distress
and declining  conditions  within our Northern  California  real estate  market,
resulting in further increased developer inventories, slower lot and home sales,
and substantially declining market values. Net loan charge-offs recorded for the
three  months  ended  March  31,  2008 also  include  $9.7  million  of net loan
charge-offs  associated  with our mortgage  banking  division,  compared to $5.5
million for the comparable  period in 2007. Our annualized net loan  charge-offs
as a percentage  of average  loans was 1.31% for the first three months of 2008,
compared to 0.52% for the comparable period in 2007.
<PAGE>

Our allowance for loan losses was $185.2 million at March 31, 2008,  compared to
$168.4  million at December 31, 2007 and $142.1  million at March 31, 2007.  Our
allowance  for loan losses as a percentage of loans,  net of unearned  discount,
was 2.05% at March 31, 2008, compared to 1.89% at December 31, 2007 and 1.79% at
March 31, 2007.  Our allowance for loan losses as a percentage of  nonperforming
loans was 78.20%,  83.27% and 227.37% at March 31,  2008,  December 31, 2007 and
March 31, 2007, respectively.  We continue to closely monitor our loan portfolio
and address the ongoing challenges posed by the economic environment,  including
highly competitive markets within certain sectors of our loan portfolio.

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.
Furthermore,   management  has  implemented  additional  procedures  to  analyze
concentrations  in our real estate  portfolio  in light of current  economic and
market  conditions.  These  procedures  include  monthly  meetings with our real
estate  groups and  enhanced  reporting  to track land,  lot,  construction  and
finished  inventory  levels within our real estate  construction and development
portfolio. 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 operations.

                                    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. The aggregate funds acquired from
these  sources  were  $2.01  billion  and $2.00  billion  at March 31,  2008 and
December 31, 2007, 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 March 31, 2008:
<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.............................  $  601,165           225,150           826,315
         Over three months through six months.............     431,259            46,054           477,313
         Over six months through twelve months............     280,905           101,000           381,905
         Over twelve months...............................      95,388           230,760           326,148
                                                            ----------          --------        ----------
              Total.......................................  $1,408,717           602,964         2,011,681
                                                            ==========          ========        ==========
</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 March 31,
2008 and December 31, 2007, First Bank's borrowing  capacity under the agreement
was approximately $1.73 billion and $523.3 million, respectively.

In addition,  First Bank's borrowing  capacity through its relationship with the
FHLB was  approximately  $553.4 million and $672.3 million at March 31, 2008 and
December 31, 2007,  respectively.  We had FHLB  advances  outstanding  of $200.8
million at March 31,  2008,  compared  to $857,000 at  December  31,  2007.  The
increase  during the three months ended March 31, 2008  resulted from two $100.0
million FHLB advances drawn by First Bank in January 2008 that mature in January
2009 and July 2009.
<PAGE>

Our  loan-to-deposit  ratio  increased to 101.1% at March 31, 2008 from 97.1% at
December  31,  2007.  As a  result  of this  increase,  we  implemented  certain
strategies  during the first quarter of 2008 to improve our liquidity  position,
including the $200.0 million FHLB  borrowings,  as discussed  above,  as well as
increasing the availability of our borrowing  relationship with both the Federal
Reserve Bank of St. Louis and the FHLB through a review of available collateral.
Our borrowing  capacity with the FHLB  increased to $906.5 million in April 2008
as a result of additional collateral availability.  We are continuing to monitor
liquidity and take appropriate  actions in light of uncertain market conditions,
increased loan funding needs and deposit trends.

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 March 31, 2008 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.......................  $    16,935     28,294     20,312     51,785     117,326
         Certificates of deposit (2)............    3,500,835    296,542     61,205      2,182   3,860,764
         Other borrowings (2)...................      324,203    100,761    120,000         --     544,964
         Notes payable (2)......................       48,000     10,000         --         --      58,000
         Subordinated debentures (2)............           --         --         --    353,771     353,771
         Other contractual obligations..........        1,271(3)     189        136         60       1,656
                                                  -----------   --------   --------   --------  ----------
              Total.............................  $ 3,891,244    435,786    201,653    407,798   4,936,481
                                                  ===========   ========   ========   ========  ==========
         ---------------
         (1)  Amounts exclude FIN 48 unrecognized tax liabilities of $12.5 million and related accrued interest
              expense of $1.6 million for which the timing of payment of such liabilities cannot be  reasonably
              estimated as of March 31, 2008.
         (2)  Amounts exclude the related interest expense accrued on  these  obligations as of March 31, 2008.
         (3)  Includes  an  accrued  expense  related to our remaining estimated indemnification obligation, as
              member bank, to share certain  litigation costs of Visa, as further described under "-Noninterest
              Expense."
</TABLE>

