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

                                    FORM 10-Q


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

                For the quarterly period ended September 30, 2006

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

               For the transition period from _______ to ________

                         Commission File Number: 0-20632

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

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

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

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

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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No


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

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


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


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

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

   Common Stock, $250.00 par value                           23,661



<PAGE>

<TABLE>
<CAPTION>

                                       FIRST BANKS, INC.

                                       TABLE OF CONTENTS





                                                                                             Page
                                                                                             ----

PART I.    FINANCIAL INFORMATION

  ITEM 1.  FINANCIAL STATEMENTS:

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

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

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

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

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

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

  ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....................    41

  ITEM 4.  CONTROLS AND PROCEDURES........................................................    42

PART II.   OTHER INFORMATION

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

SIGNATURES................................................................................    44
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                                           PART I - FINANCIAL INFORMATION
                                            ITEM 1 - FINANCIAL STATEMENTS

                                                  FIRST BANKS, INC.

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

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

                                                       ASSETS
                                                       ------

Cash and cash equivalents:
<S>                                                                                      <C>                <C>
     Cash and due from banks..........................................................   $  212,231         212,667
     Short-term investments...........................................................       32,036          73,985
                                                                                         ----------       ---------
          Total cash and cash equivalents.............................................      244,267         286,652
                                                                                         ----------       ---------

Investment securities:
     Trading..........................................................................       56,752           3,389
     Available for sale...............................................................    1,095,717       1,311,289
     Held to maturity (fair value of $24,550 and $25,791, respectively)...............       24,767          26,105
                                                                                         ----------       ---------
          Total investment securities.................................................    1,177,236       1,340,783
                                                                                         ----------       ---------

Loans:
     Commercial, financial and agricultural...........................................    1,868,940       1,619,822
     Real estate construction and development.........................................    1,875,289       1,564,255
     Real estate mortgage.............................................................    3,520,948       3,469,788
     Consumer and installment.........................................................       75,128          64,724
     Loans held for sale..............................................................      393,279         315,134
                                                                                         ----------       ---------
          Total loans.................................................................    7,733,584       7,033,723
     Unearned discount................................................................      (16,114)        (12,952)
     Allowance for loan losses........................................................     (149,310)       (135,330)
                                                                                         ----------       ---------
          Net loans...................................................................    7,568,160       6,885,441
                                                                                         ----------       ---------

Bank premises and equipment, net of accumulated depreciation and amortization.........      163,717         144,941
Goodwill..............................................................................      231,786         167,056
Bank-owned life insurance.............................................................      114,669         111,442
Deferred income taxes.................................................................      109,703         128,938
Other assets..........................................................................      151,150         105,080
                                                                                         ----------       ---------
          Total assets................................................................   $9,760,688       9,170,333
                                                                                         ==========       =========

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

Deposits:
     Noninterest-bearing demand.......................................................   $1,249,717       1,299,350
     Interest-bearing demand..........................................................      957,730         981,837
     Savings..........................................................................    2,120,029       2,106,470
     Time deposits of $100 or more....................................................    1,396,945       1,076,908
     Other time deposits..............................................................    2,374,442       2,077,266
                                                                                         ----------       ---------
          Total deposits..............................................................    8,098,863       7,541,831
Other borrowings......................................................................      392,210         539,174
Notes payable.........................................................................       75,000         100,000
Subordinated debentures...............................................................      304,547         215,461
Deferred income taxes.................................................................       32,279          27,104
Accrued expenses and other liabilities................................................       88,289          61,762
Minority interest in subsidiary.......................................................        5,617           6,063
                                                                                         ----------       ---------
          Total liabilities...........................................................    8,996,805       8,491,395
                                                                                         ----------       ---------
<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............................................................        5,910           5,910
Retained earnings.....................................................................      754,181         673,956
Accumulated other comprehensive loss..................................................      (15,186)        (19,906)
                                                                                         ----------       ---------
          Total stockholders' equity..................................................      763,883         678,938
                                                                                         ----------       ---------
          Total liabilities and stockholders' equity..................................   $9,760,688       9,170,333
                                                                                         ==========       =========


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


<PAGE>
<TABLE>
<CAPTION>


                                                 FIRST BANKS, INC.

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


                                                                            Three Months Ended     Nine Months Ended
                                                                               September 30,         September 30,
                                                                           -------------------    ------------------
                                                                              2006      2005        2006      2005
                                                                              ----      ----        ----      ----
Interest income:
<S>                                                                        <C>         <C>         <C>       <C>
     Interest and fees on loans........................................... $ 153,394   109,903     426,456   303,515
     Investment securities................................................    13,881    17,057      43,514    52,001
     Short-term investments...............................................     1,018       841       3,288     1,701
                                                                           ---------  --------    --------  --------
          Total interest income...........................................   168,293   127,801     473,258   357,217
                                                                           ---------  --------    --------  --------
Interest expense:
     Deposits:
       Interest-bearing demand............................................     2,057       979       5,832     2,799
       Savings............................................................    13,491     8,345      36,929    20,420
       Time deposits of $100 or more......................................    15,902     7,206      41,716    18,806
       Other time deposits................................................    25,526    16,832      68,706    46,967
     Other borrowings.....................................................     4,322     4,946      12,263    12,480
     Notes payable........................................................     1,434       862       4,331     1,103
     Subordinated debentures..............................................     6,377     5,985      17,751    16,096
                                                                           ---------  --------    --------  --------
          Total interest expense..........................................    69,109    45,155     187,528   118,671
                                                                           ---------  --------    --------  --------
          Net interest income.............................................    99,184    82,646     285,730   238,546
Provision for loan losses.................................................     2,000        --       8,000    (8,000)
                                                                           ---------  --------    --------  --------
          Net interest income after provision for loan losses.............    97,184    82,646     277,730   246,546
                                                                           ---------  --------    --------  --------
Noninterest income:
     Service charges on deposit accounts and customer service fees........    11,122    10,175      32,350    29,651
     Gain on loans sold and held for sale.................................     4,604     6,505      17,524    17,865
     Net gain (loss) on investment securities.............................     1,603        (3)     (2,384)       (3)
     Bank-owned life insurance investment income..........................       665     1,177       2,432     3,711
     Investment management income.........................................     2,036     2,129       6,633     6,375
     Other................................................................     9,964     4,965      24,815    14,755
                                                                           ---------  --------    --------  --------
          Total noninterest income........................................    29,994    24,948      81,370    72,354
                                                                           ---------  --------    --------  --------
Noninterest expense:
     Salaries and employee benefits.......................................    42,454    35,667     124,558   103,145
     Occupancy, net of rental income......................................     6,997     5,327      19,657    15,792
     Furniture and equipment..............................................     4,158     3,960      12,237    11,798
     Postage, printing and supplies.......................................     1,550     1,387       4,964     4,339
     Information technology fees..........................................     9,365     9,141      27,616    26,686
     Legal, examination and professional fees.............................     2,078     2,257       6,583     6,710
     Amortization of intangible assets....................................     2,243     1,168       5,440     3,523
     Communications.......................................................       589       495       1,747     1,470
     Advertising and business development.................................     1,826     1,623       5,703     5,018
     Charitable contributions.............................................     1,594       111       4,918     1,789
     Other................................................................     7,619     6,716      22,916    21,612
                                                                           ---------  --------    --------  --------
          Total noninterest expense.......................................    80,473    67,852     236,339   201,882
                                                                           ---------  --------    --------  --------
          Income before provision for income taxes and minority
             interest in loss of subsidiary...............................    46,705    39,742     122,761   117,018
Provision for income taxes................................................    17,249    13,265      42,452    41,568
                                                                           ---------  --------    --------  --------
          Income before minority interest in loss of subsidiary...........    29,456    26,477      80,309    75,450
Minority interest in loss of subsidiary...................................      (204)   (1,036)       (440)   (1,036)
                                                                           ---------  --------    --------  --------
          Net income......................................................    29,660    27,513      80,749    76,486
Preferred stock dividends.................................................       196       196         524       524
                                                                           ---------  --------    --------  --------
          Net income available to common stockholders..................... $  29,464    27,317      80,225    75,962
                                                                           =========  ========    ========  ========

Basic earnings per common share........................................... $1,245.28  1,154.52    3,390.62  3,210.44
                                                                           =========  ========    ========  ========

Diluted earnings per common share......................................... $1,231.06  1,139.46    3,347.84  3,163.13
                                                                           =========  ========    ========  ========

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

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

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                                         FIRST BANKS, INC.

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




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

<S>                                                             <C>         <C>      <C>      <C>      <C>         <C>      <C>
Consolidated balances, December 31, 2004....................... $12,822     241      5,915    5,910    577,836     (1,831)  600,893
                                                                                                                            -------
Nine months ended September 30, 2005:
  Comprehensive income:(1)
    Net income.................................................      --      --         --       --     76,486         --    76,486
    Other comprehensive loss, net of tax:
       Unrealized losses on investment securities..............      --      --         --       --         --     (7,842)   (7,842)
       Reclassification adjustment for investment securities
          losses included in net income........................      --      --         --       --         --          2         2
       Derivative instruments:
          Current period transactions..........................      --      --         --       --         --     (3,896)   (3,896)
                                                                                                                            -------
  Total comprehensive income...................................                                                              64,750
  Class A preferred stock dividends, $0.80 per share...........      --      --         --       --       (513)        --      (513)
  Class B preferred stock dividends, $0.07 per share...........      --      --         --       --        (11)        --       (11)
                                                                -------     ---      -----    -----    -------    -------   -------
Consolidated balances, September 30, 2005......................  12,822     241      5,915    5,910    653,798    (13,567)  665,119
Three months ended December 31, 2005:
  Comprehensive income:
    Net income.................................................      --      --         --       --     20,420         --    20,420
    Other comprehensive loss, net of tax:
       Unrealized losses on investment securities..............      --      --         --       --         --     (7,817)   (7,817)
       Reclassification adjustment for investment securities
          losses included in net income........................      --      --         --       --         --      1,865     1,865
       Derivative instruments:
          Current period transactions..........................      --      --         --       --         --       (387)     (387)
                                                                                                                            -------
  Total comprehensive income...................................                                                              14,081
  Class A preferred stock dividends, $0.40 per share...........      --      --         --       --       (256)        --      (256)
  Class B preferred stock dividends, $0.04 per share...........      --      --         --       --         (6)        --        (6)
                                                                -------     ---      -----    -----    -------    -------   -------
Consolidated balances, December 31, 2005.......................  12,822     241      5,915    5,910    673,956    (19,906)  678,938
Nine months ended September 30, 2006:
  Comprehensive income:(1)
    Net income.................................................      --      --         --       --     80,749         --    80,749
    Other comprehensive income, net of tax:
       Unrealized gains on investment securities...............      --      --         --       --         --      1,460     1,460
       Reclassification adjustment for investment securities
          losses included in net income........................      --      --         --       --         --      1,487     1,487
       Derivative instruments:
          Current period transactions..........................      --      --         --       --         --      1,773     1,773
                                                                                                                            -------
  Total comprehensive income...................................                                                              85,469
  Class A preferred stock dividends, $0.80 per share...........      --      --         --       --       (513)        --      (513)
  Class B preferred stock dividends, $0.07 per share...........      --      --         --       --        (11)        --       (11)
                                                                -------     ---      -----    -----    -------    -------   -------
Consolidated balances, September 30, 2006...................... $12,822     241      5,915    5,910    754,181    (15,186)  763,883
                                                                =======     ===      =====    =====    =======    =======   =======
<PAGE>

--------------------
(1) Disclosure of comprehensive income:
                                                                         Three Months Ended      Nine Months Ended
                                                                            September 30,          September 30,
                                                                        -------------------     -------------------
                                                                          2006       2005         2006       2005
                                                                          ----       ----         ----       ----
Comprehensive income:
  Net income........................................................... $29,660     27,513       80,749     76,486
  Other comprehensive income (loss), net of tax:
     Unrealized gains (losses) on investment securities................  13,363     (4,271)       1,460     (7,842)
     Reclassification adjustment for investment securities
       (gains) losses included in net income...........................    (252)         2        1,487          2
     Derivative instruments:
       Current period transactions.....................................   1,935     (1,153)       1,773     (3,896)
                                                                        -------     ------       ------     ------
Total comprehensive income............................................. $44,706     22,091       85,469     64,750
                                                                        =======     ======       ======     ======


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


<PAGE>

<TABLE>
<CAPTION>

                                               FIRST BANKS, INC.

                              CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
                                       (dollars expressed in thousands)
                                                                                                Nine Months Ended
                                                                                                  September 30,
                                                                                            ------------------------
                                                                                               2006          2005
                                                                                               ----          ----
Cash flows from operating activities:
<S>                                                                                         <C>              <C>
     Net income.........................................................................    $  80,749        76,486
     Adjustments to reconcile net income to net cash provided by (used in)
      operating activities:
       Depreciation and amortization of bank premises and equipment.....................       13,698        12,895
       Amortization, net of accretion...................................................       10,898        13,180
       Originations of loans held for sale..............................................     (731,297)   (1,013,954)
       Proceeds from sales of loans held for sale.......................................      757,596       895,299
       Provision for loan losses........................................................        8,000        (8,000)
       Provision for deferred income taxes..............................................        3,210        (1,967)
       (Increase) decrease in accrued interest receivable...............................       (4,365)          702
       Increase in accrued interest payable.............................................        6,902         2,618
       Proceeds from sales of trading securities........................................        6,840            --
       Purchases of trading securities..................................................      (60,877)           --
       Gain on loans sold and held for sale.............................................      (17,524)      (17,865)
       Net loss on investment securities................................................        2,384             3
       Other operating activities, net..................................................       47,464        26,920
       Minority interest in loss of subsidiary..........................................         (440)       (1,036)
                                                                                            ---------    ----------
          Net cash provided by (used in) operating activities...........................      123,238       (14,719)
                                                                                            ---------    ----------

Cash flows from investing activities:
     Cash paid for acquired entities, net of cash and cash equivalents received.........     (245,031)       (9,500)
     Proceeds from sales of investment securities available for sale....................      198,009            --
     Maturities of investment securities available for sale.............................      771,714       556,455
     Maturities of investment securities held to maturity...............................        2,177         1,684
     Purchases of investment securities available for sale..............................     (571,153)     (317,776)
     Purchases of investment securities held to maturity................................         (865)       (3,508)
     Net increase in loans..............................................................     (499,582)     (209,519)
     Recoveries of loans previously charged-off.........................................       12,405        15,702
     Purchases of bank premises and equipment...........................................      (22,041)       (9,876)
     Sale of minority interest in subsidiary............................................           --         7,350
     Other investing activities, net....................................................       (2,307)        1,393
                                                                                            ---------    ----------
          Net cash (used in) provided by investing activities...........................     (356,674)       32,405
                                                                                            ---------    ----------

Cash flows from financing activities:
     Decrease in demand and savings deposits............................................     (202,750)      (74,456)
     Increase in time deposits..........................................................      488,795       107,520
     Decrease in Federal Home Loan Bank advances........................................      (43,368)       (6,144)
     Decrease in securities sold under agreements to repurchase.........................     (113,733)      (29,785)
     Advances drawn on notes payable....................................................           --        80,000
     Repayments of notes payable........................................................      (25,000)      (15,000)
     Proceeds from issuance of subordinated debentures..................................       87,631            --
     Repayments of subordinated debentures..............................................           --       (59,278)
     Payment of preferred stock dividends...............................................         (524)         (524)
                                                                                            ---------    ----------
          Net cash provided by financing activities.....................................      191,051         2,333
                                                                                            ---------    ----------
          Net (decrease) increase in cash and cash equivalents..........................      (42,385)       20,019
Cash and cash equivalents, beginning of period..........................................      286,652       267,110
                                                                                            ---------    ----------
Cash and cash equivalents, end of period................................................    $ 244,267       287,129
                                                                                            =========    ==========

Supplemental disclosures of cash flow information:
     Cash paid during the period for:
        Interest on liabilities.........................................................    $ 180,626       116,053
        Income taxes....................................................................       28,472        41,983
                                                                                            =========    ==========
     Noncash investing and financing activities:
        Securitization and transfer of loans to investment securities...................    $ 138,944            --
        Loans transferred to other real estate..........................................        6,199         2,783
                                                                                            =========    ==========

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

                                FIRST BANKS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      BASIS OF PRESENTATION

         The  consolidated   financial  statements  of  First  Banks,  Inc.  and
subsidiaries  (First Banks or the Company) are  unaudited  and should be read in
conjunction with the  consolidated  financial  statements  contained in the 2005
Annual Report on Form 10-K.  The  consolidated  financial  statements  have been
prepared in accordance with U.S.  generally accepted  accounting  principles and
conform to  predominant  practices  within the banking  industry.  Management of
First  Banks has made a number of  estimates  and  assumptions  relating  to the
reporting of assets and liabilities and the disclosure of contingent  assets and
liabilities to prepare the consolidated  financial statements in conformity with
U.S. generally accepted accounting principles.  Actual results could differ from
those estimates.  In the opinion of management,  all adjustments,  consisting of
normal recurring  accruals  considered  necessary for a fair presentation of the
results of  operations  for the  interim  periods  presented  herein,  have been
included.  Operating  results for the three and nine months ended  September 30,
2006 are not necessarily  indicative of the results that may be expected for the
year ending December 31, 2006.

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

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


(2)      ACQUISITIONS AND INTEGRATION COSTS

         Completed Acquisitions

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

         On January 20, 2006, First Bank completed its acquisition of the branch
office of Dallas National Bank in Richardson,  Texas (Richardson Branch). At the
time of the  acquisition,  the  Richardson  Branch had  assets of $1.1  million,
including loans,  net of unearned  discount,  of $144,000,  and deposits of $1.1
million.

