FIRST BANKS INC
General.  We are a registered bank holding  company  incorporated in Missouri in 1978 and  headquartered  in St. Louis,  Missouri.  We operate through our wholly owned  subsidiary  bank holding  company,  The San  Francisco  Company,  or SFC, headquartered  in San  Francisco,  California,  and its wholly owned  subsidiary bank,  First Bank,  headquartered  in St. Louis,  Missouri.  First Bank operates through  its branch  banking  offices  and  subsidiaries,  First  Bank  Business Capital, Inc. (formerly FB Commercial Finance,  Inc.), Missouri Valley Partners, Inc. and Small  Business  Loan Source LLC, or SBLS LLC,  which,  except for SBLS LLC, are wholly owned  subsidiaries.  First Bank  currently  operates 178 branch offices  in  California,   Illinois,   Missouri  and  Texas.   Since  1994,  our organization has grown  significantly,  primarily as a result of our acquisition strategy,  as well as through  internal  growth.  At December 31,  2005,  we had assets of $9.17  billion,  loans,  net of unearned  discount,  of $7.02 billion, deposits of $7.54 billion and stockholders' equity of $678.9 million.           Various trusts,  which were created by and are  administered by and for the benefit of Mr. James F. Dierberg,  our Chairman of the Board, and members of his immediate family,  own all of our voting stock. Mr. Dierberg and his family, therefore, control our management and policies.           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,  and asset-based  loans and trade financing.  Other financial services   include   mortgage   banking,   debit  cards,   brokerage   services, credit-related insurance, internet banking, automated teller machines, telephone banking,  safe deposit boxes,  trust,  private banking and  institutional  money management services.           Primary  responsibility  for managing our banking  units 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.           Since  1996,  we have  formed 10  financing  entities  that  operate as affiliated  business  or  statutory  trusts.  These  trusts,  of which  six were outstanding  at December 31, 2005,  were created for the sole purpose of issuing trust  preferred  securities,  and  the  sole  assets  of  the  trusts  are  our subordinated  debentures.  In  conjunction  with the  formation of our financing entities  and  their  issuance  of the  trust  preferred  securities,  we issued subordinated  debentures to each of our financing entities in amounts equivalent to the  respective  trust  preferred  securities  plus the  amount of the common securities of the individual trusts, as outlined in the following table and more fully  described in Note 12 to our  Consolidated  Financial  Statements.  We pay interest on our subordinated debentures to our respective financing entities. In turn,  our  financing  entities  pay  distributions  to the holders of the trust preferred  securities.   These  interest  and  distribution  payments  are  paid quarterly in arrears, in March, June, September, and December of each year, with the  exception  of the  trust  preferred  securities  and  related  subordinated debentures  of First Bank  Capital  Trust,  which are payable  semi-annually  in arrears  in April and  October of each year.  The  distributions  payable on our subordinated  debentures  are included in interest  expense in our  consolidated statements of income.           A summary of the outstanding  trust preferred  securities issued by our affiliated   statutory  and  business  trusts,  and  our  related   subordinated debentures  issued  to the  respective  trusts  in  conjunction  with the  trust preferred securities offerings, is as follows:                                                                                  Interest     Preferred      Subordinated         Name of Trust               Date Formed        Type of Offering         Rate       Securities      Debentures         -------------               -----------        ----------------         ----       ----------      ----------        First Preferred Capital Trust III  November 2001     Publicly Underwritten      9.00       55,200,000      56,907,250 First Bank Capital Trust            April 2002         Private Placement      Variable     25,000,000      25,774,000 First Bank Statutory Trust          March 2003         Private Placement        8.10       25,000,000      25,774,000 First Preferred Capital Trust IV   January 2003      Publicly Underwritten      8.15       46,000,000      47,422,700 First Bank Statutory Trust II      September 2004      Private Placement      Variable     20,000,000      20,619,000 First Bank Statutory Trust III     November 2004       Private Placement      Variable     40,000,000      41,238,000 First Bank Statutory Trust IV      February 2006       Private Placement      Variable     40,000,000      41,238,000               Each of our existing financing entities operates as a Delaware business trust with the  exception of First Bank  Statutory  Trust,  which  operates as a Connecticut  statutory  trust.  