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

                       Effects of New Accounting Standards

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.  On January 1, 2008,
we opted to measure  servicing rights at fair value. The election of this option
resulted in the  recognition  of a cumulative  effect of a change in  accounting
principle  of $6.3  million,  which was  recorded as an  increase  to  beginning
retained  earnings as further described in Note 1 and Note 3 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,  for  financial  assets  and  liabilities  and  nonfinancial  assets  and
nonfinancial  liabilities  that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). Implementation is
deferred  for all  nonfinancial  assets and  nonfinancial  liabilities  that are
recognized  or  disclosed  at  fair  value  in  the  financial  statements  on a
nonrecurring  basis to fiscal years  beginning  after  November 15, 2008.  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. 157 related to financial  assets and  liabilities  and
nonfinancial  assets  and  nonfinancial   liabilities  that  are  recognized  or
disclosed at fair value in our consolidated  financial statements on a recurring
basis (at least  annually)  on January  1,  2008,  which did not have a material
impact on our financial  condition or results of  operations  other than certain
additional disclosure requirements.

In  September  2006,  the FASB issued SFAS No. 158 - Employers'  Accounting  for
Defined Benefit Pension and Other  Postretirement  Plans.  SFAS No. 158 requires
companies to recognize the overfunded or underfunded status of a defined benefit
postretirement  plan as a net asset or  liability  in the  balance  sheet and to
recognize changes in the funded status of the plan through  comprehensive income
in the year in which the  changes  occur.  The funded  status is measured as the
difference  between the fair value of the plan assets and the benefit obligation
as of the date of the company's fiscal year end. Effective December 31, 2007, we
adopted the recognition and disclosure  provisions of SFAS No. 158, resulting in
a cumulative  effect of change in  accounting  principle of $902,000,  which was
recorded as a decrease to accumulated  other  comprehensive  loss as of December
31, 2007. We have not yet adopted the  measurement  date  provisions of SFAS No.
158, which become effective for us as of December 31, 2008;  however,  we do not
anticipate the adoption of the  measurement  date  provisions of SFAS No. 158 to
have a material effect on our consolidated financial statements.

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  implemented  SFAS No. 159 on  January  1, 2008,  which did not have a
material impact on our financial condition or results of operations.

In November 2007, the SEC issued SEC Staff Accounting Bulletin,  or SAB, No. 109
- Written Loan Commitments Recorded at Fair Value Through Earnings.  SAB No. 109
requires fair value measurements of derivative loan commitments or other written
loan  commitments  recorded  through earnings to include the expected net future
cash  flows  related  to the  associated  servicing  of the  loan.  SAB No.  109
supersedes SAB 105 - Application of Accounting  Principles to Loan  Commitments,
which applied only to derivative  loan  commitments  accounted for at fair value
through  earnings,  and broadens its application to all written loan commitments
that are accounted for at fair value through  earnings.  SAB No. 109 also states
that internally  developed  intangible  assets should not be recorded as part of
the fair value of a derivative  loan  commitment.  SAB No. 109 is effective on a
prospective  basis to derivative loan  commitments  issued or modified in fiscal
quarters  beginning  after  December 15,  2007.  We  implemented  SAB No. 109 on
January 1, 2008, which did not have a material impact on our financial condition
or results of operations.