         On March 31, 2006, First Bank completed its acquisition of Adrian Baker
for $7.4 million in cash and certain payments  contingent on the future earnings
of Adrian Baker for each of the years in the  three-year  period  following  the
closing date of the transaction.  Adrian Baker is an insurance brokerage company
based in  Clayton,  Missouri  that  provides a  comprehensive  range of employee
benefit and commercial and personal  insurance  services on a nationwide  basis.
The  acquisition  served to diversify  First Banks' products and services in the
highly-specialized  financial  services  industry.  The  transaction  was funded
through internally generated funds. At the time of the acquisition, Adrian Baker
had assets of $3.0  million and  stockholders'  equity of  $810,000.  The assets
acquired and liabilities  assumed were recorded at their estimated fair value on
the acquisition date.  Goodwill,  which is not deductible for tax purposes,  was
$4.3 million.  The customer  list  intangibles  of $3.7  million,  which are not
deductible for tax purposes,  are being  amortized  over 15 years  utilizing the
straight-line  method.  Adrian Baker  operates as a wholly owned  subsidiary  of
First Bank.
<PAGE>

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

         On May 1, 2006,  First Banks  acquired the majority of the  outstanding
common  stock  of First  Independent  National  Bank  (FINB),  and  subsequently
acquired the remaining  outstanding  common stock in May 2006, for $19.2 million
in cash, in aggregate.  FINB was headquartered in Plano,  Texas and operated two
banking offices in Plano, Texas,  located in Collin County. In addition,  at the
time of the  acquisition,  FINB was in the  process of opening a de novo  branch
banking office located in the Preston Forest  Shopping  Center in Dallas County,
which  subsequently  opened on June 26, 2006. The  acquisition  served to expand
First Banks'  banking  franchise in Texas.  The  transaction  was funded through
internally   generated  funds  and  the  issuance  of  subordinated   debentures
associated  with a  private  placement  of  $40.0  million  of  trust  preferred
securities  through  a newly  formed  affiliated  statutory  trust,  as  further
discussed in Note 11 to the Consolidated  Financial  Statements.  At the time of
the  acquisition,  FINB had  assets of $68.2  million,  loans,  net of  unearned
discount,  of $59.6 million,  deposits of $55.5 million and stockholders' equity
of $7.3 million.  The assets acquired and  liabilities  assumed were recorded at
their  estimated  fair value on the  acquisition  date.  Goodwill,  which is not
deductible for tax purposes, was $9.3 million, and the core deposit intangibles,
which are not  deductible  for tax  purposes and are being  amortized  over five
years utilizing the  straight-line  method,  were $2.5 million.  FINB was merged
with and into First Bank on May 16, 2006.

         On May 31, 2006,  First Bank completed its acquisition of KIF, Inc., an
Iowa  corporation,   and  its  wholly  owned  subsidiaries,   UPAC,  a  Missouri
corporation,   and  UPAC  of   California,   Inc.,  a   California   corporation
(collectively  "UPAC"),  for $52.7  million  in cash.  In  conjunction  with the
acquisition  of UPAC,  First  Banks  repaid in full the  outstanding  senior and
subordinated  notes of UPAC,  which  totaled  $125.9  million at the time of the
acquisition.  UPAC is an insurance premium finance company  headquartered in the
Kansas City suburb of Lenexa,  Kansas and operates in 49 states. The acquisition
served to diversify First Banks' products and services in the highly-specialized
financial  services  industry.  The  transaction  was funded through  internally
generated  funds and a $52.0  million  short-term  Federal Home Loan Bank (FHLB)
advance.  At the time of the  acquisition,  UPAC had  assets of $152.8  million,
loans, net of unearned discount,  of $149.2 million and stockholders'  equity of
$18.3  million.  The assets  acquired and  liabilities  assumed were recorded at
their  estimated  fair value on the  acquisition  date.  Goodwill,  which is not
deductible for tax purposes, was $25.4 million. The customer list intangibles of
$19.3 million,  which are not deductible for tax purposes,  are being  amortized
over 16 years utilizing the straight-line  method. KIF, Inc. was merged with and
into UPAC on June 30, 2006. UPAC of California,  Inc. operates as a wholly owned
subsidiary of UPAC, which operates as a wholly owned subsidiary of First Bank.

         On August 15, 2006,  First Banks completed its acquisition of San Diego
Community Bank (SDCB) for $25.5 million in cash. SDCB was headquartered in Chula
Vista,  California,  which is located  approximately ten miles south of downtown
San Diego, and operated two other banking offices in Kearney Mesa and Otay Mesa.
The  acquisition  served to expand  First Banks'  banking  franchise in southern
California.  The transaction was funded through  internally  generated funds and
the issuance of subordinated debentures associated with the private placement of
$20.0 million of trust preferred  securities  through a newly formed  affiliated
statutory trust, as further  described in Note 11 to the Consolidated  Financial
Statements.  At the time of the  acquisition,  SDCB had assets of $91.7 million,
loans, net of unearned discount, of $78.6 million, deposits of $76.1 million and
stockholders'  equity of $12.3  million.  The assets  acquired  and  liabilities
assumed were recorded at their  estimated  fair value on the  acquisition  date.
Preliminary   goodwill,   which  is  not  deductible   for  tax  purposes,   was
approximately  $8.4  million,  and the core deposit  intangibles,  which are not
deductible for tax purposes and are being  amortized  over five years  utilizing
the straight-line  method, were approximately $4.3 million. SDCB was merged with
and into First Bank at the time of the acquisition.

         On August 31, 2006,  First Banks  completed its  acquisition of TeamCo,
Inc. and its wholly owned banking subsidiary,  Oak Lawn Bank (collectively,  Oak
Lawn)  for  $13.9  million  in cash.  Oak Lawn was  headquartered  in Oak  Lawn,
Illinois,  which is located approximately 15 miles southwest of the Chicago Loop
in Chicago  Southland,  and  operated a second  banking  office in Orland  Park,

<PAGE>

Illinois, which is located approximately 39 miles southwest of downtown Chicago.
The  acquisition  served to expand  First Banks'  banking  franchise in Chicago,
Illinois.  The transaction was funded through internally generated funds and the
issuance of subordinated  debentures  associated  with the private  placement of
$25.0 million of trust preferred  securities  through a newly formed  affiliated
statutory trust, as further  described in Note 11 to the Consolidated  Financial
Statements.  At the  time of the  acquisition,  Oak  Lawn  had  assets  of $67.9
million,  loans, net of unearned discount,  of $43.1 million,  deposits of $60.1
million  and  stockholders'  equity of $5.5  million.  The assets  acquired  and
liabilities  assumed  were  recorded  at  their  estimated  fair  value  on  the
acquisition  date.  Preliminary  goodwill,  which  is  not  deductible  for  tax
purposes,  was  approximately  $7.3 million,  and the core deposit  intangibles,
which are not  deductible  for tax  purposes and are being  amortized  over five
years utilizing the straight-line  method, were approximately $2.3 million.  Oak
Lawn was merged with and into First Bank at the time of the acquisition.

         Pending Acquisitions

         On July 10, 2006,  First Bank  entered  into a Purchase and  Assumption
Agreement  providing for First Bank to acquire MidAmerica  National Bank's three
banking  offices  located in Peoria  and  Bloomington,  Illinois  (collectively,
MidAmerica  Offices).  As  further  described  in  Note  13 to the  Consolidated
Financial  Statements,  First Bank  completed its  acquisition of the MidAmerica
Offices on November 10, 2006.

         On August 7,  2006,  First  Bank  entered  into a Branch  Purchase  and
Assumption  Agreement  providing for First Bank to acquire First Bank of Beverly
Hills'  banking  office  located in Beverly  Hills,  California  (Beverly  Drive
Office).  As  further  described  in  Note  13  to  the  Consolidated  Financial
Statements,  First Bank completed its acquisition of the Beverly Drive Office on
November 3, 2006.

         Subsequent to September 30, 2006, First Banks entered into an agreement
related to an acquisition transaction, as more fully described in Note 13 to the
Consolidated Financial Statements.

         Acquisition and Integration Costs

         First Banks accrues certain costs  associated with its  acquisitions as
of the respective consummation dates. The accrued costs relate to adjustments to
the staffing levels of the acquired  entities or to the anticipated  termination
of information  technology or item processing contracts of the acquired entities
prior to their stated  contractual  expiration dates. The most significant costs
that First  Banks  incurs  relate to salary  continuation  agreements,  or other
similar agreements,  of executive  management and certain other employees of the
acquired  entities  that were in place  prior to the  acquisition  dates.  These
agreements  provide for payments over periods  generally  ranging from two to 15
years and are  triggered  as a result of the change in  control of the  acquired
entity.   Other  severance   benefits  for  employees  that  are  terminated  in
conjunction  with the  integration  of the acquired  entities  into First Banks'
existing  operations are normally paid to the  recipients  within 90 days of the
respective  consummation date and are expensed in the consolidated statements of
income as incurred.  The accrued  severance  balance of $541,000 as of September
30, 2006,  as summarized in the  following  table,  is comprised of  contractual
obligations  under salary  continuation  agreements  to seven  individuals  with
remaining  terms  ranging  from  approximately  five months to 10 years.  As the
obligation  to  make  payments   under  these   agreements  is  accrued  at  the
consummation  date,  such  payments  do not have any impact on the  consolidated
statements of income.  First Banks also incurs integration costs associated with
acquisitions that are expensed in the consolidated  statements of income.  These
costs relate  principally to additional  costs incurred in conjunction  with the
information  technology  conversions of the respective entities.  The cumulative
acquisition and integration  costs  attributable to the Company's  acquisitions,
which were accrued as of the consummation  dates of the respective  acquisition,
are summarized in the following table.  These  acquisition and integration costs
are  reflected  in accrued and other  liabilities  in the  consolidated  balance
sheets.
<TABLE>
<CAPTION>

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

<S>                                                                   <C>                 <C>           <C>
         Balance at December 31, 2005.............................    $   542             134           676
         Nine Months Ended September 30, 2006:
           Amounts accrued at acquisition date....................      1,702           1,952         3,654
           Payments...............................................     (1,703)         (1,651)       (3,354)
                                                                      -------         -------       -------
         Balance at September 30, 2006............................    $   541             435           976
                                                                      =======         =======       =======

</TABLE>


<PAGE>

(3)      GOODWILL AND OTHER INTANGIBLE ASSETS

         Intangible  assets  associated  with the purchase of  subsidiaries  and
branch  offices,  net  of  amortization,  were  comprised  of the  following  at
September 30, 2006 and December 31, 2005:
<TABLE>
<CAPTION>
                                                             September 30, 2006         December 31, 2005
                                                          ------------------------   -----------------------
                                                           Gross                      Gross
                                                          Carrying     Accumulated   Carrying    Accumulated
                                                           Amount     Amortization    Amount    Amortization
                                                           ------     ------------    ------    ------------
                                                                   (dollars expressed in thousands)

         Amortized intangible assets:
<S>                                                       <C>           <C>           <C>         <C>
              Core deposit intangibles.................   $ 49,792      (16,516)      36,555      (11,710)
              Customer list intangibles................     23,051         (527)          --           --
              Goodwill associated with the
                 purchase of branch offices............      2,210       (1,253)       2,210       (1,146)
                                                          --------      -------      -------      -------
                   Total...............................   $ 75,053      (18,296)      38,765      (12,856)
                                                          ========      =======      =======      =======

         Unamortized intangible assets:
              Goodwill associated with the
                 purchase of subsidiaries..............   $230,829                   165,992
                                                          ========                   =======
</TABLE>

         Amortization   of   intangibles   associated   with  the   purchase  of
subsidiaries  and branch offices was $2.2 million and $5.4 million for the three
and nine months ended  September  30, 2006,  respectively,  and $1.2 million and
$3.5 million for the  comparable  periods in 2005.  Amortization  of intangibles
associated  with the purchase of  subsidiaries,  including  amortization of core
deposit  intangibles,  customer list  intangibles  and goodwill  associated with
branch office purchases, has been estimated in the following table, and does not
take into  consideration any pending or potential future  acquisitions or branch
office purchases.
<TABLE>
<CAPTION>
                                                                         (dollars expressed in thousands)
         Year ending December 31:
<S>                                                                                  <C>
              2006 remaining.......................................................  $ 2,363
              2007.................................................................    9,453
              2008.................................................................    9,453
              2009.................................................................    7,550
              2010.................................................................    7,089
              2011.................................................................    5,156
              Thereafter...........................................................   15,693
                                                                                    --------
                  Total............................................................ $ 56,757
                                                                                    ========
</TABLE>

         Changes  in the  carrying  amount  of  goodwill  for the three and nine
months ended September 30, 2006 and 2005 were as follows:
<TABLE>
<CAPTION>
                                                                 Three Months Ended         Nine Months Ended
                                                                    September 30,             September 30,
                                                               ----------------------     ----------------------
                                                                  2006        2005           2006        2005
                                                                  ----        ----           ----        ----
                                                                       (dollars expressed in thousands)

<S>                                                            <C>           <C>            <C>         <C>
         Balance, beginning of period........................  $ 226,811     154,664        167,056     156,849
         Goodwill acquired during period.....................      4,365      12,969         64,171      15,186
         Acquisition-related adjustments (1).................        646      (1,427)           666      (5,758)
         Amortization - purchases of branch offices..........        (36)        (36)          (107)       (107)
                                                               ---------    --------       --------    --------
         Balance, end of period..............................  $ 231,786     166,170        231,786     166,170
                                                               =========    ========       ========    ========

         ------------------
         (1)   Acquisition-related   adjustments   recorded  in  2006   included $646,000  recorded in the third
               quarter of 2006 pertaining to the acquisition of Northway State Bank in October 2005. Acquisition
               -related  adjustments  recorded in 2005  included $4.3 million  recorded in  the first quarter of
               2005  pertaining to the acquisition of CIB Bank in November 2004 and $1.4 million recorded in the
               third  quarter  of  2005  pertaining to the acquisition  of  Continental  Mortgage  Corporation -
               Delaware in July 2004.  Acquisition-related  adjustments  included additional purchase accounting
               adjustments necessary to appropriately adjust preliminary  goodwill  recorded  at the time of the
               acquisition, which  was  based  upon  current estimates  available  at  that time, to reflect the
               receipt of additional valuation data.
</TABLE>

<PAGE>

(4)      SERVICING RIGHTS

         Mortgage  Banking  Activities.  At September  30, 2006 and December 31,
2005, First Banks serviced  mortgage loans for others amounting to $1.06 billion
and $1.01 billion,  respectively.  Changes in mortgage  servicing rights, net of
amortization,  for the three and nine months ended  September  30, 2006 and 2005
were as follows:
<TABLE>
<CAPTION>

                                                                 Three Months Ended         Nine Months Ended
                                                                    September 30,             September 30,
                                                               ----------------------     ----------------------
                                                                  2006        2005           2006        2005
                                                                  ----        ----           ----        ----
                                                                       (dollars expressed in thousands)

<S>                                                              <C>           <C>            <C>        <C>
         Balance, beginning of period........................    $ 7,237       8,502          6,623      10,242
         Mortgage servicing rights acquired..................         --          --             --         435
         Originated mortgage servicing rights (1)............        275         256          3,003         657
         Amortization........................................       (998)     (1,261)        (3,112)     (3,837)
                                                                 -------     -------        -------     -------
         Balance, end of period..............................    $ 6,514       7,497          6,514       7,497
                                                                 =======     =======        =======     =======

         ------------------------
          (1)  In March 2006, First Banks capitalized mortgage servicing rights of $1.2 million associated with
               the  securitization  of $77.1  million  of  certain  residential  mortgage  loans  held  in  the
               Company's loan  portfolio,  resulting  in  the  recognition  of $1.2  million  in loan servicing
               income related to the future servicing  of  the  underlying loans. Additionally, in  April 2006,
               First Banks capitalized mortgage servicing rights of $927,000 associated with the securitization
               of  $61.8  million  of  certain residential mortgage loans held in the Company's loan portfolio,
               resulting  in  the  recognition  of $927,000 in loan servicing  income  related  to  the  future
               servicing of the underlying loans.
</TABLE>
         First Banks did not incur any impairment of mortgage  servicing  rights
during the three and nine months ended September 30, 2006 and 2005.

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

                                                                         (dollars expressed in thousands)

         Year ending December 31:
<S>                                                                                  <C>
              2006 remaining.......................................................  $   775
              2007.................................................................    2,269
              2008.................................................................    1,221
              2009.................................................................      742
              2010.................................................................      539
              2011.................................................................      416
              Thereafter...........................................................      552
                                                                                     -------
                  Total............................................................  $ 6,514
                                                                                     =======
</TABLE>
         Other  Servicing  Activities.  At  September  30, 2006 and December 31,
2005,  First Banks serviced  United States Small Business  Administration  (SBA)
loans for others  amounting to $142.2 million and $163.4 million,  respectively.
Changes in SBA servicing  rights,  net of amortization  and impairment,  for the
three and nine months ended September 30, 2006 and 2005 were as follows:

<TABLE>
<CAPTION>

                                                                 Three Months Ended         Nine Months Ended
                                                                   September 30,              September 30,
                                                               ----------------------     ----------------------
                                                                  2006        2005           2006        2005
                                                                  ----        ----           ----        ----
                                                                       (dollars expressed in thousands)

<S>                                                              <C>           <C>            <C>        <C>
         Balance, beginning of period........................    $ 8,209      12,351          9,489      13,013
         Originated SBA servicing rights.....................        215         393            533         932
         Amortization........................................       (396)       (576)        (1,254)     (1,777)
         Impairment..........................................       (180)     (2,359)          (920)     (2,359)
                                                                 -------     -------        -------     -------
         Balance, end of period..............................    $ 7,848       9,809          7,848       9,809
                                                                 =======     =======        =======     =======
</TABLE>
<PAGE>

         First Banks  recognized  impairment  of $180,000  and  $920,000 for the
three  and  nine  months  ended  September  30,  2006,  respectively,  primarily
resulting from a decline in the fair value of the SBA servicing assets below the
carrying  value  attributable  to the  placement of certain  loans on nonaccrual
status and payoffs  received on certain  existing loans.  First Banks recognized
impairment  of $2.4  million for the three and nine months ended  September  30,
2005  primarily  resulting from a decline in the fair value of the SBA servicing
assets  below  the  carrying  value  following  substantial  damage  to  several
shrimping  vessels  within  the  servicing  portfolio  caused by the  effects of
Hurricane Katrina.