The trust preferred  securities  issued by First Preferred  Capital  Trust III are  publicly  held and traded on the Nasdaq Stock Market's National Market system. The trust preferred  securities issued by First Preferred  Capital  Trust IV are publicly  held and traded on the New York Stock Exchange.  The trust  preferred  securities  issued by First Bank Capital Trust, First Bank Statutory Trust, First Bank Statutory Trust II, or FBST II, and First Bank  Statutory  Trust III, or FBST III, were issued in private  placements  and rank equal to the trust preferred  securities  issued by First Preferred Capital Trust IV, and junior to the trust preferred securities issued by First Preferred Capital Trust III. The trust  preferred  securities have no voting rights except in certain limited circumstances.  Strategy. In the development of our banking franchise, we acquire other entities providing financial services as one means of achieving our growth objectives and to augment internal growth.  Acquisitions may serve to enhance our presence in a given market, to expand the extent of our market area, to enable us to enter new or  noncontiguous  markets  or to  enable us to  expand  the array of  financial services that we provide. Due to the nature of our ownership, we have elected to only engage in those acquisitions that can be accomplished for cash, rather than by  issuing  securities.  However,  by  using  cash  in  our  acquisitions,  the characteristics  of  the  acquisition  arena  may,  at  times,  place  us  at  a competitive   disadvantage   relative   to  other   acquirers   offering   stock transactions.  This results from the market  attractiveness  of other  financial institutions'  stock and the  advantages  of tax-free  exchanges  to the selling shareholders. Our acquisition activities are generally somewhat sporadic because we may consummate  multiple  transactions in a particular period,  followed by a substantially less active acquisition period. Furthermore, the intangible assets recorded in conjunction with these acquisitions create an immediate reduction in our  regulatory  capital.  This  reduction,  as required by  regulatory  policy, provides  further  financial  disincentives  to paying  large  premiums  in cash acquisitions.           Recognizing   these   facts,   we  follow   certain   patterns  in  our acquisitions.   First,  we  generally  acquire  several  smaller   institutions, sometimes over an extended  period of time,  rather than a single larger one. We attribute  this  approach  to the  constraints  imposed  by the  amount of funds required for a larger  transaction,  as well as the  opportunity to minimize the aggregate premium required through smaller individual transactions.  However, we may  periodically   acquire  larger   institutions  that  provide  us  with  the opportunity  to rapidly  expand our market  presence in a highly  desired market area.  Secondly,  in  some  acquisitions,  we may  acquire  institutions  having significant asset-quality,  ownership,  regulatory or other problems. We seek to address  the  risks  of these  issues  by  adjusting  the  acquisition  pricing, accompanied  by  appropriate   remedial  attention  after  consummation  of  the transaction.   In  these   institutions,   these  issues  may   diminish   their attractiveness to other potential acquirers, and therefore may reduce the amount of acquisition premium required. Finally, we may pursue our acquisition strategy in other geographic areas, or pursue internal growth more  aggressively  because cash  transactions  may not be  economically  viable  in  extremely  competitive acquisition markets.           During the five  years  ended  December  31,  2005,  we  completed  ten acquisitions of banks, one acquisition of a loan origination  business,  and two purchases  of branch  offices,  which  provided  us with an  aggregate  of $2.84 billion in assets and 53 banking  locations as of the dates of the acquisitions. This included five bank  acquisitions in  metropolitan  Chicago,  Illinois,  and three in metropolitan Los Angeles,  California. Our acquisitions of FBA Bancorp, Inc., or FBA, in Chicago,  Illinois,  in April 2005, and Northway State Bank, or NSB, in Grayslake,  Illinois,  in November  2005,  served to further  expand our growing Chicago banking  franchise with the addition of four banking offices and $123.7 million in assets. In September 2005, we expanded our southern California banking franchise with our acquisition of International  Bank of California,  or IBOC,  in Los  Angeles,  California,  which  provided  five  additional  banking locations.  