In December 2007, the FASB issued SFAS No. 141(R) - Business Combinations.  SFAS
No. 141(R) will  significantly  change how entities apply the acquisition method
to business  combinations.  The most significant  changes affecting how entities
will account for business  combinations  under SFAS No. 141(R) include:  (a) the
acquisition  date will be the date the acquirer  obtains  control;  (b) all (and
only)  identifiable  assets acquired,  liabilities  assumed,  and noncontrolling
interests in the acquiree will be stated at fair value on the acquisition  date;
(c) assets or  liabilities  arising from  noncontractual  contingencies  will be
measured at their acquisition date fair value only if it is more likely than not
that they meet the definition of an asset or liability on the acquisition  date;
(d) adjustments  subsequently  made to the provisional  amounts  recorded on the
acquisition date will be made  retroactively  during a measurement period not to
exceed one year; (e)  acquisition-related  restructuring  costs that do not meet
the  criteria in SFAS No. 146 -  Accounting  for Costs  Associated  with Exit or
Disposal Activities, will be expensed as incurred; (f) transaction costs will be
expensed as incurred;  (g) reversals of deferred income tax valuation allowances
and income tax  contingencies  will be recognized in earnings  subsequent to the
measurement  period;  and (h) the  allowance for loan losses of an acquiree will
not be permitted to be recognized by the acquirer. Additionally, SFAS No. 141(R)
will  require new and modified  disclosures  surrounding  subsequent  changes to
acquisition-related  contingencies,  contingent  consideration,   noncontrolling
interests, acquisition-related transaction costs, fair values and cash flows not
expected  to  be  collected  for  acquired  loans,  and  an  enhanced   goodwill
rollforward.  SFAS  No.  141(R)  is  effective  for  all  business  combinations
completed on or after  January 1, 2009.  Early  adoption is not  permitted.  For
business  combinations  in which the  acquisition  date was before the effective
date, the provisions of SFAS No. 141(R) will apply to the subsequent  accounting
for deferred income tax valuation  allowances and income tax  contingencies  and
will  require any changes in those  amounts to be recorded in  earnings.  We are
currently  evaluating the impact that SFAS No. 141(R) will have on our financial
condition,  results of operations and the disclosures  that will be presented in
our consolidated financial statements.

In December  2007,  the FASB issued SFAS No. 160 -  Noncontrolling  Interests in
Consolidated  Financial  Statements,  an  Amendment  of ARB  51.  SFAS  No.  160
establishes new accounting and reporting standards for noncontrolling  interests
in a subsidiary and for the  deconsolidation of a subsidiary.  SFAS No. 160 will
require  entities  to  classify  noncontrolling  interests  as  a  component  of
stockholders'  equity and will require subsequent changes in ownership interests
in a subsidiary to be accounted for as an equity transaction. Additionally, SFAS
No.  160 will  require  entities  to  recognize  a gain or loss upon the loss of
control of a subsidiary and to remeasure any ownership interest retained at fair
value on that date. SFAS No. 160 also requires expanded disclosures that clearly
identify and  distinguish  between the interests of the parent and the interests
of the noncontrolling  owners.  SFAS No. 160 is effective on a prospective basis
for fiscal years, and interim periods within those fiscal years, beginning on or
after   December  15,  2008,   except  for  the   presentation   and  disclosure
requirements,  which are required to be applied retrospectively.  Early adoption
is not permitted.  We are currently  evaluating the requirements of SFAS No. 160
to determine their impact on our financial condition,  results of operations and
the disclosures that will be presented in our consolidated financial statements.

In March  2008,  the FASB  issued SFAS No. 161 -  Disclosures  about  Derivative
Instruments  and Hedging  Activities,  an Amendment of SFAS No. 133 - Accounting
for  Derivative  Instruments  and  Hedging  Activities.  SFAS No.  161  requires
entities to provide  greater  transparency  about (a) how and why an entity uses
derivative instruments,  (b) how derivative instruments and related hedged items
are  accounted for under No. SFAS 133 and its related  interpretations,  and (c)
how derivative instruments and related hedged items affect an entity's financial
position,  results of operations and cash flows. To meet those objectives,  SFAS
No.  161  requires  (1)  qualitative  disclosures  about  objectives  for  using
derivatives by primary underlying risk exposure and by purpose or strategy (fair
value hedge, cash flow hedge, and non-hedges),  (2) information about the volume
of derivative  activity in a flexible  format that the preparer  believes is the
most  relevant and  practicable,  (3) tabular  disclosures  about  balance sheet
location  and  gross  fair  value  amounts  of  derivative  instruments,  income
statement and other  comprehensive  income  location of gain and loss amounts on
derivative   instruments  by  type  of  contract,   and  (4)  disclosures  about
credit-risk related contingent features in derivative  agreements.  SFAS No. 161
is  effective  for  financial  statements  issued for fiscal  years and  interim
periods  beginning  after  November 15, 2008.  We are currently  evaluating  the
requirements of SFAS No. 161 to determine  their impact on the disclosures  that
will be presented in our consolidated financial statements.





       ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


At December 31, 2007, 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 interest rates more rapidly than our liabilities,  and our simulation
model  indicates a loss of projected net interest  income should  interest rates
decline.  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 3.9% of net interest income,
based on assets and  liabilities  at December  31, 2007.  At March 31, 2008,  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 the effect of recent cuts in interest
rates in late  2007 and in the  first  three  months  of  2008,  has  negatively
impacted  our net interest  income and will  continue to impact the level of our
net interest  income over time, as reflected in our net interest  margin for the
three months ended March 31, 2008 as compared to the comparable  period in 2007,
and further discussed under  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations."





                        ITEM 4 - CONTROLS AND PROCEDURES

Except for the changes noted below,  there was no change in our 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 quarter ended March 31, 2008 that
has  materially  affected,  or is reasonably  likely to materially  affect,  our
internal control over financial reporting.

As  reported  in  Amendment  No.  1 to our  2007  Annual  Report  on Form  10-K,
management  identified  material  weaknesses in internal  control over financial
reporting at our mortgage banking  division.  Specifically,  we did not maintain
sufficient  anti-fraud  controls for the mortgage banking division which allowed
the former President of our mortgage  banking  division to intentionally  effect
certain  transactions  and  journal  entries  to  omit  a  repurchase  agreement
obligation,  including  the related  interest  expense  thereon,  and  overstate
mortgage banking revenues.

The  following  material  weaknesses  were  identified  related to our  internal
control over financial reporting:

     >>   We did not maintain appropriate oversight  and  supervision of certain
          operational and accounting personnel in the mortgage banking division;

<PAGE>

     >>   We did not maintain  a  sufficient  complement  of  personnel  in  our
          mortgage  banking  division  with an appropriate  level of  accounting
          knowledge, experience and  training  necessary to properly account for
          certain  complex  transactions  associated with the  operations of the
          mortgage banking division; and

     >>   We did not maintain  effective  controls over the recording of journal
          entries necessary to properly account for certain complex transactions
          associated with the  operations  of  the  mortgage  banking  division.
          Specifically,  effective  controls  were not designed  and in place to
          provide  reasonable  assurance that journal entries were prepared with
          sufficient  supporting  documentation  and  reviewed  and  approved to
          provide  reasonable  assurance of the completeness and accuracy of the
          journal entries recorded.

As a  result  of  these  material  weaknesses,  management  concluded  that  the
Company's  disclosure  controls and procedures were not effective as of December
31, 2007.

As of July 30,  2008,  we have  implemented  additional  measures to address the
aforementioned material weaknesses, including the following:

     >>   Changed  the  oversight  and   supervision  of  the  operational   and
          accounting  personnel  in  the  mortgage   banking   division  through
          the  establishment  of  a  direct  reporting  line  to  the  Company's
          President and Chief Executive Officer and Chief Financial Officer;

     >>   Centralized  and  realigned  certain   areas  of   responsibility  and
          functions previously handled within the mortgage  banking  division;

     >>   Instituted  increased   segregation  of  duties  controls  within  the
          Company's mortgage banking division; and

     >>   Examined the methods in which internal  controls were circumvented and
          developed measures to strengthen such controls.

In  addition,  the  individual  directly  responsible  for the  omission  of the
repurchase agreement obligation, including the related interest expense thereon,
and an overstatement  of mortgage banking revenues was terminated  subsequent to
December 31, 2007 and prior to the identification of the material weaknesses.

We will continue to evaluate the  effectiveness  of our remediation  process and
the actions taken to date as summarized above.

Our President and 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  President and 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 not 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 as a result of the material  weaknesses  outlined above.  Under the
direction of our President and Chief  Executive  Officer and our Chief Financial
Officer,  we are further  evaluating our disclosure  controls and procedures and
internal control over financial reporting,  including  modifications to controls
currently planned and being implemented,  with the intent to fully remediate the
material weaknesses in our 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
      --------------                        -----------

          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:  July 30, 2008

                                  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)