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

                                                                         (dollars expressed in thousands)

         Year ending December 31:
<S>                                                                                      <C>
              2006 remaining.......................................................   $  384
              2007.................................................................    1,363
              2008.................................................................    1,135
              2009.................................................................      944
              2010.................................................................      783
              2011.................................................................      647
              Thereafter...........................................................    2,592
                                                                                      ------
                  Total............................................................   $7,848
                                                                                      ======
</TABLE>

(5)      EARNINGS PER COMMON SHARE

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

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

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

     Three months ended September 30, 2005:
         Basic EPS - income available to common stockholders.........  $27,317         23,661      $ 1,154.52
         Effect of dilutive securities:
           Class A convertible preferred stock.......................      192            481          (15.06)
                                                                       -------        -------      ----------
         Diluted EPS - income available to common stockholders.......  $27,509         24,142      $ 1,139.46
                                                                       =======        =======      ==========

     Nine months ended September 30, 2006:
         Basic EPS - income available to common stockholders.........  $80,225         23,661      $ 3,390.62
         Effect of dilutive securities:
           Class A convertible preferred stock.......................      513            456          (42.78)
                                                                       -------        -------      ----------
         Diluted EPS - income available to common stockholders.......  $80,738         24,117      $ 3,347.84
                                                                       =======        =======      ==========

     Nine months ended September 30, 2005:
         Basic EPS - income available to common stockholders.........  $75,962         23,661      $ 3,210.44
         Effect of dilutive securities:
           Class A convertible preferred stock.......................      513            516          (47.31)
                                                                       -------        -------      ----------
         Diluted EPS - income available to common stockholders.......  $76,475         24,177      $ 3,163.13
                                                                       =======        =======      ==========
</TABLE>

<PAGE>

(6)      TRANSACTIONS WITH RELATED PARTIES

         First Services,  L.P., a limited partnership  indirectly owned by First
Banks'  Chairman  and  members of his  immediate  family,  provides  information
technology,  item processing and various related  services to First Banks,  Inc.
and its subsidiaries.  Fees paid under agreements with First Services, L.P. were
$7.8 million and $22.8 million for the three and nine months ended September 30,
2006,  respectively,  and $7.6  million  and $22.3  million  for the  comparable
periods in 2005. First Services,  L.P. leases  information  technology and other
equipment from First Bank.  During the three months ended September 30, 2006 and
2005,  First  Services,   L.P.  paid  First  Bank  $976,000  and  $1.1  million,
respectively,  and during the nine  months  ended  September  30, 2006 and 2005,
First   Services,   L.P.   paid  First  Bank  $3.2  million  and  $3.3  million,
respectively, in rental fees for the use of that equipment.

         First Brokerage America, L.L.C., a limited liability company indirectly
owned by First Banks'  Chairman and members of his  immediate  family,  received
approximately  $703,000  and $2.1  million for the three and nine  months  ended
September  30,  2006,  respectively,  and  $529,000  and  $1.8  million  for the
comparable  periods in 2005, in  commissions  paid by  unaffiliated  third-party
companies.  The commissions  received were primarily in connection with sales of
annuities, securities and other insurance products to customers of First Bank.

         First Title  Guaranty LLC D/B/A First Banc Insurors  (First  Title),  a
limited liability company  established and administered by First Banks' Chairman
and members of his immediate family,  received approximately $2,000 and $119,000
for the three and nine  months  ended  September  30,  2006,  respectively,  and
$98,000 and $281,000 for the  comparable  periods in 2005,  in  commissions  for
policies  purchased by First Banks or customers of First Bank from  unaffiliated
third-party  insurers.  The insurance  premiums on which these  commissions were
earned were competitively bid, and First Banks deems the commissions First Title
earned from  unaffiliated  third-party  companies to be comparable to those that
would have been earned by an unaffiliated third-party agent.

         First Bank leases certain of its in-store  branch offices and ATM sites
from Dierbergs Markets,  Inc., a grocery store chain headquartered in St. Louis,
Missouri that is owned and operated by the brother of First Banks'  Chairman and
members of his immediate family. Total rent expense incurred by First Bank under
the lease  obligation  contracts was $96,000 and $287,000 for the three and nine
months ended September 30, 2006, respectively,  and $77,000 and $246,000 for the
comparable periods in 2005.

         First  Bank  has had in the  past,  and may  have in the  future,  loan
transactions   in  the  ordinary  course  of  business  with  its  directors  or
affiliates.  These  loan  transactions  have been on the same  terms,  including
interest rates and  collateral,  as those  prevailing at the time for comparable
transactions with unaffiliated  persons and did not involve more than the normal
risk  of  collectibility  or  present  other  unfavorable  features.   Loans  to
directors,  their  affiliates and executive  officers of First Banks,  Inc. were
approximately $59.2 million and $37.9 million at September 30, 2006 and December
31, 2005, respectively.  First Bank does not extend credit to its officers or to
officers of First Banks,  Inc., except extensions of credit secured by mortgages
on personal  residences,  loans to purchase  automobiles,  personal  credit card
accounts and deposit account overdraft  protection under a plan whereby a credit
limit has been  established  in  accordance  with First Bank's  standard  credit
criteria.

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

         In June 2005,  SBLS LLC executed a  Multi-Party  Agreement by and among
SBLS LLC, First Bank, Colson Services Corp.,  fiscal transfer agent for the SBA,
and the SBA,  in addition to a Loan and  Security  Agreement  by and among First
Bank and the SBA  (collectively,  the  Agreement)  that provides a $50.0 million
warehouse line of credit for loan funding purposes.  The Agreement  provided for
an initial  maturity date of June 30, 2008,  which was extended on June 15, 2006
by First Bank to June 30, 2009.  Interest is payable monthly, in arrears, on the
outstanding  balances  at a rate  equal  to First  Bank's  prime  lending  rate.
Advances  under the Agreement  are secured by the  assignment of the majority of
the assets of SBLS LLC. The balance of advances  outstanding  under this line of
credit was $44.1  million and $31.4  million at September  30, 2006 and December
31, 2005,  respectively.  Interest  expense recorded under the Agreement by SBLS
LLC for the three and nine months ended September 30, 2006 was $796,000 and $2.0
million, respectively, and $518,000 for the comparable periods in 2005.
<PAGE>

         In August  2005,  First Bank  entered  into a contract  with World Wide
Technology,  Inc.  (WWT),  a wholly owned  subsidiary  of World Wide  Technology
Holding Co.,  Inc.  (WWTHC).  WWTHC is an electronic  procurement  and logistics
company in the  information  technology  industry  headquartered  in St.  Louis,
Missouri.  The  contract  provided  for WWT to  provide  information  technology
services  associated with the initial phase of the upgrade of personal computers
for First  Bank  employees  in an  ongoing  effort to  further  standardize  the
technological  infrastructure  throughout the First Bank branch banking network.
Mr.  David L.  Steward,  a  director  of First  Banks  and a member of the Audit
Committee  of First  Banks,  serves as the Chairman of the Board of Directors of
WWTHC. Prior to entering into this contract,  the Audit Committee of First Banks
reviewed and approved the utilization of WWT for information technology services
for this phase of the project with fees not to exceed $500,000.  First Bank made
payments  of $478,000  under the  contract  for the first phase of the  project.
First Bank evaluated the second phase of its  corporate-wide  personal  computer
upgrade  project  and  entered  into a contract  with WWT on August 21, 2006 for
additional  information  technology  services.   Prior  to  entering  into  this
contract,  the  Audit  Committee  of  First  Banks  reviewed  and  approved  the
utilization  of WWT for  this  phase of the  project  with  fees  not to  exceed
$500,000.  As of September 30, 2006,  First Bank had not made any payments under
the contract for the second phase of the project.

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

         During the three and nine months ended  September 30, 2006,  First Bank
contributed $1.5 million and $4.5 million to the Dierberg Operating  Foundation,
Inc., a charitable  foundation  established by First Banks' Chairman and members
of his immediate  family.  There were no charitable  contributions  made to this
organization during the comparable periods in 2005.

         First Banks  periodically  purchases  various products from Hermannhof,
Inc.  and  Dierberg  Star Lane  Vineyards,  entities  that were created by First
Banks' Chairman and members of his immediate family.  First Banks utilizes these
products primarily for customer and employee events and promotions, and business
development  functions.  During the three and nine months  ended  September  30,
2006, First Banks purchased products from these entities of approximately $9,000
and $52,000, respectively, and $27,000 and $85,000 for the comparable periods in
2005.

 (7)     REGULATORY CAPITAL

         First  Banks and First Bank are subject to various  regulatory  capital
requirements administered by the federal and state banking agencies.  Failure to
meet minimum capital  requirements can initiate  certain  mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct  material  effect on First Banks'  financial  statements.  Under  capital
adequacy  guidelines and the regulatory  framework for prompt corrective action,
First Banks and First Bank must meet specific  capital  guidelines  that involve
quantitative measures of assets, liabilities and certain off-balance sheet items
as  calculated  under  regulatory  accounting  practices.  Capital  amounts  and
classifications  are also subject to  qualitative  judgments  by the  regulators
about components, risk weightings and other factors.
<PAGE>

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy  require  First  Banks and First Bank to maintain  minimum  amounts and
ratios  of  total  and  Tier  I  capital  (as  defined  in the  regulations)  to
risk-weighted  assets,  and of Tier I  capital  to  average  assets.  Management
believes,  as of September  30, 2006,  First Banks and First Bank were each well
capitalized.  As of September 30, 2006, the most recent  notification from First
Banks'  primary  regulator  categorized  First  Banks  and  First  Bank  as well
capitalized under the regulatory  framework for prompt corrective  action. To be
categorized  as well  capitalized,  First  Banks  and First  Bank must  maintain
minimum total  risk-based,  Tier I risk-based and Tier I leverage  ratios as set
forth in the following table.

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


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

Total capital (to risk-weighted assets):
<S>                                                        <C>           <C>            <C>             <C>
         First Banks...................................    10.22%        10.14%         8.0%            10.0%
         First Bank....................................    10.37         10.66          8.0             10.0

Tier 1 capital (to risk-weighted assets):
         First Banks...................................     8.54          8.88          4.0              6.0
         First Bank....................................     9.11          9.41          4.0              6.0

Tier 1 capital (to average assets):
         First Banks...................................     8.08          8.13          3.0              5.0
         First Bank....................................     8.63          8.61          3.0              5.0
</TABLE>

         In March 2005,  the Board of  Governors of the Federal  Reserve  System
(Federal  Reserve) adopted a final rule,  Risk-Based  Capital  Standards:  Trust
Preferred  Securities  and the  Definition  of  Capital,  which  allows  for the
continued limited inclusion of trust preferred securities in Tier 1 capital. The
Federal  Reserve's final rule limits  restricted core capital elements to 25% of
the  sum of  all  core  capital  elements,  including  restricted  core  capital
elements, net of goodwill less any associated deferred tax liability. Amounts of
restricted  core  capital  elements in excess of these  limits may  generally be
included in Tier 2 capital. Specifically,  amounts of qualifying trust preferred
securities and cumulative  perpetual  preferred stock in excess of the 25% limit
may be  included  in  Tier  2  capital,  but  will  be  limited,  together  with
subordinated debt and limited-life preferred stock, to 50% of Tier 1 capital. In
addition,  the final  rule  provides  that in the last  five  years  before  the
maturity of the  underlying  subordinated  note, the  outstanding  amount of the
associated trust preferred  securities is to be excluded from Tier 1 capital and
included in Tier 2 capital,  subject to  one-fifth  amortization  per year.  The
final rule provides for a five-year  transition  period,  ending March 31, 2009,
for the  application  of the  quantitative  limits.  Until March 31,  2009,  the
aggregate  amount  of  qualifying   cumulative  perpetual  preferred  stock  and
qualifying trust preferred  securities that may be included in Tier 1 capital is
limited to 25% of the sum of the  following  core capital  elements:  qualifying
common stockholders' equity,  qualifying  noncumulative and cumulative perpetual
preferred  stock,  qualifying  minority  interest  in  the  equity  accounts  of
consolidated subsidiaries and qualifying trust preferred securities. First Banks
has evaluated the impact of the final rule on the Company's  financial condition
and results of  operations,  and determined  the  implementation  of the Federal
Reserve's  final rules that will be  effective  in March 2009 would reduce First
Banks' Tier 1 capital (to  risk-weighted  assets) and Tier 1 capital (to average
assets) to 7.67% and 7.26%, respectively,  and would not have an impact on total
capital (to risk-weighted assets), as of September 30, 2006.
<PAGE>


(8)      BUSINESS SEGMENT RESULTS

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



<PAGE>

<TABLE>
<CAPTION>

         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:

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

Balance sheet information:

<S>                                    <C>             <C>                <C>             <C>            <C>          <C>
Investment securities...............   $1,150,613      1,324,219          26,623          16,564         1,177,236    1,340,783
Loans, net of unearned discount.....    7,717,470      7,020,771              --              --         7,717,470    7,020,771
Goodwill............................      231,786        167,056              --              --           231,786      167,056
Total assets........................    9,729,876      9,148,931          30,812          21,402         9,760,688    9,170,333
Deposits............................    8,158,299      7,601,162         (59,436)        (59,331)        8,098,863    7,541,831
Notes payable.......................           --             --          75,000         100,000            75,000      100,000
Subordinated debentures.............           --             --         304,547         215,461           304,547      215,461
Stockholders' equity................    1,071,314        931,192        (307,431)       (252,254)          763,883      678,938
                                       ==========      =========        ========        ========         =========    =========

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

Interest income.....................    $ 168,024        127,612             269             189           168,293      127,801
Interest expense....................       61,445         38,419           7,664           6,736            69,109       45,155
                                        ---------       --------         -------         -------          --------     --------
   Net interest income..............      106,579         89,193          (7,395)         (6,547)           99,184       82,646
Provision for loan losses...........        2,000             --              --              --             2,000           --
                                        ---------       --------         -------         -------          --------     --------
   Net interest income after
      provision for loan losses.....      104,579         89,193          (7,395)         (6,547)           97,184       82,646
                                        ---------       --------         -------         -------          --------     --------
Noninterest income..................       29,840         25,152             154            (204)           29,994       24,948
Noninterest expense.................       80,360         66,186             113           1,666            80,473       67,852
                                        ---------       --------         -------         -------          --------     --------
   Income before provision for
      income taxes and minority
      interest in loss
      of subsidiary.................       54,059         48,159          (7,354)         (8,417)           46,705       39,742
Provision for income taxes..........       19,827         16,206          (2,578)         (2,941)           17,249       13,265
                                        ---------       --------         -------         -------          --------     --------
   Income before minority interest
      in loss of subsidiary.........       34,232         31,953          (4,776)         (5,476)           29,456       26,477
Minority interest in loss
      of subsidiary.................         (204)        (1,036)             --              --              (204)      (1,036)
                                        ---------       --------         -------         -------          --------     --------
   Net income.......................    $  34,436         32,989          (4,776)         (5,476)           29,660       27,513
                                        =========       ========         =======         =======          ========     ========
<PAGE>

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

Interest income.....................    $ 472,551        356,682             707             535           473,258      357,217
Interest expense....................      165,808        101,615          21,720          17,056           187,528      118,671
                                        ---------       --------        --------        --------          --------     --------
   Net interest income..............      306,743        255,067         (21,013)        (16,521)          285,730      238,546
Provision for loan losses...........        8,000         (8,000)             --              --             8,000       (8,000)
                                        ---------       --------        --------        --------          --------     --------
   Net interest income after
      provision for loan losses.....      298,743        263,067         (21,013)        (16,521)          277,730      246,546
                                        ---------       --------        --------        --------          --------     --------
Noninterest income..................       81,596         72,994            (226)           (640)           81,370       72,354
Noninterest expense.................      233,975        197,931           2,364           3,951           236,339      201,882
                                        ---------       --------        --------        --------          --------     --------
   Income before provision for
      income taxes and minority
      interest in loss
      of subsidiary.................      146,364        138,130         (23,603)        (21,112)          122,761      117,018
Provision for income taxes..........       50,717         48,940          (8,265)         (7,372)           42,452       41,568
                                        ---------       --------        --------        --------          --------     --------
   Income before minority interest
      in loss of subsidiary.........       95,647         89,190         (15,338)        (13,740)           80,309       75,450
Minority interest in loss
      of subsidiary.................         (440)        (1,036)             --              --              (440)      (1,036)
                                        ---------       --------        --------        --------          --------     --------

   Net income.......................    $  96,087         90,226         (15,338)        (13,740)           80,749       76,486
                                        =========       ========        ========        ========          ========     ========

-------------------
(1)  Corporate and other includes $4.2 million and $3.9 million of interest expense on subordinated debentures, after applicable
     income tax benefits of $2.2 million and $2.1 million, for the three months ended September 30, 2006 and 2005, respectively.
     For the nine months ended September 30, 2006  and 2005,  corporate  and  other  includes $11.6 million and $10.5 million of
     interest  expense  on  subordinated  debentures,  after applicable  income  tax benefits of  $6.2 million and $5.6 million,
     respectively.
</TABLE>


<PAGE>


(9)      OTHER BORROWINGS

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


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

         Securities sold under agreements to repurchase:
<S>                                                                           <C>                  <C>
              Daily........................................................   $ 188,143            199,874
              Term.........................................................     200,000            300,000
         FHLB advances (1).................................................       4,067             39,300
                                                                              ---------           --------
                  Total....................................................   $ 392,210            539,174
                                                                              =========           ========
         --------------------
         (1)  On March 17, 2006 and May 10, 2006,  First Bank  prepaid  $20.5 million  and  $14.8 million, respectively,
              of FHLB advances that were assumed in conjunction with previous  acquisitions.  First  Bank did  not incur
              any losses associated with the prepayment of the FHLB advances.