We also  completed a purchase  of the  Roodhouse,  Illinois,  branch office from Bank and Trust Company in September  2005. In addition,  in 2005, we announced  plans  to  expand  our  Dallas,  Texas  banking  franchise  with  our acquisition  of First National Bank of Sachse,  or FNBS,  which was completed on January 3, 2006,  and our  acquisition  of the branch office of Dallas  National Bank in Richardson, Texas, or East Renner Branch, which was completed on January 20, 2006. We also announced plans to acquire Pittsfield Community Bancorp, Inc., or  Bancorp,  and  its  wholly  owned  banking  subsidiary,  Community  Bank  of Pittsfield,  or  Pittsfield,  in  Pittsfield,  Illinois,  and First  Independent National  Bank,  in Plano,  Texas.  In 2004,  we expanded our Chicago,  Illinois banking  franchise with our  acquisition of Continental  Mortgage  Corporation - Delaware, or CMC, in Aurora,  Illinois, which provided an additional two banking offices and $140.7 million in assets, and Hillside Investors, Ltd., or Hillside, and its wholly owned banking subsidiary,  CIB Bank (collectively,  CIB Bank), in Hillside,  Illinois.  The  acquisition  of  CIB  Bank  represented  the  largest acquisition  in our  history,  providing  us with  assets of $1.20  billion  and expanding  our branch  banking  network in the Chicago  metropolitan  area by an additional 16 branch offices.  In August 2004, we acquired  substantially all of the assets of Small  Business Loan Source,  Inc.,  or SBLS,  in Houston,  Texas, which   originates,   sells  and   services   United   States   Small   Business Administration,  or SBA, loans to small business  concerns.  In 2003, we further expanded our Midwest  banking  franchise  with our  acquisition  of Bank of Ste. Genevieve, or BSG, in Ste. Genevieve,  Missouri. These acquisitions have allowed   us to  significantly  expand our presence  throughout  our  geographic  markets, improve operational efficiencies,  convey a more consistent image and quality of service and more cohesively market and deliver our products and services.           Following  our  acquisitions,  various  undertakings  are  necessary to effectively  integrate  the  acquired  entities  into our  business  systems and culture.  While the  activities  required are  specifically  dependent  upon the individual  circumstances  surrounding  each  acquisition,  the  majority of our efforts have been concentrated in various areas including, but not limited to:           >>  improving asset quality;           >>  reducing   unnecessary,   duplicative   and/or  excessive  expenses              including  personnel,  information  technology  and  certain  other              operational and administrative expenses;           >>  maintaining,  repairing   and,  in some  cases,  refurbishing  bank              premises  necessitated by the deferral of such projects  by some of              the acquired entities;           >>  renegotiating long-term leases that provide space in excess of that              necessary  for  banking  activities  and/or  at rates in  excess of              current market rates, or subleasing excess space to third parties;           >>  relocating  branch  offices  which are not  adequate,  conducive or              convenient for banking operations; and           >>  managing  actual or potential  litigation that existed with respect              to   acquired   entities   to   minimize   the   overall  costs  of              negotiation, settlement or litigation.           The  post-acquisition  process also  includes the combining of separate and  distinct  entities  together  to form a cohesive  organization  with common objectives  and focus.  We have  invested  significant  resources to  reorganize staff,  recruit  personnel  where needed,  and establish the direction and focus necessary  for the  combined  entity  to  take  advantage  of the  opportunities available  to it.  This  investment  contributed  to  increases  in  noninterest expense,  and  resulted in the  creation of new banking  units  within the newly integrated  combined entity,  which conveyed a more consistent image and quality of service.  The new banking units provide a broad array of banking  products to their customers and generally compete effectively in their marketplaces, even in the presence of other financial institutions with much greater resources.  While some of these  modifications  did not  contribute to  reductions of  noninterest expense,  they  contributed to the commercial  and retail  business  development efforts of the banks,  and  ultimately to their  prospects for improving  future profitability.           In 2002 and 2003,  our  acquisition  prospects  were  somewhat  limited primarily due to the market environment requiring  significantly higher premiums in order  to  transact  financial  institution  acquisitions.  As a  result,  we expanded our business  strategy to include the opening of de novo branch offices as another means of achieving our growth objectives. Our de novo branch strategy also provides similar  opportunities to our acquisition  strategy by allowing us to  enhance  our  presence  in our  existing  markets  and  enter  new  markets. Additionally,   we  generally  have  more  flexibility  in  selecting  the  most opportunistic sites for our de novo branches, constructing the branch offices in accordance  with our standard  business  model and  marketing  and promoting our customized products and services under our long-established trade name. In 2004, we opened  four de novo  branches  in Houston  and  McKinney,  Texas,  Wildwood, Missouri,  which  is  located  in  West  St.  