</TABLE>



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


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

         September 30, 2006:
<S>                                                  <C>             <C>                     <C>
             July 19, 2010 (1).................      $ 100,000       LIBOR + 0.5475% (3)     5.00% / Floor (3)
             October 12, 2010 (2)..............        100,000       LIBOR + 0.5100% (3)     4.50% / Floor (3)
                                                     ---------
                                                     $ 200,000
                                                     =========

         December 31, 2005:
             January 12, 2007 (2)..............      $ 150,000       LIBOR + 0.0050% (4)     3.00% / Floor (4)
             June 14, 2007 (5).................         50,000       LIBOR - 0.3300% (4)     3.00% / Floor (4)
             June 14, 2007 (5).................         50,000       LIBOR - 0.3400% (4)     3.00% / Floor (4)
             August 1, 2007 (6)................         50,000       LIBOR + 0.0800% (4)     3.00% / Floor (4)
                                                     ---------
                                                     $ 300,000
                                                     =========
         --------------------
         (1)  First Bank entered into this $100.0 million four-year term repurchase agreement under a  master repurchase
              agreement on July 14, 2006. Interest is paid quarterly, beginning on October 18, 2006.
         (2)  First Bank terminated $50.0 million of this term repurchase  agreement on April 28, 2006, resulting in  an
              $83,000  prepayment  penalty  and  the  recognition  of  a  $310,000 loss on the sale  of $50.0 million of
              available-for-sale investment securities associated with the termination of the term repurchase agreement.
              On August 24, 2006,  First Bank restructured the  remaining $100.0 million term  repurchase  agreement  to
              extend the maturity date to October 12, 2010 and to modify the pricing structure, including  the  interest
              rate floor  strike  price, effective  immediately  following the next quarterly scheduled interest payment
              date of October 12, 2006. First Bank did not incur any costs in   conjunction with the restructure of this
              term repurchase agreement.
         (3)  The interest rate paid on these term repurchase agreements is  based on the  three-month  London Interbank
              Offering Rate (LIBOR) plus the spread amount shown  above  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 above, if the
              three-month LIBOR falls below the strike price associated with the interest rate floor agreements.
         (4)  The interest rate paid on these term repurchase agreements is  based on the LIBOR reset in arrears plus or
              minus  the  spread amount shown above minus a floating amount equal to the differential between the three-
              month LIBOR reset in arrears and the strike price shown above, if the three-month LIBOR reset in   arrears
              falls below the strike price associated with the interest rate floor agreements.
         (5)  First Bank terminated these term repurchase agreements on February 14, 2006, and recognized a $1.6 million
              loss  on  the  sale  of  $100.0 million  of  available-for-sale  investment securities associated with the
              termination of the term repurchase agreements.
         (6)  First Bank terminated this term repurchase agreement on March 28,  2006, resulting in a prepayment penalty
              of $223,000, and the recognition  of a $746,000 loss on  the sale  of $50.0 million of  available-for-sale
              investment securities associated with the termination of the term repurchase agreement.
</TABLE>




<PAGE>


(10)     NOTES PAYABLE

         On August 10, 2006,  First Banks entered into a First  Amendment to its
Amended and  Restated  Secured  Credit  Agreement  with a group of  unaffiliated
financial institutions (Amended Credit Agreement). The Amended Credit Agreement,
in the amount of $96.0  million,  amended  the  previous  Amended  and  Restated
Secured Credit  Agreement  dated August 11, 2005 in the amount of $122.5 million
that provided a $15.0 million senior secured  revolving credit facility,  a $7.5
million  senior secured  standby letter of credit  facility and a $100.0 million
senior  secured  term loan  facility  (Term  Loan).  The primary  changes to the
structure  of  the  financing  arrangement  relate  to a  reduction  of  certain
components of the secured credit facilities,  a reduction in the overall pricing
structure of the secured  credit  facilities,  and the renewal of the  revolving
credit and letter of credit facilities.  The Amended Credit Agreement provides a
$10.0 million senior secured revolving credit facility  (Revolving  Credit) that
matures on August 9, 2007 and a $1.0 million  senior  secured  standby letter of
credit facility (LC Facility) that matures on August 9, 2007, in addition to the
existing  Term Loan that  matures on August 10,  2008 and had a balance of $85.0
million at the time of the amendment. The Amended Credit Agreement also provides
First Banks an option to increase the Revolving Credit,  which is limited to two
increase  requests from August 10, 2006 until its maturity date, by an amount of
up to $40.0 million  provided such increase will not cause the Revolving  Credit
to exceed $50.0 million.  Interest is payable on the outstanding  principal loan
balances  under the  Revolving  Credit at a  floating  rate  equal to either the
lender's prime rate or, at First Banks' option,  LIBOR plus a margin  determined
by the  outstanding  loan balances and First Banks' net income for the preceding
four calendar  quarters.  If the loan balances  outstanding  under the Revolving
Credit are accruing at the prime rate, interest is payable quarterly in arrears.
If the loan  balances  outstanding  under the  Revolving  Credit are accruing at
LIBOR,  interest is payable based on the one, two, three or six-month  LIBOR, as
selected by First Banks.  First Banks is also subject to a quarterly  commitment
fee on the unused portion of the Revolving Credit. First Banks had not drawn any
advances on the Revolving  Credit as of September 30, 2006.  Interest is payable
on the  outstanding  principal  loan balance of the Term Loan at a floating rate
equal to LIBOR plus a margin  determined  by the  outstanding  loan  balance and
First  Banks'  net  income  for  the  preceding  four  calendar  quarters.   The
outstanding  principal  balance  of  the  Term  Loan  is  payable  in  quarterly
installments of $5.0 million, at a minimum,  with the remainder of the Term Loan
balance to be repaid in full,  including any unpaid interest,  upon its maturity
date. As of September  30, 2006,  First Banks had made payments of $25.0 million
on the outstanding principal balance of the Term Loan, reducing the balance from
$100.0 million at December 31, 2005 to $75.0 million at September 30, 2006.

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


(11)     SUBORDINATED DEBENTURES

         During the nine months ended September 30, 2006,  First Banks,  through
three newly formed statutory trusts:  (a) First Bank Statutory Trust IV, or FBST
IV; (b) First Bank  Statutory  Trust V, or FBST V; and (c) First Bank  Statutory
Trust VI, or FBST VI  (collectively,  the Trusts),  issued  variable  rate trust
preferred  securities in private placements.  First Banks owns all of the common
securities of the Trusts.  The gross  proceeds of the offerings were used by the
Trusts to purchase variable rate  subordinated  debentures from First Banks. The
subordinated debentures are the sole asset of the Trusts. In connection with the
issuance of the trust preferred securities,  First Banks made certain guarantees
and  commitments  that, in the  aggregate,  constitute a full and  unconditional
guarantee  by First  Banks of the  obligations  of the  Trusts  under  the trust
preferred securities.  First Banks' distributions on the subordinated debentures
issued to FBST IV, FBST V and FBST VI,  which are payable  quarterly  in arrears
beginning on June 15, 2006,  June 15, 2006,  and October 7, 2006,  respectively,
were $1.5 million and $2.7 million, in aggregate,  for the three and nine months
ended September 30, 2006, respectively.



<PAGE>

<TABLE>
<CAPTION>

         A  summary  of the  subordinated  debentures  issued  to the  Trusts in
conjunction  with the trust preferred  securities  offerings for the nine months
ended September 30, 2006 is as follows:

                                                                        Proceeds, Net       Spread Over
                         Date          Maturity            Call          of Offering        Three-Month
          Trust         Issued           Date              Date           Expenses             LIBOR
          -----         ------           ----              ----           --------             -----
                                                                    (dollars expressed
                                                                      in thousands)

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

</TABLE>


(12)     CONTINGENT LIABILITIES

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

         In August 2004, SBLS LLC acquired  substantially  all of the assets and
assumed certain  liabilities of Small Business Loan Source, Inc. The Amended and
Restated Asset Purchase  Agreement  (Asset  Purchase  Agreement)  governing this
transaction  provided for certain  payments to the seller  contingent  on future
valuations of specifically  identified  assets,  including  servicing assets and
retained  interests  in  securitizations.  SBLS LLC was not required to make any
payments to the seller as of September  30, 2006 and  September  30,  2005,  the
first and  second  measurement  dates  under  the  terms of the  Asset  Purchase
Agreement.  However,  as of September 30, 2006, SBLS LLC recorded a liability of
$375,000,  as  settlement  in  full of all  obligations  associated  with  these
contingent  payments pursuant to a mutual agreement  amongst the parties.  As of
December 31, 2005,  SBLS LLC had not  recorded a liability  for the  obligations
associated with these contingent payments, as the likelihood that SBLS LLC would
be required to make future  payments under the Asset Purchase  Agreement was not
ascertainable at that time.




<PAGE>



(13)     SUBSEQUENT EVENTS

         On  November  3, 2006,  First Bank  completed  its  acquisition  of the
Beverly Drive Office.  At the time of the acquisition,  the Beverly Drive Office
had assets of approximately  $156.1 million and deposits of approximately $154.4
million.  Total assets  consisted  primarily of cash received upon assumption of
deposit liabilities and certain assets.

         On November 7, 2006,  First Banks entered into an Agreement and Plan of
Reorganization providing for the acquisition of Royal Oaks Bancshares,  Inc. and
its wholly owned banking subsidiary,  Royal Oaks Bank, ssb (collectively,  Royal
Oaks), for  approximately  $38.6 million in cash.  Royal Oaks,  headquartered in
Houston,  Texas, operates four banking offices in the Houston area and is in the
process of opening two  additional de novo banking  offices in Sugarland and the
Heights,  near downtown  Houston,  both of which are expected to be completed in
the fourth quarter of 2006. The transaction,  which is subject to regulatory and
shareholder  approvals,  is expected to be completed during the first quarter of
2007. At September 30, 2006, Royal Oaks had assets of $200.8 million, loans, net
of  unearned  discount,  of  $159.0  million,  deposits  of $174.5  million  and
stockholders' equity of $12.4 million.

         On November 10,  2006,  First Bank  completed  its  acquisition  of the
MidAmerica Offices. At the time of the acquisition,  the MidAmerica Offices had,
on a combined basis,  assets of approximately  $210.3 million,  including loans,
net of unearned  discount,  of  approximately  $153.5  million,  and deposits of
approximately  $52.4 million.  The assets consisted of loans,  fixed assets, and
cash received upon assumption of deposit liabilities and certain assets.



<PAGE>


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


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


                                     General

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

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

         First Bank's  subsidiaries  are wholly owned except for SBLS LLC, which
is 51.0% owned by First Bank and 49.0% owned by First Capital  America,  Inc. At
September  30,  2006,  we had assets of $9.76  billion,  loans,  net of unearned
discount,  of $7.72 billion,  deposits of $8.10 billion and stockholders' equity
of $763.9  million,  and  operated  186 branch  banking  offices in  California,
Illinois, Missouri and Texas.
<PAGE>

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

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

                               Financial Condition

         Total  assets were $9.76  billion at September  30, 2006,  reflecting a
$590.4 million increase from $9.17 billion at December 31, 2005. The increase in
our total assets  primarily  results from internal  growth and  acquisitions  of
banks and other financial service companies in our target markets,  including an
insurance  premium  finance  company and an insurance  brokerage  agency.  Funds
available from deposit growth and excess short-term  investments,  which include
federal funds sold and interest-bearing  deposits,  as well as the maturities of
available-for-sale  investment  securities,  were utilized to fund internal loan
growth  and  to  reinvest  in  higher-yielding   available-for-sale   investment
securities.  We issued additional subordinated debentures,  as further described
below,  which  provided  a portion of the funds  that we  utilized  for our bank
acquisitions in 2006. The increase in assets reflects a $696.7 million  increase
in our loans, net of unearned discount,  to $7.72 billion at September 30, 2006,
from $7.02  billion at December  31,  2005.  This  increase is  attributable  to
internal  growth of our loan  portfolio  and the  addition of $391.0  million of
loans associated with our acquisitions  completed in 2006. The increase in loans
was  partially  offset  by a  decrease  of  $138.9  million  resulting  from the
securitization of certain residential  mortgage loans held in our loan portfolio
that were transferred to our investment portfolio, the sale of $100.0 million of
certain other  residential  mortgage loans during the third quarter of 2006, and
the sale of certain nonperforming loans.

         The overall increase in our assets was partially offset by a decline of
$163.5  million  in our  investment  securities  portfolio  to $1.18  billion at
September 30, 2006, from $1.34 billion at December 31, 2005. The decrease in our
investment securities portfolio primarily reflects: (a) proceeds from maturities
of investment  securities  not  reinvested  in  investment  securities of $201.9
million; (b) the sale of  available-for-sale  investment  securities  associated
with the  termination  of $200.0  million of term  repurchase  agreements in the
first and second quarters of 2006 to better  position our overall  interest rate
risk  profile,  as more  fully  described  below;  partially  offset  by (c) the
securitization  of $77.1  million  and  $61.8  million  of  certain  residential
mortgage  loans  held in our loan  portfolio  in  March  2006  and  April  2006,
respectively,  which  resulted  in a  change  in  our  overall  asset  mix  from
residential  mortgage  loans to  available-for-sale  investment  securities,  as
further  described  under  "--Loans and  Allowance  for Loan Losses," and (d) an
increase in our trading securities portfolio of $53.4 million during 2006.

         Goodwill  increased  $64.7  million to $231.8  million at September 30,
2006 primarily as a result of our acquisitions of First National Bank of Sachse,
or FNBS; First Independent National Bank, or FINB; Pittsfield Community Bancorp,
Inc., or Community Bank; Adrian Baker;  UPAC; San Diego Community Bank, or SDCB;
and TeamCo,  Inc., or Oak Lawn; as summarized in the following table and further
discussed in Note 2 to our Consolidated Financial Statements. In addition, other
assets  increased  $46.1 million to $151.2  million at September 30, 2006,  from
$105.1  million at December 31, 2005.  The increase in other assets is primarily
attributable  to  the  core  deposit   intangibles   associated  with  our  bank
acquisitions and the customer list intangibles  associated with our purchases of
Adrian Baker and UPAC. These assets increased to $55.8 million,  on an aggregate
basis,  at September 30, 2006,  from $24.8 million,  on an aggregate  basis,  at
December  31,  2005,  as  more  fully  described  in  Note  2 and  Note 3 to our
Consolidated  Financial  Statements.  In addition,  increases of $6.1 million in
accrued  interest   receivable,   $5.4  million  in  our  derivative   financial
instruments  portfolio and $4.9 million in other real estate further contributed
to the overall increase in other assets.



<PAGE>


         Our  acquisitions  completed  in the first nine  months of 2006 were as
follows:
<TABLE>
<CAPTION>

                                                Loans,                                                    Number
                                                Net of                                       Goodwill       of
           Entity /                   Total    Unearned   Investment              Purchase   and Other    Banking
         Closing Date                Assets    Discount   Securities   Deposits    Price    Intangibles  Locations
         ------------                ------    --------   ----------   --------    -----    -----------  ---------
                                                         (dollars expressed in thousands)
   First National Bank of Sachse
   Sachse, Texas
<S>        <C>                     <C>           <C>        <C>         <C>        <C>         <C>           <C>
   January 3, 2006                 $  76,200     49,300     14,300      66,200     20,800      12,400        1

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

   Adrian N. Baker & Company
   Clayton, Missouri
   March 31, 2006                      3,000         --         --          --      7,000       8,000       --

   Pittsfield Community Bancorp, Inc.
   Pittsfield, Illinois (2)
   April 28, 2006                     17,600     11,100      3,300      12,300      5,100       1,300       --

   First Independent National Bank
   Plano, Texas
   May 1, 2006                        68,200     59,600        800      55,500     19,200      11,800        3

   Universal Premium Acceptance
   Corporation
   Lenexa, Kansas (3)
   May 31, 2006                      152,800    149,200         --          --     52,700      44,700       --

   San Diego Community Bank
   Chula Vista, California
   August 15, 2006                    91,700     78,600      2,800      76,100     25,500      12,700        3

   TeamCo, Inc.
   Oak Lawn, Illinois
   August 31, 2006                    67,900     43,100     16,100      60,100     13,900       9,600        2
                                   ---------   --------    -------    --------   --------    --------      ---
                                   $ 478,500    391,000     37,300     271,300    144,900     100,500       10
                                   =========   ========    =======    ========   ========    ========      ===

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

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

         Deposits  increased  $557.0  million to $8.10  billion at September 30,
2006,  from $7.54  billion at December  31,  2005,  reflecting  internal  growth
through enhanced product and service offerings and marketing campaigns,  as well
as the acquisitions of banks in our target market areas.  During the nine months
ended September 30, 2006, our time and savings deposits increased $617.2 million
and $13.6 million,  respectively, in contrast to our interest-bearing demand and
noninterest-bearing  demand  accounts,  which  declined  $24.1 million and $49.6
million,  respectively.  The growth in our  deposits  for the nine months  ended
September 30, 2006 reflects our continued deposit marketing focus and efforts to
further develop multiple account relationships with our customers,  coupled with
higher deposit rates paid on certain products.  The overall growth was partially
offset  by  an  anticipated  level  of  attrition  associated  with  our  recent
acquisitions and continued aggressive competition within our market areas.
<PAGE>

         Other  borrowings   decreased  $147.0  million  to  $392.2  million  at
September 30, 2006,  from $539.2  million at December 31, 2005. We attribute the
decrease in other  borrowings to a net  reduction of $100.0  million in our term
repurchase  agreements and a $35.2 million reduction in the outstanding  balance
of our Federal Home Loan Bank, or FHLB, advances. As further described in Note 9
to our Consolidated Financial Statements, we terminated $150.0 million and $50.0
million of term repurchase  agreements in the first and second quarters of 2006,
respectively,  to better position our overall interest rate risk profile. In the
third  quarter  of  2006,  we  entered  into a  $100.0  million  four-year  term
repurchase  agreement  and we  restructured  our  existing  $100.0  million term
repurchase  agreement  to extend the  maturity  date and to modify  the  pricing
structure.  The  decrease in our FHLB  advances  reflects  prepayments  of $20.5
million  and  $14.8   million  in  the  first  and  second   quarters  of  2006,
respectively, of advances that we assumed with certain of our bank acquisitions,
as further described in Note 9 to our Consolidated Financial Statements.

         Notes payable decreased $25.0 million to $75.0 million at September 30,
2006 as a result of scheduled quarterly principal  installment  payments of $5.0
million, which commenced on March 31, 2006, as well as additional prepayments of
$10.0 million on our $100.0 million term loan facility,  as further described in
Note 10 to our Consolidated Financial Statements.

         Subordinated  debentures  increased  $89.1 million to $304.5 million at
September 30, 2006,  from $215.5 million at December 31, 2005,  primarily due to
the issuance of $87.6 million of subordinated  debentures in private  placements
through three newly formed statutory  trusts.  On March 1, 2006, we issued $41.2
million of variable rate  subordinated  debentures to First Bank Statutory Trust
IV; on April 28, 2006,  we issued $20.6  million of variable  rate  subordinated
debentures  to First Bank  Statutory  Trust V; and on June 16,  2006,  we issued
$25.8 million of variable rate  subordinated  debentures to First Bank Statutory
Trust  VI,  as  further  described  in  Note  11 to our  Consolidated  Financial
Statements.  A portion of the proceeds  from the issuance of these  subordinated
debentures  were utilized to fund our  acquisitions  of FINB, SDCB and Oak Lawn.
The remaining  proceeds will be used to fund future  acquisitions as well as for
general corporate purposes. The increase in our subordinated debentures was also
attributable to the continued amortization of debt issuance costs and changes in
the fair value of our interest  rate swap  agreements  designated  as fair value
hedges,  following the  termination of our single  remaining fair value interest
rate swap agreement,  in February 2006, that hedged certain of our  subordinated
debentures, as further discussed under "--Interest Rate Risk Management."

         Stockholders' equity was $763.9 million and $678.9 million at September
30, 2006 and December 31, 2005,  respectively,  reflecting  an increase of $84.9
million.  We attribute  the increase to net income of $80.7  million,  partially
offset by dividends  paid on our Class A and Class B preferred  stock and a $4.7
million increase in accumulated other  comprehensive  income,  comprised of $2.9
million   associated  with  changes  in  unrealized  gains  and  losses  on  our
available-for-sale  investment  securities portfolio and $1.8 million associated
with changes in the fair value of our derivative financial instruments.


                              Results of Operations


Net Income

         Net income was $29.7  million and $27.5  million  for the three  months
ended  September  30, 2006 and 2005,  respectively.  For the nine  months  ended
September  30, 2006 and 2005,  net income was $80.7  million and $76.5  million,
respectively. Our return on average assets was 1.22% and 1.14% for the three and
nine months ended September 30, 2006, respectively,  compared to 1.23% and 1.17%
for the comparable periods in 2005. Our return on average  stockholders'  equity
was 16.01% and 15.08% for the three and nine months  ended  September  30, 2006,
respectively,  compared to 16.61% and 16.26% for the comparable periods in 2005.
Net income for the three and nine  months  ended  September  30,  2006  reflects
increased net interest income and  noninterest  income,  partially  offset by an
increase  in our  provision  for loan  losses and higher  levels of  noninterest
expense.  We  recorded a  provision  for loan  losses of $2.0  million  and $8.0
million for the three and nine months ended  September  30, 2006,  respectively.
For the nine months ended  September 30, 2005, we recorded a negative  provision
for loan  losses of $8.0  million to reduce our  allowance  for loan losses to a
level  commensurate  with the  decreasing  credit risk that  existed in the loan
portfolio during that period.  We did not record a provision for loan losses for
the three months ended September 30, 2005. The overall increase in our provision
for loan losses in 2006 contributed to a reduction in our earnings for the three
and  nine  months  ended   September  30,  2006,  as  further   discussed  under
"--Provision for Loan Losses."
<PAGE>

         The  increase in earnings in 2006  reflects our  continuing  efforts to
strengthen  net interest  income and net interest  margin while  continuing  our
focus on reducing the overall level of our nonperforming  assets.  For the three
and nine months ended  September  30, 2006,  our earnings  reflect  increases of
20.0% and 19.8% in net interest income,  and increases of 45 basis points and 42
basis  points  in  our  net  interest  margin,  respectively,  compared  to  the
comparable  periods in 2005.  The increase in net  interest  income for the nine
months ended  September 30, 2006  reflects:  (a) an overall  increase in average
interest-earning assets of 8.4% from the comparable period in 2005; (b) internal
loan growth coupled with higher  prevailing  interest rates in our markets;  (c)
the  transfer  of  funding  from   lower-yielding   investment   securities   to
higher-yielding  loans;  (d) the  reduction  of the use of higher  cost  funding
sources,  such as term  repurchase  agreements  and FHLB  advances;  and (e) the
acquisition of banks and other financial service companies completed in 2005 and
2006.  The increase  was  partially  offset by (a)  increased  interest  expense
stemming from higher interest rates paid on an increasing deposit base driven by
internal  growth and our 2005 and 2006  acquisitions,  as well as a shift in our
deposit mix to higher volumes of time deposit accounts;  and (b) higher interest
rates paid on other borrowings and our subordinated debentures. In addition, our
net  interest  income was  adversely  affected  by a decline in  earnings on our
interest rate swap  agreements  that were entered into in  conjunction  with our
interest rate risk management  program,  which declined primarily as a result of
an increase in prevailing  interest  rates and the maturity and  termination  of
certain interest rate swap agreements,  as further  discussed under  "--Interest
Rate Risk  Management."  While our earnings have  benefited  from the increasing
interest rate environment,  overall conditions within our markets and the impact
of the decline in  earnings on our  interest  rate swap  agreements  continue to
exert pressure on our net interest  income and net interest  margin.  During the
third quarter of 2006, we  significantly  expanded our utilization of derivative
financial  instruments in conjunction with planned hedging strategies associated
with our interest  rate risk  management  program,  as further  discussed  under
"--Interest Rate Risk Management."

         Our ongoing  efforts to improve our overall  asset  quality  levels are
reflected in a 13.3% overall reduction in our nonperforming assets for the first
nine months of 2006,  which declined to $86.0 million at September 30, 2006 from
$99.2  million at  December  31,  2005.  However,  our  nonperforming  assets at
September 30, 2006  increased 9.6% from $78.5 million at June 30, 2006 resulting
from the  deterioration of the financial  position of two credit  relationships.
Nonperforming  loans were $79.1 million at September 30, 2006, compared to $73.0
million at June 30, 2006 and $97.2 million at December 31, 2005, and represented
1.02%,  0.96% and 1.38% of loans, net of unearned  discount,  respectively.  The
$13.2  million  reduction in the level of  nonperforming  assets during the nine
months ended  September  30, 2006  primarily  resulted  from the sale of certain
acquired  nonperforming  loans,  loan payoffs  and/or  external  refinancing  of
various credits.  We recorded net loan charge-offs of $1.3 million for the three
months ended September 30, 2006 and net loan recoveries of $772,000 for the nine
months ended September 30, 2006. Net loan charge-offs were $1.8 million and $4.7
million for the three and nine months ended September 30, 2005, respectively. We
continue to closely monitor our loan portfolio and consider these factors in our
overall  assessment of the adequacy of the allowance for loan losses, as further
discussed  under  "--Provision  for Loan Losses" and "--Loans and  Allowance for
Loan Losses."

         Noninterest  income was $30.0  million and $81.4  million for the three
and nine  months  ended  September  30,  2006,  respectively,  compared to $24.9
million and $72.4 million for the comparable periods in 2005. Noninterest income
for the three and nine  months  ended  September  30,  2006  reflects  increased
service charges on deposit  accounts and customer service fees related to higher
deposit  balances,  increased  commission fee income  associated  with our newly
acquired  insurance  brokerage  agency,  and  increased  gains on sales of other
assets. These increases were partially offset by reduced gains on loans sold and
held for sale resulting from a decline in the volume of loans sold, a write-down
of a  nonperforming  loan held for sale prior to its  transfer  back to the loan
portfolio in September 2006,  partially  offset by a gain on the sale of certain
nonperforming  loans in March 2006,  as further  discussed  under  "--Loans  and
Allowance  for Loan Losses."  Noninterest  income for 2006 also  increased  loan
servicing income associated with the capitalization of mortgage servicing rights
related to the securitization of certain residential mortgage loans in March and
April 2006.  Noninterest income also reflects net gains on investment securities
of $1.6 million for the three months ended September 30, 2006,  including market
valuation  adjustments on our trading securities  portfolio of $1.2 million, and
net losses on  investment  securities  of $2.4 million for the nine months ended
September  30,  2006,   which  include  $2.7  million  of  losses  on  sales  of
available-for-sale  investment  securities  associated  with the  termination of
certain of our term repurchase agreements, as further described in Note 9 to our
Consolidated Financial Statements.

         Noninterest  expense was $80.5 million and $236.3 million for the three
and nine  months  ended  September  30,  2006,  respectively,  compared to $67.9
million and $201.9 million for the comparable  periods in 2005. The  acquisition
of UPAC, our insurance premium finance company,  and Adrian Baker, our insurance
brokerage agency, in addition to our acquisitions of banks completed in 2005 and
2006,  resulted in significant  expansion of our employee base and branch office

<PAGE>

network, and contributed to the increase in overall expense levels, specifically
salaries and employee  benefits  expense,  occupancy and furniture and equipment
expense,   and   amortization  of  intangible   assets   associated  with  these
transactions.  The  increase in salaries  and  employee  benefits  expense  also
resulted from continued costs associated with employing and retaining  qualified
personnel,  including increased costs driven by enhanced incentive  compensation
programs and other employee  benefit plans.  Our system  conversions  associated
with recent acquisitions and the expansion of technological equipment,  networks
and  communication  channels,  contributed  to the overall levels of information
technology  fees. The overall  increase in  noninterest  expense also reflects a
higher  level of  charitable  contributions.  We  continue  to  closely  monitor
noninterest  expense  levels  and have  implemented  certain  expense  reduction
measures in an effort to improve our expense control in future periods.


Net Interest Income

         Net interest  income,  expressed on a  tax-equivalent  basis,  reflects
continued  growth,  increasing to $99.6 million and $286.9 million for the three
and nine  months  ended  September  30,  2006,  respectively,  compared to $83.0
million and $239.5 million for the comparable  periods in 2005. Our net interest
margin  increased 45 basis points and 42 basis points to 4.45% and 4.39% for the
three and nine months ended  September  30, 2006,  respectively,  from 4.00% and
3.97% for the comparable  periods in 2005. 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
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 equivalent yield earned on interest-earning  assets and the average rate
paid on interest-bearing liabilities.

         The  increase  in our net  interest  income  reflects  an  increase  in
interest-earning  assets  provided  by  internal  growth  and our  2005 and 2006
acquisitions  as well as higher  interest rates on increased  loan volumes.  The
increase  was  partially  offset by  reduced  interest  income  on a  decreasing
portfolio of investment  securities;  increased interest expense associated with
higher  interest rates paid on a changing and  increasing  deposit base mix that
reflects  increased  average time deposits as opposed to transactional  accounts
such as demand and savings  accounts;  and increased  interest rates paid on our
other  borrowings  and on the  subordinated  debentures  that we issued in 2006.
Average  interest-earning  assets  increased  8.0% and 8.4% to $8.88 billion and
$8.74  billion  for  the  three  and  nine  months  ended  September  30,  2006,
respectively, from $8.22 billion and $8.06 billion for the comparable periods in
2005. The increase is primarily  attributable  to continued  internal growth and
interest-earning  assets  provided  by our  acquisitions  completed  in 2005 and
during the first nine months of 2006,  which provided assets,  in aggregate,  of
$280.3  million  and  $478.5  million,  respectively.  Net  interest  income was
adversely impacted by a decline in earnings on our interest rate swap agreements
that were entered into in  conjunction  with our interest  rate risk  management
program. The derivative financial instruments reduced our net interest income by
$1.2 million and $3.6 million for the three and nine months ended  September 30,
2006, respectively,  and $626,000 for the three months ended September 30, 2005,
in contrast to increasing  our net interest  income by $3.3 million for the nine
months  ended  September  30,  2005,  reflecting  a decline in  earnings  on our
interest  rate swap  agreements  of $604,000  and $6.9 million for the three and
nine months ended September 30, 2006,  respectively,  as further discussed under
"--Interest Rate Risk Management." Despite the rising interest rate environment,
overall  competitive  conditions  within our market areas, and the impact of the
maturity and termination of certain interest rate swap agreements,  as discussed
above and under "--Interest Rate Risk Management," continue to exert pressure on
our net  interest  income and net  interest  margin.  However,  during the third
quarter  of  2006,  we  expanded  our   utilization   of  derivative   financial
instruments, as further discussed under "--Interest Rate Risk Management."

         Average loans, net of unearned  discount,  were $7.63 billion and $7.38
billion for the three and nine months ended September 30, 2006, respectively, in
comparison to $6.45 billion and $6.29 billion for the same periods in 2005.  The
yield on our loan  portfolio  increased 122 basis points and 127 basis points to
7.98%  and  7.73%  for the  three and nine  months  ended  September  30,  2006,
respectively,  in  comparison  to 6.76% and 6.46% for the same  periods in 2005.
Although  our loan  portfolio  yields  increased  commensurate  with the  rising
interest rate  environment  during 2005 and 2006,  total interest  income on our
loan portfolio was adversely impacted by decreased earnings on our interest rate
swap  agreements  designated as cash flow hedges.  Higher interest rates and the

<PAGE>

maturities  of  interest  rate swap  agreements  designated  as cash flow hedges
resulted  in  decreased  earnings  on our  swap  agreements,  thereby  partially
offsetting our increased net interest income as well as the overall  increase in
yields on our loan portfolio.  Our interest rate swap  agreements  designated as
cash flow  hedges  reduced  interest  income on loans by $1.2  million  and $2.8
million for the three and nine months ended  September  30, 2006,  respectively,
and  increased  interest  income on loans by $170,000  and $2.9  million for the
comparable  periods  in 2005.  Interest  income on our loan  portfolio  for 2006
includes  a $2.0  million  recovery  of  interest  and fees from the payoff of a
single  nonaccrual  loan, as further  described under "--Loans and Allowance for
Loan  Losses." The increase in average  loans of $1.18 billion and $1.09 billion
for the three and nine months ended September 30, 2006,  respectively,  compared
with  the  comparable  periods  in  2005,   reflects  internal  growth  and  our
acquisitions  completed  in 2005 and 2006,  partially  offset by a reduction  of
$138.9  million  related to the  securitization  of  certain of our  residential
mortgage loans held in our loan portfolio, the sale of $100.0 million of certain
residential  mortgage loans, and reductions in our nonperforming  loan portfolio
due to the sale of certain  nonperforming  loans,  loan payoffs and/or  external
refinancing  of  various  credits,  as  further  described  under  "--Loans  and
Allowance  for Loan Losses." Our  acquisitions  completed in 2005 and during the
first nine months of 2006 provided loans,  net of unearned  discount,  of $209.6
million  and  $391.0  million,  in  aggregate,  respectively,  on the  dates  of
acquisition.  The  increase  in average  loans for the first nine months of 2006
compared to the same period in 2005  primarily  resulted  from: a $446.4 million
increase in average real estate  mortgage  loans; a $374.1  million  increase in
average  real  estate  construction  and  development  loans;  a $183.4  million
increase in average  commercial,  financial and agricultural  loans; and a $93.7
million increase in average loans held for sale.

         Average investment  securities were $1.17 billion and $1.27 billion for
the three and nine months ended  September 30, 2006,  respectively,  compared to
$1.68 billion and $1.70 billion for the comparable periods in 2005. The yield on
our investment portfolio was 4.78% and 4.66% for the three and nine months ended
September 30, 2006, respectively, compared to 4.09% and 4.15% for the comparable
periods in 2005. Investment securities provided by our acquisitions completed in
2005 and  during  the first nine  months of 2006 were  $20.1  million  and $37.3
million,  in  aggregate,  respectively,  as of the dates of  acquisition.  Funds
available  from deposit  growth and excess  short-term  investments,  as well as
maturities of investment securities, were utilized to fund internal loan growth.
In March 2006 and April 2006, our investment  securities increased $77.1 million
and $61.8 million,  respectively, due to the securitization of $138.9 million of
certain  of  our  residential   mortgage  loans  held  in  our  loan  portfolio.
Additionally, as discussed under "--Interest Rate Risk Management" and in Note 9
to our Consolidated  Financial  Statements,  we terminated $150.0 million of our
term  repurchase  agreements  during the first quarter of 2006 and  recognized a
combined   loss  of  $2.4   million   on  the   sale  of   $150.0   million   of
available-for-sale  investment securities associated with the termination of the
term repurchase agreements. In addition, we terminated $50.0 million of our term
repurchase agreements during the second quarter of 2006 and recognized a loss of
$310,000  on  the  sale  of  $50.0  million  of  available-for-sale   investment
securities associated with the termination of the term repurchase agreement.

         Average  deposits  increased to $8.04 billion and $7.91 billion for the
three and nine months ended September 30, 2006, respectively, from $7.23 billion
and $7.12  billion for the  comparable  periods in 2005.  For the three and nine
months ended September 30, 2006, the aggregate weighted average rate paid on our
deposit  portfolio  increased 111 basis points and 106 basis points to 3.33% and
3.08%,  respectively,  from 2.22% and 2.02% for the comparable  periods in 2005,
reflective of the rising  interest rate  environment  and a change in the mix of
our average  deposits which reflects  increasing time deposits for the three and
nine months ended  September  30, 2006, as compared to the same periods in 2005.
Average time  deposits  were $3.73  billion and $3.57  billion for the three and
nine months ended  September 30, 2006,  respectively,  compared to $2.89 billion
and $2.84 billion for the comparable periods in 2005. Average demand and savings
deposits  were $4.31  billion  and $4.34  billion  for the three and nine months
ended  September  30, 2006,  respectively,  compared to $4.34  billion and $4.28
billion for the comparable periods in 2005. In addition,  the decreased earnings
associated with certain of our interest rate swap agreements  designated as fair
value hedges,  as well as the termination of $150.0 million of fair value hedges
in February 2005, resulted in a reduction in our net interest income of $924,000
and $1.5 million for the three and nine months  ended  September  30, 2005.  The
increase in average  deposits is reflective of internal growth stemming from our
deposit development  programs and our acquisitions  completed in 2005 and during
the first nine months of 2006, which provided deposits, in aggregate,  of $238.1
million and $271.3 million, respectively.
<PAGE>

         Average other borrowings decreased to $375.3 million and $382.3 million
for the three and nine months ended September 30, 2006,  respectively,  compared
to $570.9  million and $572.7  million for the  comparable  periods in 2005. The
aggregate weighted average rate paid on our other borrowings was 4.57% and 4.29%
for the three and nine months ended September 30, 2006,  respectively,  compared
to 3.44% and 2.91% for the  comparable  periods in 2005. The increased rate paid
on our other borrowings reflects the rising short-term interest rate environment
that began in mid-2004.  The decrease in average  other  borrowings  for 2006 of
$190.4 million is primarily  attributable  to the  termination of $150.0 million
and $50.0 million of term repurchase agreements in the first and second quarters
of 2006,  respectively,  partially  offset by a $100.0  million term  repurchase
agreement  entered into in the third  quarter of 2006,  as further  described in
Note 9 to our Consolidated Financial Statements.  In addition, on March 17, 2006
and May 10, 2006, we prepaid $20.5 million and $14.8 million,  respectively,  of
FHLB advances that were assumed with certain bank acquisitions.

         Notes  payable  averaged  $85.3 million and $93.4 million for the three
and nine  months  ended  September  30,  2006,  respectively,  compared to $44.3
million and $18.8  million for the  comparable  periods in 2005.  The  aggregate
weighted  average  rate  paid on our notes  payable  was 6.67% and 6.20% for the
three and nine months ended September 30, 2006, respectively,  compared to 7.71%
and 7.85% for the comparable  periods in 2005. The weighted average rate paid on
our notes payable  reflects  unused  commitment,  arrangement  and renewal fees.
Exclusive of these fees, the weighted average rate paid on our notes payable was
6.36%  and  6.06%  for the  three and nine  months  ended  September  30,  2006,
respectively, compared to 4.74% and 4.55% for the comparable periods in 2005. In
conjunction  with our Amended and  Restated  Secured  Credit  Agreement  that we
entered into in August 2005 to restructure our overall financing arrangement, we
borrowed  $80.0  million  on the  term  loan in  August  2005 and  borrowed  the
remaining  $20.0 million on the term loan in November  2005. The proceeds of the
term loan were used to fund our  acquisition  of IBOC, and to partially fund the
redemption  of our  10.24%  subordinated  debentures  issued to First  Preferred
Capital  Trust II in September  2005,  as further  discussed  below.  As further
described in Note 10 to our  Consolidated  Financial  Statements,  on August 10,
2006,  we entered into an Amendment to our Amended and Restated  Secured  Credit
Agreement and reduced certain components of our financing arrangement, including
the overall pricing structure.  We subsequently repaid $25.0 million of the term
loan during 2006,  reducing the balance to $75.0  million at September 30, 2006.
The outstanding  balance of our former  revolving  credit facility was repaid in
full in June 2005 through dividends from our subsidiary bank.

         Average subordinated  debentures were $304.4 million and $270.6 million
for the three and nine months ended September 30, 2006,  respectively,  compared
to $274.5  million and $274.0  million for the  comparable  periods in 2005. The
aggregate  weighted average rate paid on our  subordinated  debentures was 8.31%
and 8.77% for the three and nine months ended September 30, 2006,  respectively,
compared to 8.65% and 7.85% for the comparable periods in 2005. Interest expense
on our subordinated  debentures was $6.4 million and $17.8 million for the three
and nine months ended September 30, 2006, respectively, compared to $6.0 million
and $16.1 million for the comparable  periods in 2005. As previously  discussed,
we issued $41.2 million of variable rate subordinated  debentures in March 2006,
$20.6 million of variable rate subordinated  debentures in April 2006, and $25.8
million of variable rate subordinated  debentures in June 2006 to partially fund
our bank  acquisitions.  In addition,  in September  2005, we repaid in full our
outstanding $59.3 million of 10.24%  subordinated  debentures that we previously
issued  in  October  2000.  The  reduction  of  these  outstanding  subordinated
debentures,  which carried a high interest  rate,  improved  future net interest
income and net interest  margin.  However,  the earnings  impact of our interest
rate swap agreements had a declining impact on the reduction of interest expense
associated  with  our   subordinated   debentures.   These  interest  rate  swap
agreements,  which reduced interest expense by $129,000 and $1.9 million for the
three and nine months ended September 30, 2005, respectively, increased interest
expense by $814,000 for the nine months  ended  September  30, 2006.  As further
discussed  under  "--Interest  Rate Risk  Management,"  on February 14, 2006, we
terminated our single  remaining $25.0 million notional fair value interest rate
swap  agreement  associated  with our  subordinated  debentures  and  recognized
additional  expense  of  $849,000  in  aggregate,  representing  the  net  basis
adjustment   associated  with  the  fair  value  interest  rate  swap  agreement
terminated in February 2006 and the remaining net basis  adjustments  associated
with the fair value  interest  rate swap  agreements  that we  terminated in May
2005.

         The following  table sets forth,  on a  tax-equivalent  basis,  certain
information  relating to our average  balance  sheets,  and reflects the average
yield earned on  interest-earning  assets, the average cost of  interest-bearing
liabilities and the resulting net interest income for the periods indicated:



<PAGE>

<TABLE>
<CAPTION>


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

             ASSETS
             ------

Interest-earning assets:
<S>      <C>   <C>               <C>        <C>     <C>   <C>        <C>     <C>   <C>        <C>     <C>   <C>        <C>     <C>
   Loans (1)(2)(3)(4)..........  $7,634,494 153,540 7.98% $6,450,922 109,997 6.76% $7,382,161 426,877 7.73% $6,288,486 303,801 6.46%
   Investment securities (4)...   1,174,077  14,134 4.78   1,676,052  17,296 4.09   1,270,896  44,279 4.66   1,698,032  52,710 4.15
   Short-term investments......      75,835   1,018 5.33      96,257     841 3.47      89,084   3,288 4.93      75,830   1,701 3.00
                                 ---------- -------       ---------- -------       ---------- -------       ---------- -------
         Total interest-earning
           assets..............   8,884,406 168,692 7.53   8,223,231 128,134 6.18   8,742,141 474,444 7.26   8,062,348 358,212 5.94
                                            -------                  -------                  -------                  -------
Nonearning assets..............     776,127                  651,429                  736,317                  653,118
                                 ----------               ----------               ----------               ----------
         Total assets..........  $9,660,533               $8,874,660               $9,478,458               $8,715,466
                                 ==========               ==========               ==========               ==========

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

Interest-bearing liabilities:
   Interest-bearing deposits:
     Interest-bearing demand
       deposits................  $  949,195   2,057 0.86% $  897,502     979 0.43% $  959,983   5,832 0.81% $  888,585   2,799 0.42%
     Savings deposits..........   2,104,323  13,491 2.54   2,171,596   8,345 1.52   2,117,601  36,929 2.33   2,150,792  20,420 1.27
     Time deposits of $100
       or more.................   1,369,503  15,902 4.61     907,311   7,206 3.15   1,288,897  41,716 4.33     854,041  18,806 2.94
     Other time deposits (3)...   2,356,661  25,526 4.30   1,979,844  16,832 3.37   2,276,270  68,706 4.04   1,986,212  46,967 3.16
                                 ---------- -------       ---------- -------       ---------- -------       ---------- -------
         Total interest-bearing
           deposits............   6,779,682  56,976 3.33   5,956,253  33,362 2.22   6,642,751 153,183 3.08   5,879,630  88,992 2.02
   Other borrowings............     375,278   4,322 4.57     570,919   4,946 3.44     382,280  12,263 4.29     572,686  12,480 2.91
   Notes payable (5)...........      85,315   1,434 6.67      44,348     862 7.71      93,417   4,331 6.20      18,791   1,103 7.85
   Subordinated debentures (3).     304,412   6,377 8.31     274,466   5,985 8.65     270,568  17,751 8.77     274,026  16,096 7.85
                                 ---------- -------       ---------- -------       ---------- -------       ---------- -------
         Total interest-bearing
           liabilities.........   7,544,687  69,109 3.63   6,845,986  45,155 2.62   7,389,016 187,528 3.39   6,745,133 118,671 2.35
                                            -------                  -------                  -------                  -------
Noninterest-bearing liabilities:
   Demand deposits.............   1,257,277                1,274,933                1,263,623                1,242,166
   Other liabilities...........     123,611                   96,719                  109,743                   99,094
                                 ----------               ----------               ----------               ----------
         Total liabilities.....   8,925,575                8,217,638                8,762,382                8,086,393
Stockholders' equity...........     734,958                  657,022                  716,076                  629,073
                                 ----------               ----------               ----------               ----------
         Total liabilities and
           stockholders' equity  $9,660,533               $8,874,660               $9,478,458               $8,715,466
                                 ==========               ==========               ==========               ==========


Net interest income............              99,583                   82,979                   286,916                  239,541
                                            =======                  =======                   =======                  =======
Interest rate spread...........                     3.90                     3.56                     3.87                     3.59
Net interest margin (6)........                     4.45%                    4.00%                    4.39%                    3.97%
                                                    ====                     ====                     ====                     ====

--------------------
(1)  For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2)  Interest income on loans includes loan fees.
(3)  Interest income and interest expense include the effects of interest rate swap agreements.
(4)  Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The tax-equivalent adjustments were
     approximately $399,000 and $1.2 million for the three and nine months ended September 30, 2006,  respectively, and
     $333,000 and $995,000 for the comparable periods in 2005.
(5)  Interest expense on notes payable includes commitment, arrangement and  renewal fees. Exclusive of these fees, the
     interest rates paid were 6.36% and 6.06% for the three and nine months ended September 30, 2006, respectively, and
     4.74% and 4.55% for the comparable periods in 2005.
(6)  Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-
     earning assets.

</TABLE>



<PAGE>



Provision for Loan Losses

         We recorded provisions for loan losses of $2.0 million and $8.0 million
for the three and nine  months  ended  September  30,  2006,  respectively.  The
provisions  recorded  during 2006 were primarily  driven by  significant  growth
within our loan portfolio,  and also reflect an increase in nonperforming  loans
during the second and third quarters of 2006, following a significant  reduction
in our nonperforming  loans from December 31, 2005 to March 31, 2006, as further
discussed  under "--Loans and Allowance for Loan Losses." We recorded a negative
provision  for loan losses of $8.0 million for the nine months  ended  September
30, 2005  commensurate  with the decreasing credit risk that existed in the loan
portfolio during that period.  We did not record a provision for loan losses for
the three months  ended  September  30,  2005.  During the three and nine months
ended September 30, 2005, we experienced improvement in nonperforming loans that
was primarily attributable to loan payoffs and/or external refinancings, as well
as a reduction in net loan charge-offs during the first nine months of 2005.

         We recorded net loan  charge-offs  of $1.3 million for the three months
ended  September 30, 2006,  compared to net loan  recoveries of $772,000 for the
nine months ended  September 30, 2006.  Net loan  recoveries  for the first nine
months of 2006 include a loan recovery of $5.0 million on the payoff of a single
loan that was  transferred  to our held for sale portfolio on December 31, 2005.
We recorded net loan  charge-offs of $1.8 million and $4.7 million for the three
and nine months ended September 30, 2005, respectively.  Our nonperforming loans
decreased $18.1 million,  or 18.6%, to $79.1 million at September 30, 2006, from
$97.2 million at December 31, 2005.  Our net loan  recoveries for the first nine
months  of  2006  were  (0.01%)  of  average  loans,   representing  significant
improvement  over our net charge-offs for the comparable  period of 2005,  which
were  0.08% of average  loans,  and net loan  charge-offs  of 0.21% for the year
ended December 31, 2005. However,  our nonperforming loans at September 30, 2006
increased  $6.1  million,  or 8.3%,  from $73.0  million at June 30,  2006.  The
decrease  in the overall  level of  nonperforming  loans  during the nine months
ended  September 30, 2006 reflects  improvement in asset quality  resulting from
the sale of  nonperforming  loans  that  were  transferred  to the held for sale
portfolio on December 31, 2005,  loan payoffs  and/or  external  refinancing  of
various credits, and a significant reduction in net loan charge-offs, as further
discussed  under  "--Loans and  Allowance  for Loan  Losses." This was partially
offset by credit relationships of $8.9 million, $10.0 million, and $7.5 million,
that were placed on nonaccrual status in the first,  second,  and third quarters
of 2006,  respectively,  contributing to the overall  increase in  nonperforming
loans in 2006.  Loans past due 90 days or more and still accruing  interest were
$6.4  million at September  30, 2006,  compared to $5.7 million at June 30, 2006
and $5.6 million at December 31, 2005.

         Our allowance for loan losses was $149.3 million at September 30, 2006,
compared to $147.4  million at June 30, 2006 and $135.3  million at December 31,
2005,  representing  1.93%,  1.94% and 1.93% of loans, net of unearned discount,
respectively.  Our allowance  for loan losses as a percentage  of  nonperforming
loans was 188.79% at September  30,  2006,  compared to 201.81% at June 30, 2006
and 139.23% at December 31, 2005. The allowance for loan losses at September 30,
2006 includes  $5.2 million of balances  acquired in  conjunction  with our 2006
acquisitions.  Management  has closely  monitored its  operations to address the
ongoing  challenges  posed  by the  significant  level  of  nonperforming  loans
acquired  with  our  CIB  Bank  acquisition  in  November  2004.  The  level  of
nonperforming  loans  associated  with our purchase of CIB Bank has decreased to
$17.1  million,  or  21.6%  of  nonperforming  loans,  at  September  30,  2006,
representing  a  significant   reduction   from  $55.0  million,   or  56.6%  of
nonperforming loans, at December 31, 2005. We continue our efforts to reduce the
overall level of  nonperforming  loans in our loan portfolio,  with attention to
the loan portfolios acquired through our bank acquisitions. Management considers
these  factors in its overall  assessment  of the adequacy of the  allowance for
loan losses.

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


Noninterest Income

         Noninterest  income was $30.0  million and $81.4  million for the three
and nine  months  ended  September  30,  2006,  respectively,  compared to $24.9
million and $72.4 million for the comparable periods in 2005. Noninterest income
consists  primarily of service charges on deposit  accounts and customer service
fees, mortgage-banking revenues, investment management income and other income.

         Service  charges on deposit  accounts  and  customer  service fees were
$11.1  million and $32.4  million for the three and nine months ended  September
30, 2006, respectively, in comparison to $10.2 million and $29.7 million for the
comparable periods in 2005. The increase in service charges and customer service
fees is  attributable  to increased  deposit  account  balances  associated with
internal  growth and our  acquisitions  of banks  completed in 2005 and 2006, as
further  discussed  under   "--Financial   Condition"  and  in  Note  2  to  our
Consolidated  Financial  Statements.   The  increase  is  also  attributable  to
additional  products  and  services  available  and  utilized  by our retail and

<PAGE>

commercial customer base, increased fee income from customer service charges for
non-sufficient  funds and returned  check fees, as well as pricing  increases on
certain service charges and customer  service fees instituted to reflect current
market conditions.

         The gain on loans  sold and held for sale was $4.6  million  and  $17.5
million for the three and nine months ended September 30, 2006, respectively, in
comparison to $6.5 million and $17.9 million for the comparable periods in 2005.
We primarily attribute the decrease to a $1.1 million write-down of the carrying
value of a  nonperforming  loan that was  transferred to our loans held for sale
portfolio on December 31, 2005 and  subsequently  transferred back into our loan
portfolio at fair value in September  2006, as further  discussed under "--Loans
and Allowance  for Loan Losses," and a decrease in the volume of mortgage  loans
originated and subsequently  sold in the secondary  market  primarily  resulting
from an increase in market interest rates. Proceeds from sales of loans held for
sale were $757.6  million for the nine  months  ended  September  30,  2006,  in
comparison  to $895.3  million for the same  period in 2005.  The  decrease  was
partially  offset  by a $1.7  million  gain,  before  applicable  income  taxes,
recorded  on the sale of  certain  nonperforming  loans in March  2006 that were
transferred  to our loans held for sale  portfolio  on December  31,  2005,  the
recognition of $1.2 million and $927,000 of income in March 2006 and April 2006,
respectively,  generated from the  capitalization  of mortgage  servicing rights
pertaining to the  securitization  and transfer to our  investment  portfolio of
$77.1 million and $61.8 million,  respectively,  of  residential  mortgage loans
held in our loan portfolio,  as further  discussed in Note 4 to our Consolidated
Financial  Statements;  and a net gain of $386,000 on the sale of $100.0 million
of certain residential mortgage loans in August 2006, as further discussed under
"--Loans and Allowance for Loan Losses."

         Noninterest income includes a net gain on investment securities of $1.6
million and a net loss on  investment  securities  of $2.4 million for the three
and nine months ended September 30, 2006,  respectively,  in comparison to a net
loss on investment  securities of $3,000 for the comparable periods in 2005. The
net gain for the three months ended  September  30, 2006 resulted from a gain of
$389,000  recognized in August 2006 on the redemption of common stock held as an
available-for-sale  investment security,  and a net gain of $1.2 million related
to changes in the fair value of securities  held in our trading  portfolio.  The
net loss for the nine months ended  September 30, 2006 resulted  primarily  from
sales of certain  available-for-sale  investment  securities associated with the
termination of three $50.0 million term repurchase  agreements  during the first
quarter of 2006 and the  termination  of $50.0 million of a $150.0  million term
repurchase  agreement  in April  2006,  as  further  discussed  in Note 9 to our
Consolidated Financial Statements, partially offset by the aforementioned gains.

         Bank-owned  life  insurance  investment  income was  $665,000  and $2.4
million for the three and nine months ended September 30, 2006, respectively, in
comparison to $1.2 million and $3.7 million for the comparable  periods in 2005.
The decrease  reflects a reduced  return on the  performance  of the  underlying
investments  surrounding the insurance contracts which is primarily attributable
to the portfolio mix of investments and overall market conditions.

         Investment  management income generated by MVP, our institutional money
management subsidiary,  was $2.0 million and $6.6 million for the three and nine
months ended September 30, 2006, respectively, in comparison to $2.1 million and
$6.4 million for the comparable  periods in 2005. Despite the slight increase in
investment  management  income  recorded for the nine months ended September 30,
2006, the level of income  generated from portfolio  management fees declined in
the third  quarter of 2006,  compared to the same period in 2005, as a result of
the loss of certain  customers.  We  anticipate  this decline  will  continue in
future  months,  however,  we are unable to predict the level of such decline at
the present time.

         Other income was $10.0 million and $24.8 million for the three and nine
months ended September 30, 2006, respectively, in comparison to $5.0 million and
$14.8  million for the  comparable  periods in 2005.  We  attribute  the primary
components of the increase in other income to:

         >>    commission  fee income of $1.5  million and $3.3  million for the
               three and nine months ended  September  30,  2006,  respectively,
               generated  by  Adrian  Baker,  our  insurance   brokerage  agency
               acquired on March 31, 2006, as further described in Note 2 to our
               Consolidated Financial Statements;

         >>    an increase of $2.7 million and $2.3 million in gains on sales of
               other  assets for the three and nine months ended  September  30,
               2006,  respectively,  in  comparison to the same periods in 2005,
               reflecting a $2.8 million gain  recognized  in September  2006 on
               the sale of stock that was  acquired as  settlement  in full of a
               loan charged-off in prior years;

         >>    a net increase of $2.0 million and $1.3 million in loan servicing
               fees for the three and nine months ended  September  30, 2006, in
               comparison  to  the  same  periods  in  2005,   attributable  to:
               decreases  of $2.2  million and $1.4  million,  respectively,  in
               impairment  charges on SBA servicing rights  primarily  resulting
               from the  recognition  of a $2.0  million  impairment  charge  in

<PAGE>

               September 2005 following  substantial damage to several shrimping
               vessels within the servicing  portfolio  caused by the effects of
               Hurricane  Katrina;  and  decreases of $443,000 and $1.2 million,
               respectively, in the amortization of servicing rights, as further
               described  in Note 4 to our  Consolidated  Financial  Statements;
               partially  offset by  decreases  of  $664,000  and $1.4  million,
               respectively, in fees from loans serviced for others;

         >>    an  increase  of $1.0  million  in gains  on sales of other  real
               estate.  Gains on sales of other real  estate were  $316,000  and
               $1.9  million for the three and nine months ended  September  30,
               2006,  respectively,  and included a $1.5 million gain recognized
               on the sale of a parcel  of other  real  estate in  January  2006
               acquired  with our  acquisition  of CIB  Bank.  Gains on sales of
               other real estate for the three and nine months  ended  September
               30, 2005 were $413,000 and $915,000, respectively;

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

         >>    a  decrease  of   $934,000  in  net  losses  on  our   derivative
               instruments; and

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

         >>    a decrease in recoveries of certain loan principal  balances that
               had been  previously  charged-off  by the financial  institutions
               prior to their  acquisitions  by First Banks of $1.5  million and
               $1.2  million for the three and nine months ended  September  30,
               2006,  respectively,  in comparison to the comparable  periods in
               2005.

Noninterest Expense

         Noninterest  expense was $80.5 million and $236.3 million for the three
and nine months ended September 30, 2006,  respectively,  in comparison to $67.9
million and $201.9  million for the  comparable  periods in 2005. Our efficiency
ratio  decreased  slightly  to 62.30% and  64.38% for the three and nine  months
ended  September  30,  2006,  respectively,  from  63.06%  and  64.93%  for  the
comparable  periods in 2005. The increase in  noninterest  expense was primarily
attributable  to  increases  in  expenses  resulting  from  our  2005  and  2006
acquisitions,  including  salaries  and  employee  benefits  expense,  occupancy
expense and  information  technology  fees,  as well as increases in  charitable
contributions expense and other expense.

         Salaries and  employee  benefits  expense was $42.5  million and $124.6
million for the three and nine months ended September 30, 2006, respectively, in
comparison to $35.7  million and $103.1  million for the  comparable  periods in
2005.  We attribute  this increase to increased  salaries and employee  benefits
expenses associated with an aggregate of 19 additional branches acquired in 2005
and 2006,  one de novo branch  opened in 2005,  the  acquisitions  of UPAC,  our
insurance  premium finance company,  and Adrian Baker,  our insurance  brokerage
agency,  in addition to  generally  higher  salary and  employee  benefit  costs
associated  with  employing and  retaining  qualified  personnel,  including the
implementation  of enhanced  incentive  compensation and employee benefit plans.
Our total  full-time  equivalent  employees  increased  to  approximately  2,580
employees at September 30, 2006, from approximately 2,240 employees at September
30, 2005.

         Occupancy,  net of rental income,  and furniture and equipment  expense
was  $11.2  million  and $31.9  million  for the  three  and nine  months  ended
September  30,  2006,  respectively,  in  comparison  to $9.3  million and $27.6
million for the comparable  periods in 2005. The increase reflects higher levels
of expense resulting from our acquisitions in 2005 and 2006, as discussed above,
as well as increased technology equipment expenditures,  continued expansion and
renovation of certain corporate and branch offices,  and increased  depreciation
expense associated with acquisitions and capital expenditures.

         Information technology fees were $9.4 million and $27.6 million for the
three and nine months ended September 30, 2006,  respectively,  in comparison to
$9.1 million and $26.7 million for the comparable periods in 2005. As more fully
described in Note 6 to our Consolidated  Financial  Statements,  First Services,
L.P., a limited partnership  indirectly owned by our Chairman and members of his
immediate  family,  provides  information  technology  and  various  operational
support services to our subsidiaries  and us.  Information  technology fees also
include fees paid to outside servicers  associated with our mortgage lending and
trust divisions,  our small business lending and institutional  money management
subsidiaries,  and UPAC and Adrian Baker.  We attribute  the increased  level of
information  technology  fees to the additional  branch offices  provided by our
acquisitions and de novo branch office  openings;  certain  de-conversion  costs
from other providers associated with our acquisitions;  growth and technological
advancements  consistent with our product and service  offerings;  and continued
expansion and upgrades to technological  equipment,  networks and  communication
channels,  including costs to maintain security and provide  compliance with the

<PAGE>

Sarbanes-Oxley  Act of 2002;  partially offset by expense  reductions  resulting
from information  technology  conversions of our acquisitions completed in 2005,
as  well  as  the  achievement  of  certain  efficiencies  associated  with  the
implementation of various technology projects.

         Legal,  examination  and  professional  fees were $2.1 million and $6.6
million for the three and nine months ended September 30, 2006, respectively, in
comparison to $2.3 million and $6.7 million for the comparable  periods in 2005.
The  continued   expansion  of  overall   corporate   activities,   the  ongoing
professional  services  utilized by certain of our  acquired  entities,  and the
levels  of legal  fees  associated  with  certain  defense  litigation  have all
contributed to the overall expense levels in 2005 and 2006.

         Amortization   of   intangibles   associated   with  the   purchase  of
subsidiaries  was $2.2  million  and $5.4  million for the three and nine months
ended September 30, 2006,  respectively,  in comparison to $1.2 million and $3.5
million for the comparable periods in 2005. The increase is attributable to core
deposit  intangibles  associated  with  our  acquisitions  of FBA,  IBOC and NSB
completed in 2005 and our acquisition of FNBS,  Community  Bank,  FINB, SDCB and
Oak Lawn completed in January 2006, April 2006, May 2006, August 2006 and August
2006,  respectively,  and to the customer list  intangibles  associated with our
acquisitions of Adrian Baker and UPAC in March 2006 and May 2006,  respectively,
as  further  discussed  in  Note  2 and  Note 3 to  our  Consolidated  Financial
Statements.

         Charitable  contributions expense was $1.6 million and $4.9 million for
the three and nine months ended September 30, 2006, respectively,  in comparison
to $111,000 and $1.8 million for the comparable periods in 2005. The increase is
primarily attributable to First Bank's charitable  contributions to the Dierberg
Operating Foundation,  Inc., a charitable foundation created by our Chairman and
members  of  his  immediate  family,  as  further  discussed  in  Note  6 to our
Consolidated Financial Statements.

         Other expense was $7.6 million and $22.9 million for the three and nine
months ended September 30, 2006, respectively, in comparison to $6.7 million and
$21.6 million for the  comparable  periods in 2005.  Other  expense  encompasses
numerous general and administrative  expenses including  insurance,  freight and
courier  services,   correspondent  bank  charges,   miscellaneous   losses  and
recoveries,  expenses on other real estate owned, memberships and subscriptions,
transfer  agent  fees,  sales  taxes and travel,  meals and  entertainment.  The
increase is primarily attributable to:

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

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

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

         >>    a decrease of $1.1 million of  expenditures on other real estate.
               Expenditures  on other real estate were $193,000 and $364,000 for
               the three and nine months ended September 30, 2006, respectively.
               Expenditures  and losses on other real estate were  $337,000  and
               $1.4  million for the three and nine months ended  September  30,
               2005, and included expenditures of $812,000 and $170,000 recorded
               in the second and third quarters of 2005,  respectively,  related
               to a parcel of other real estate acquired in conjunction with our
               CIB Bank acquisition.


Provision for Income Taxes

         The  provision for income taxes was $17.2 million and $42.5 million for
the three and nine months ended September 30, 2006, respectively,  in comparison
to $13.3  million and $41.6  million  for the  comparable  periods in 2005.  The
effective  tax rate was 36.9% and  34.6%  for the  three and nine  months  ended
September  30,  2006,  respectively,  in  comparison  to 33.4% and 35.5% for the
comparable  periods in 2005.  The  effective  tax rate for the nine months ended
September  30, 2006  reflects a $3.2  million  reduction  of our  provision  for
federal and state income taxes in the first quarter of 2006  resulting  from the
reversal of certain tax reserves no longer deemed  necessary.  The effective tax
rate for the  comparable  period in 2005  reflects a reversal of a $3.1  million
state tax  reserve  in the  third  quarter  of 2005  that was no  longer  deemed
necessary  as a result of the  resolution  of a  potential  tax  liability.  The
changes  in the  effective  tax  rates  for the  periods  also  result  from the
utilization of certain tax credits.

<PAGE>

                          Interest Rate Risk Management

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


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

<S>                                                     <C>              <C>         <C>              <C>
         Cash flow hedges.............................  $ 600,000        --          300,000          114
         Fair value hedges............................         --        --           25,000          748
         Interest rate floor agreements...............    300,000       591          100,000           70
         Interest rate cap agreements.................    400,000       255               --           --
         Interest rate lock commitments...............      6,100        --            5,900           --
         Forward commitments to sell
           mortgage-backed securities.................     51,000        --           47,000           --
                                                        =========       ===         ========          ===
</TABLE>

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

         During the three and nine months ended  September 30, 2006, we realized
net interest  expense of $1.2  million and $3.6  million,  respectively,  on our
derivative financial instruments. For the three months ended September 30, 2005,
we  realized  net  interest  expense of  $626,000  on our  derivative  financial
instruments,  whereas for the nine months ended  September 30, 2005, we realized
net interest income of $3.3 million on our derivative financial instruments. The
decreased  earnings  are  primarily  attributable  to  increases  in  prevailing
interest  rates,  the  maturity of $200.0  million and $100.0  million  notional
amount of interest rate swap agreements  designated as cash flow hedges in March
2005 and April 2006, respectively, and the termination of $150.0 million, $101.2
million  and $25.0  million  notional  amount of interest  rate swap  agreements
designated as fair value hedges in February  2005,  May 2005 and February  2006,
respectively,  as further  discussed below.  Although we have implemented  other
methods to mitigate the  reduction in net interest  income  associated  with our
derivative  instruments,  the maturity and termination of the interest rate swap
agreements  has  resulted  in a  compression  of  our  net  interest  margin  of
approximately  three  basis  points  and 10 basis  points for the three and nine
months ended September 30, 2006,  respectively,  in comparison to the comparable
periods in 2005.  In addition,  the  increasing  interest rate  environment  has
mitigated  a portion of the effect of the  reduced  earnings  on our  derivative
financial  instruments.  During  the third  quarter  of 2006,  we  significantly
expanded  our  utilization  of  derivative  financial  instruments,  as  further
described below, in an effort to reduce the adverse impact that falling interest
rates would have on our net interest income.

         We  recorded  net  gains  of  $10,000  and net  losses  of  $59,000  on
derivative  instruments,  which  are  included  in  noninterest  income  in  our
consolidated statements of income, for the three and nine months ended September
30, 2006, respectively, in comparison to net losses of $403,000 and $993,000 for
the comparable  periods in 2005.  The net gains and net losses  recorded for the
three and nine months ended September 30, 2006, respectively, reflect changes in
the value of our interest rate floor  agreements  entered into in September 2005
and September 2006, and changes in the value of our interest rate cap agreements
entered  into  in  September  2006.  The net  losses  recorded  in 2005  reflect
valuation  changes in the fair value of our fair value hedges and the underlying
hedged  liabilities,  and  changes  in the  value  of our  interest  rate  floor
agreement entered into in September 2005.

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

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

         >>    On September 14, 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  loans  within  our
               commercial loan portfolio.  The swap agreements provide for us to
               receive a fixed rate of interest  and pay an  adjustable  rate of
               interest  equivalent  to the weighted  average prime lending rate
               minus 2.86%.  The terms of the swap agreements  provide for us to
               pay and receive interest on a quarterly basis.

         The amount  receivable by us under the swap agreements was $1.8 million
and $2.4 million at September 30, 2006 and December 31, 2005, respectively,  and
the amount  payable by us under the swap  agreements  was $2.6  million and $2.5
million at September 30, 2006 and December 31, 2005, respectively.

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

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

         September 30, 2006:
<S>                                                    <C>               <C>           <C>         <C>
             July 31, 2007...........................  $ 200,000         5.40%         3.08%       $ (3,612)
             September 18, 2009......................    200,000         5.39          5.20             528
             September 20, 2010......................    200,000         5.39          5.20             720
                                                       ---------                                   --------
                                                       $ 600,000         5.39          4.49        $ (2,364)
                                                       =========         ====          ====        ========

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

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

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

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

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%. On
August 24, 2006, we entered into a $200.0  million  notional  amount  three-year
interest rate floor agreement in conjunction with the  restructuring of our term
repurchase  agreement,  as  further  discussed  in  Note 9 to  our  Consolidated
Financial Statements, 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 carrying  value of
the  interest  rate floor  agreements,  which is included in other assets in our
consolidated  balance sheets, was $591,000 and $70,000 at September 30, 2006 and
December 31, 2005, respectively.

Interest Rate Floor Agreements  Embedded in Term Repurchase  Agreements.  During
2003 and 2004,  we entered  into five term  repurchase  agreements  under master
repurchase  agreements with unaffiliated third parties,  as further discussed in
Note 9 to our  Consolidated  Financial  Statements.  The  underlying  securities
associated with the term repurchase  agreements are  mortgage-backed  securities
and callable U.S.  Government  agency securities and are held by other financial
institutions under safekeeping  agreements.  The term repurchase agreements were
entered into with the objective of  stabilizing  net interest  income over time,
further protecting our net interest margin against changes in interest rates and
providing  funding for security  purchases.  The interest rate floor  agreements
included within the term repurchase  agreements  represent  embedded  derivative
instruments which, in accordance with existing accounting  literature  governing
derivative  instruments,  are  not  required  to  be  separated  from  the  term
repurchase  agreements  and accounted for  separately as a derivative  financial
instrument.  As such,  the term  repurchase  agreements  are  reflected in other
borrowings in our  consolidated  balance sheets and the related interest expense
is  reflected  as  interest  expense  on other  borrowings  in our  consolidated
statements of income.  In March 2005, in accordance  with our interest rate risk
management program, we modified our term repurchase  agreements to terminate the
interest rate cap agreements  embedded within the agreements and  simultaneously
enter into interest rate floor agreements,  also embedded within the agreements.
These modifications resulted in adjustments to the existing interest rate spread
to  LIBOR  for  the  underlying  agreements.  The  modified  terms  of the  term
repurchase agreements became effective during the second quarter of 2005. We did
not incur any costs associated with the  modifications of the agreements nor did
the modifications result in a change to the accounting treatment of the embedded
derivative instruments.

         In  November  2005,  we  terminated  a $50.0  million  term  repurchase
agreement with a maturity date of August 15, 2006, and simultaneously recognized
a loss of $2.9 million on the sale of  available-for-sale  investment securities
associated  with the termination of the term  repurchase  agreement.  As further
discussed in Note 9 to our Consolidated  Financial  Statements,  on February 14,
2006,  we  terminated  the two $50.0  million term  repurchase  agreements  with
maturity  dates of June 14, 2007, and recognized a $1.6 million loss on the sale
of $100.0 million of  available-for-sale  investment  securities associated with
the  termination  of the term  repurchase  agreements;  on March  28,  2006,  we
terminated the $50.0 million term  repurchase  agreement with a maturity date of
August 1, 2007,  and  recognized a $746,000 loss on the sale of $50.0 million of
available-for-sale  investment securities associated with the termination of the
term repurchase agreement; and on April 28, 2006, we terminated $50.0 million of
the $150.0 million term repurchase agreement with a maturity date of January 12,
2007,  and  recognized  a  $310,000  loss  on  the  sale  of  $50.0  million  of
available-for-sale  investment securities associated with the termination of the
term repurchase  agreement.  Our termination  transactions  entered into in 2006
resulted in a reduction of $200.0 million of our term repurchase agreements, the
recognition  of a $2.7 million loss on the sale of $200.0  million of investment
securities held in our available-for-sale  investment portfolio,  and prepayment
penalties of $306,000  incurred in conjunction with the early termination of the
term repurchase  agreements.  Additionally,  on August 24, 2006, we restructured
the remaining  $100.0 million term  repurchase  agreement to extend the maturity
date to October  12,  2010 and to modify the pricing  structure,  including  the
interest rate floor strike price. We did not incur any costs associated with the
restructuring of the agreement.
<PAGE>

         On July 14,  2006,  we entered  into a $100.0  million  four-year  term
repurchase  agreement under a master  repurchase  agreement with an unaffiliated
third  party,  as  further  described  in Note 9 to our  Consolidated  Financial
Statements.  The  underlying  securities  associated  with the  term  repurchase
agreement  are  U.S.  Government  agency   collateralized   mortgage  obligation
securities  and are held by other  financial  institutions  under a  safekeeping
agreement.  This transaction was structured  consistently with our 2003 and 2004
term repurchase agreement transactions discussed above, and, consistent with our
interest rate risk  management  program,  was entered into with the objective of
stabilizing  net  interest  income  over  time and  further  protecting  our net
interest margin against changes in interest rates.

Interest  Rate Cap  Agreements.  On September 14, 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 on September 14, 2006, as further discussed above, 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 carrying value of the
interest  rate  cap  agreements,  which  is  included  in  other  assets  in our
consolidated balance sheets, was $255,000 at September 30, 2006.

Pledged Collateral.  At September 30, 2006 and December 31, 2005, we had pledged
investment  securities  available for sale with a fair value of $1.4 million and
$5.1  million,   respectively,   in  connection  with  our  interest  rate  swap
agreements.  In addition,  at December 31, 2005, we had a $2.0 million letter of
credit  issued on our behalf to the  counterparty  and had pledged  cash of $1.8
million as collateral in connection with our interest rate swap agreements.

Interest Rate Lock  Commitments / Forward  Commitments  to Sell  Mortgage-Backed
Securities.  Derivative  financial  instruments issued by us consist of interest
rate lock commitments to originate  fixed-rate loans to be sold.  Commitments to
originate  fixed-rate loans consist  primarily of residential real estate loans.
These net loan  commitments  and loans  held for sale are  hedged  with  forward
contracts  to sell  mortgage-backed  securities.  The  carrying  value  of these
interest  rate lock  commitments  included in other  assets in our  consolidated
balance sheets was $407,000 and ($49,000) at September 30, 2006 and December 31,
2005, respectively.



                       Loans and Allowance for Loan Losses

         Interest and fees on loans,  which  represent the  principal  source of
income for First Banks,  were 91.1% and 90.1% of total  interest  income for the
three and nine months ended September 30, 2006,  respectively,  in comparison to
86.0% and 85.0% for the comparable periods in 2005. Total loans, net of unearned
discount, increased to $7.72 billion, or 79.1% of total assets, at September 30,
2006, compared to $7.02 billion, or 76.6% of total assets, at December 31, 2005.
The overall  increase in loans, net of unearned  discount,  in 2006 is primarily
attributable  to internal loan growth and our  acquisitions  of FNBS,  Community
Bank,  FINB,  UPAC,  SDCB and Oak Lawn,  which provided  loans,  net of unearned
discount,   of  $391.0   million,   in  aggregate,   partially   offset  by  the
securitization of $138.9 million of certain  residential  mortgage loans that we
transferred to our investment  portfolio,  and the sale and payoff of certain of
our  nonperforming  loans  that  were held for sale at  December  31,  2005.  We
attribute the net increase in our loan portfolio to:

         >>    an increase of $311.0 million in our real estate construction and
               development   portfolio   resulting   primarily   from  new  loan
               originations and seasonal  fluctuations on existing and available
               credit lines,  as well as $34.2 million,  in aggregate,  of loans
               provided by our acquisitions of FNBS, SDCB and Oak Lawn;

         >>    an increase of $249.1  million in our  commercial,  financial and
               agricultural  portfolio,   primarily  attributable  to  continued
               internal  loan  production  growth,  and $149.2  million of loans
               provided  by our  acquisition  of UPAC,  and  $20.3  million,  in
               aggregate,  of  loans  provided  by  our  acquisitions  of  FNBS,
               Community Bank, FINB, SDCB and Oak Lawn;

         >>    an  increase  of  $51.2  million  in  our  real  estate  mortgage
               portfolio.  The net increase was attributable to: internal growth
               within  our  loan  portfolio  of  approximately  $137.7  million,
               largely attributable to the retention, in the first six months of
               2006, of certain mortgage loan production in our residential real
               estate  mortgage   portfolio;   and  our  acquisitions  of  FNBS,
               Community Bank,  FINB, SDCB and Oak Lawn, which provided loans of
               $182.4 million, in aggregate; partially offset by
<PAGE>

               o    the  securitization  of $77.1  million and $61.8  million of
                    certain  residential  mortgage loans in March 2006 and April
                    2006, respectively,  which resulted in a change in our asset
                    structure    from    residential     mortgage    loans    to
                    available-for-sale investment securities;

               o    the transfer of $100.0  million of certain loans to our held
                    for sale  portfolio  in June 2006,  which were  subsequently
                    sold in August  2006,  resulting  in a net gain of $386,000;
                    and

               o    the transfer of an additional $30.0 million of certain loans
                    to our held for sale portfolio in September 2006,  following
                    a commitment to sell approximately $100.0 million of certain
                    residential mortgage loans in October 2006; and

         >>    an  increase  of  $78.1  million  in  our  loans  held  for  sale
               portfolio, primarily reflecting: the transfer of $30.0 million of
               certain  residential  mortgage  loans to our loans  held for sale
               portfolio,   as   discussed   above;   and  the  timing  of  loan
               originations  and  subsequent  sales  in the  secondary  mortgage
               market;  partially  offset by the sale of  certain  nonperforming
               loans that were  transferred  to our held for sale  portfolio  on
               December 31, 2005; the payoff of a single  nonperforming  loan in
               January 2006 that was included in our held for sale  portfolio at
               December  31,  2005;   and  the  transfer  of  a  $13.5   million
               nonperforming  loan from our loans held for sale portfolio to our
               commercial  real estate  loan  portfolio  after  recording a $1.1
               million  write-down of the credit to its estimated  fair value at
               the time of transfer, as further discussed below.

         Nonperforming  assets include nonaccrual loans,  restructured loans and
other real estate.  The following table presents the categories of nonperforming
assets and certain ratios as of September 30, 2006 and December 31, 2005:
<TABLE>
<CAPTION>

                                                                                 September 30,     December 31,
                                                                                     2006              2005
                                                                                     ----              ----
                                                                                (dollars expressed in thousands)
         Commercial, financial and agricultural:
<S>                                                                              <C>                   <C>
           Nonaccrual.........................................................   $   12,771             4,948
         Real estate construction and development:
           Nonaccrual.........................................................       16,545            11,137
         Real estate mortgage:
           One-to-four family residential:
              Nonaccrual......................................................       12,275             9,576
              Restructured....................................................            9                10
           Multi-family residential loans:
              Nonaccrual......................................................          740               740
           Commercial real estate loans:
              Nonaccrual......................................................       36,675            70,625
         Consumer and installment:
           Nonaccrual.........................................................           73               160
                                                                                 ----------         ---------
                  Total nonperforming loans...................................       79,088            97,196
         Other real estate....................................................        6,924             2,025
                                                                                 ----------         ---------
                  Total nonperforming assets..................................   $   86,012            99,221
                                                                                 ==========         =========

         Loans, net of unearned discount......................................   $7,717,470         7,020,771
                                                                                 ==========         =========

         Loans past due 90 days or more and still accruing....................   $    6,400             5,576
                                                                                 ==========         =========

         Ratio of:
           Allowance for loan losses to loans.................................         1.93%             1.93%
           Nonperforming loans to loans.......................................         1.02              1.38
           Allowance for loan losses to nonperforming loans...................       188.79            139.23
           Nonperforming assets to loans and other real estate................         1.11              1.41
                                                                                 ==========         =========
</TABLE>



<PAGE>


         Nonperforming  loans,  consisting  of loans on  nonaccrual  status  and
restructured  loans, were $79.1 million at September 30, 2006, compared to $73.0
million at June 30, 2006 and $97.2  million at  December  31,  2005.  Other real
estate owned was $6.9  million,  $5.5 million and $2.0 million at September  30,
2006,  June 30, 2006 and  December  31, 2005,  respectively.  Our  nonperforming
assets,  consisting of  nonperforming  loans and other real estate  owned,  were
$86.0 million at September 30, 2006,  compared to $78.5 million at June 30, 2006
and  $99.2  million  at  December  31,  2005.  A  significant   portion  of  our
nonperforming   assets  includes   nonperforming   loans   associated  with  our
acquisition of CIB Bank in November 2004,  which have decreased  considerably to
$17.1 million, or 21.6% of our total nonperforming loans, at September 30, 2006,
from $55.0 million,  or 56.6% of our nonperforming  loans, at December 31, 2005.
Nonperforming loans were 1.02% of loans, net of unearned discount,  at September
30, 2006,  compared to 0.96% and 1.38% of loans,  net of unearned  discount,  at
June 30, 2006 and December 31, 2005, respectively.  Additionally, loans past due
90 days or more and still  accruing  interest were $6.4 million at September 30,
2006,  compared to $5.7  million and $5.6  million at June 30, 2006 and December
31, 2005,  respectively.  Nonperforming  loans at September  30, 2006 reflect an
$18.1 million, or 18.6%, decrease from nonperforming loans at December 31, 2005,
and a $6.1 million, or 8.3%, increase from nonperforming loans at June 30, 2006.
The decrease in  nonperforming  loans during the nine months ended September 30,
2006 primarily  resulted from our plans to reduce  nonperforming  assets through
the  sale  of  certain   nonperforming   loans,  loan  payoffs  and/or  external
refinancing of various  credits.  We had been actively  marketing  approximately
$59.7 million of nonperforming  loans that were transferred to our held for sale
portfolio on December 31, 2005.  In January 2006, we received a payoff on one of
the loans held for sale that had a carrying  value of $12.4  million at December
31, 2005. In conjunction with this transaction, we recognized a loan recovery of
$5.0  million and  interest  and late fees of $2.0  million on the payoff of the
loan.  In March 2006,  we completed  the sale of the  majority of the  remaining
loans held for sale that had a carrying value of approximately $32.5 million, in
aggregate,  at December 31, 2005,  and recorded a pre-tax gain of  approximately
$1.7 million on the sale of these loans.  In September  2006, we recorded a $1.1
million  write-down  on  a  remaining  nonperforming  loan  held  for  sale  and
transferred  the loan at its estimated fair value of $13.5 million back into our
loan portfolio.  The overall decrease in our nonperforming loans during 2006 was
partially offset by the placement of credit relationships of $8.9 million, $10.0
million,  and $7.5 million,  that were placed on nonaccrual status in the first,
second and third quarters of 2006, respectively,  following deterioration of the
financial position of the borrowers.

         We recorded net loan  charge-offs  of $1.3 million for the three months
ended  September 30, 2006,  compared to net loan  recoveries of $772,000 for the
nine months ended  September 30, 2006. We recorded net loan  charge-offs of $1.8
million and $4.7 million for the three and nine months ended September 30, 2005,
respectively.  Net loan  recoveries  for 2006  include a loan  recovery  of $5.0
million  on the  payoff  of a single  loan in the  first  quarter  of  2006,  as
discussed  above. Our net loan recoveries for the first nine months of 2006 were
(0.01%) of average  loans,  representing  significant  improvement  over our net
charge-offs  for the  comparable  period in 2005,  which  were  0.08% of average
loans,  and our net loan  charge-offs  of 0.21% for the year ended  December 31,
2005.  Our allowance  for loan losses was $149.3  million at September 30, 2006,
compared to $147.4  million at June 30, 2006 and $135.3  million at December 31,
2005.  Our allowance  for loan losses as a percentage of loans,  net of unearned
discount,  was 1.93% at September 30, 2006,  compared to 1.94% and 1.93% at June
30, 2006 and December 31, 2005, respectively. Our allowance for loan losses as a
percentage of nonperforming loans was 188.79% at September 30, 2006, compared to
201.81% at June 30,  2006 and  139.23% at  December  31,  2005.  We  continue to
closely monitor our loan portfolio and address the ongoing  challenges  posed by
the economic  environment,  including reduced loan demand and highly competitive
markets within certain  sectors of our loan  portfolio.  We consider this in our
overall  assessment  of the  adequacy  of the  allowance  for  loan  losses.  In
addition,  although we have experienced  improvement in our nonperforming  asset
levels in 2006,  we continue  our  efforts to reduce the overall  level of these
assets.

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

<PAGE>

operate.  Based on this quantitative and qualitative  analysis,  adjustments are
made to the allowance  for loan losses.  Such  adjustments  are reflected in our
consolidated statements of income.

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

                                                          Three Months Ended            Nine Months Ended
                                                             September 30,                September 30,
                                                         ---------------------        ---------------------
                                                            2006       2005              2006       2005
                                                            ----       ----              ----       ----
                                                                  (dollars expressed in thousands)

<S>                                                       <C>         <C>               <C>        <C>
         Balance, beginning of period................     $147,383    140,164           135,330    150,707
         Acquired allowance for loan losses..........        1,264      1,065             5,208      1,484
                                                          --------   --------          --------   --------
                                                           148,647    141,229           140,538    152,191
                                                          --------   --------          --------   --------
         Loans charged-off...........................       (5,292)    (5,401)          (11,633)   (20,422)
         Recoveries of loans previously charged-off..        3,955      3,643            12,405     15,702
                                                          --------   --------          --------   --------
           Net loan (charge-offs) recoveries.........       (1,337)    (1,758)              772     (4,720)
                                                          --------   --------          --------   --------
         Provision for loan losses...................        2,000         --             8,000     (8,000)
                                                          --------   --------          --------   --------
         Balance, end of period......................     $149,310    139,471           149,310    139,471
                                                          ========   ========          ========   ========
</TABLE>


                                    Liquidity

         Our  liquidity  is the ability to maintain a cash flow that is adequate
to fund  operations,  service debt  obligations  and meet  obligations and other
commitments  on a timely basis.  We receive  funds for  liquidity  from customer
deposits,  loan  payments,  maturities  of  loans  and  investments,   sales  of
investments and earnings.  In addition,  we may avail ourselves of other sources
of funds by issuing  certificates  of deposit in  denominations  of  $100,000 or
more, borrowing federal funds, selling securities under agreements to repurchase
and utilizing borrowings from the FHLB and other borrowings,  including our term
loan and our  revolving  credit line.  The aggregate  funds  acquired from these
sources were $1.86  billion and $1.72 billion at September 30, 2006 and December
31, 2005, respectively.

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

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

<S>                                                        <C>                  <C>              <C>
         Three months or less...........................   $   523,233          193,143          716,376
         Over three months through six months...........       326,807            5,000          331,807
         Over six months through twelve months..........       370,801           10,000          380,801
         Over twelve months.............................       176,104          259,067          435,171
                                                           -----------         --------       ----------
              Total.....................................   $ 1,396,945          467,210        1,864,155
                                                           ===========         ========       ==========
</TABLE>

         In addition to these  sources of funds,  First Bank has  established  a
borrowing  relationship  with  the  Federal  Reserve  Bank  of St.  Louis.  This
borrowing  relationship,  which is  secured by  commercial  loans,  provides  an
additional liquidity facility that may be utilized for contingency  purposes. At
September 30, 2006 and December 31, 2005, First Bank's borrowing  capacity under
the agreement was approximately $634.6 million and $743.6 million, respectively.
In addition,  First Bank's borrowing  capacity through its relationship with the
FHLB was  approximately  $596.8 million and $679.3 million at September 30, 2006
and December 31, 2005, respectively. First Bank had FHLB advances outstanding of
$4.1  million and $39.3  million at  September  30, 2006 and  December 31, 2005,
respectively,   all  of  which  were   assumed  in   conjunction   with  various
acquisitions.  On March 17,  2006 and May 10,  2006,  First Bank  prepaid  $20.5
million and $14.8 million of FHLB advances,  respectively,  that were assumed in
conjunction with previous  acquisitions,  as further  described in Note 9 to our
Consolidated Financial Statements.



<PAGE>


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

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

<S>                                               <C>             <C>        <C>        <C>         <C>
         Operating leases.......................  $    12,431     21,256     12,479     23,192      69,358
         Certificates of deposit (1)............    3,070,202    560,866    127,625     12,694   3,771,387
         Other borrowings (1)...................      188,143      3,210    200,857         --     392,210
         Notes payable (1)......................       20,000     55,000         --         --      75,000
         Subordinated debentures (1)............           --         --         --    304,547     304,547
         Other contractual obligations..........        1,624        240         11         16       1,891
                                                  -----------   --------   --------   --------  ----------
              Total.............................  $ 3,292,400    640,572    340,972    340,449   4,614,393
                                                  ===========   ========   ========   ========  ==========
         ---------------
         (1) Amounts exclude the related interest expense accrued on these obligations as of September 30,
             2006.
</TABLE>

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



                       Effects of New Accounting Standards

         In November 2003, the Emerging  Issues Task Force,  or EITF,  reached a
consensus on certain  disclosure  requirements  under EITF Issue No.  03-1,  The
Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to  Certain
Investments.  The new disclosure  requirements  apply to investments in debt and
marketable equity securities that are accounted for under Statement of Financial
Accounting  Standards,  or SFAS, No. 115,  Accounting for Certain Investments in
Debt and Equity Securities, and SFAS No. 124, Accounting for Certain Investments
Held by  Not-for-Profit  Organizations.  Effective for fiscal years ending after
December 15, 2003,  companies are required to disclose information about debt or
marketable  equity  securities  with market  values below  carrying  values.  We
adopted the disclosure  requirements of EITF Issue No. 03-1on December 31, 2004.
In March  2004,  the EITF came to a  consensus  regarding  EITF Issue No.  03-1.
Securities in scope are those subject to SFAS No. 115 and SFAS No. 124. The EITF
adopted a three-step  model that requires  management to determine if impairment
exists,   decide   whether   it   is   other   than   temporary,    and   record
other-than-temporary  losses in  earnings.  In  September  2004,  the  Financial
Accounting  Standards Board, or FASB, approved issuing a Staff Position to delay
the  requirement  to record  impairment  losses under EITF Issue No.  03-1,  but
broadened the scope to include additional types of securities.  As proposed, the
delay would have applied only to those debt securities described in paragraph 16
of EITF Issue No. 03-1,  the Consensus  that provides  guidance for  determining
whether  an  investment's  impairment  is other  than  temporary  and  should be
recognized  in income.  In June 2005,  the FASB  directed the EITF to issue EITF
Issue No. 03-1-a, Implementation Guidance for the Application of Paragraph 16 of
EITF Issue No.  03-1,  as final.  In November  2005,  the FASB issued FASB Staff
Position,  or FSP, FAS 115-1 and FAS 124-1, The Meaning of  Other-Than-Temporary
Impairment  and Its  Application  to  Certain  Investments.  The  FSP  addresses
determining  when  an  investment  is  considered   impaired  and  whether  that
impairment is other than  temporary,  and measuring an impairment  loss. The FSP
also addresses the accounting after an entity recognizes an other-than-temporary
impairment,  and requires certain  disclosures  about unrealized losses that the
entity  did  not  recognize  as  other-than-temporary  impairments.  The FSP was
effective for reporting periods beginning after December 15, 2005. On January 1,
2006, we implemented the requirements of FSP FAS 115-1 and FAS 124-1,  which did
not have a material effect on our financial condition or results of operations.

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

         In  February  2006,  the FASB  issued  SFAS No. 155 --  Accounting  For
Certain Hybrid Financial Instruments, an amendment of SFAS No. 133 -- Accounting
For Derivative Instruments and Hedging Activities and SFAS No. 140 -- Accounting
For  Transfers  and  Servicing  of  Financial  Assets  and   Extinguishments  of
Liabilities.  SFAS No. 155 allows  entities to  remeasure at fair value a hybrid
financial  instrument that contains an embedded  derivative that otherwise would
require  bifurcation from the host instrument,  if the holder irrevocably elects
to account for the whole instrument on a fair value basis. Subsequent changes in
the fair value of the instrument  would be recognized in earnings.  SFAS No. 155
is  effective  for  financial  instruments  acquired,  issued,  or  subject to a
remeasurement  event occurring after the beginning of the first fiscal year that
begins after September 15, 2006. Early adoption is permitted as of the beginning
of the  fiscal  year  unless the entity has  already  issued  interim  financial
statements  during that fiscal year.  At its October 25, 2006 Board of Directors
meeting,  the FASB proposed issuing  guidance as an SFAS No. 133  Implementation
Issue to  address  the  application  of  paragraph  14A of SFAS No. 133 to asset
backed securities,  including mortgage-backed securities,  created from pools of
loans containing embedded call features.  This guidance would implement a narrow
scope  exception that is limited to  securitized  interests that only contain an
embedded  derivative  tied to the prepayment  risk of the underlying  prepayable
financial  assets if certain  criteria are met.  Following the end of the 30-day
public comment  period,  the FASB expects to issue final guidance in early 2007.
We are currently  awaiting  further guidance and are evaluating the requirements
of SFAS No. 155 to determine its impact on our  financial  condition and results
of operations.

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

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

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

         In September 2006, the U.S. Securities and Exchange Commission, or SEC,
issued SEC Staff Accounting Bulletin,  or SAB, No. 108 - Considering the Effects
of Prior Year  Misstatements  when  Quantifying  Misstatements  in Current  Year
Financial  Statements.  SAB No. 108 addresses  the methods in which  uncorrected
errors  in  previous  years  should be  considered  when  quantifying  errors in
current-year financial statements, and requires an entity to consider the effect
of all  carry  over and  reversing  effects  of  prior-year  misstatements  when
quantifying errors in current-year financial statements. The SAB does not change
the SEC staff's  previous  guidance on evaluating  the  materiality of errors in
financial  statements.  SAB No. 108  allows an entity to record  the  effects of
adopting the guidance as a  cumulative-effect  adjustment to retained  earnings.
This  adjustment  must be reported as of the  beginning of the first fiscal year
ending after November 15, 2006. We are currently  evaluating the requirements of
SAB No. 108 to determine its impact on our consolidated financial statements.



<PAGE>


       ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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



<PAGE>


                        ITEM 4 - CONTROLS AND PROCEDURES

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



<PAGE>


                           PART II - OTHER INFORMATION

                                ITEM 6 - EXHIBITS

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

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

            10      First  Amendment  to the Amended and Restated Secured Credit
                    Agreement ($85.0 million Term  Loan Facility, $10.0  million
                    Revolving Credit Facility and $1.0 million  Letter of Credit
                    Facility),  dated  as of August 10, 2006, by and among First
                    Banks, Inc. and Wells Fargo  Bank, National  Association, as
                    Agent, JP  Morgan Chase Bank,  N.A., LaSalle  Bank  National
                    Association,  The  Northern  Trust  Company,  Union Bank  of
                    California, N.A., Fifth  Third Bank (Chicago) and  U.S. Bank
                    National Association - filed herewith.

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

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

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

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


<PAGE>


                                   SIGNATURES


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



Date:  November 13, 2006

                                FIRST BANKS, INC.


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



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