Louis  County,  and in San  Diego, California.  In  January  2005,  we  opened  an  additional  de novo  branch  in Farmington,  Missouri.  Furthermore, we have plans to open several additional de novo branch  offices in 2006.  We expect to further  concentrate  our efforts on this  portion of our  business  strategy  while  continuing  to identify  viable acquisition  candidates at reasonable acquisition premiums that are commensurate with our established acquisition strategy.           In conjunction with our de novo and acquisition  strategy, we have also focused on building and reorganizing the infrastructure  necessary to accomplish our objectives for internal growth. Our organization is structured to leverage a strong  sales  organization  in each  of our  major  market  areas.  Within  the individual markets,  the sales organization is supported by a regional structure to  position it to serve the market  opportunities  within each area in the four states that we operate.  We are  committed  to serving  the small  business  and mid-sized  commercial  segments along with the retail consumer  market.  We have devoted significant resources to improving our infrastructure dedicated to rapid approval,  underwriting and  documentation of consumer loans,  strengthening our small business  services area,  increasing our commercial  business  development staff,  reorganizing our marketing and product  management areas,  improving the quality and depth of our regional commercial and consumer management groups, and increasing  resources for financial  service product line and delivery  systems, branch development and training,  and  administrative  and operational  support. With the significant  expansion of our Chicago banking franchise in the past two years, we have created a complete regional structure in the Chicago area as well as three  additional  commercial  banking  groups to better  service  our credit administration,  commercial  real estate and commercial  and industrial  banking groups, branch  administration,  credit review, and human resources and training functions.  We continue to focus on modifying and effectively  repositioning our internal and external resources to better serve the markets in which we operate. Although these efforts have led to certain  increased  capital  expenditures and    noninterest  expenses,  we expect they will lead to additional  internal growth, more  efficient  operations  and improved  profitability  over the long term, in accordance with our long-term corporate vision.  Lending Activities.  Our enhanced business development resources assisted in the realignment of certain acquired loan  portfolios,  which were skewed toward loan types that reflected the abilities and experiences of the management  members of the acquired  entities.  In order to achieve a more  diversified  portfolio,  to address  asset-quality issues in the portfolios and to achieve a higher interest yield on our loan portfolio, we reduced a substantial portion of the loans which were  acquired  during  this  time  through  payments,  refinancing  with  other financial institutions,  charge-offs and, in certain instances,  sales of loans. As a result,  our portfolio of consumer and installment  loans,  net of unearned discount,  decreased  significantly from $174.3 million, or 3.7% of total loans, excluding  loans held for sale, at December 31, 2000, to $51.8 million,  or 0.8% of total  loans,  excluding  loans held for sale,  at  December  31,  2005.  The decrease  primarily  reflects  reductions in our indirect auto,  credit card and student loan portfolios. The sale of our student loan and credit card portfolios in 2001 was  consistent  with our  objective  of  reducing  the  amount  of less profitable loans and expanding our commercial  lending and other consumer loans, including home equity loans.  We do not have any  continuing  involvement in the transferred  assets relating to the student loan and credit card portfolios sold in 2001.  Our expansion of other consumer loans is reflected in our portfolio of one-to-four family residential real estate mortgage loans,  excluding loans held for  sale,  which  increased  from  $726.5  million,  or 15.5%  of total  loans, excluding loans held for sale, at December 31, 2000, to $1.21 billion,  or 18.1% of total loans,  excluding  loans held for sale,  at December 31, 2005,  in line with our current focus to increase  residential  mortgage  loans and home equity lines. Our business strategy decision in mid-2003 to retain a portion of our new loan  production  in  our  real  estate  mortgage   portfolio  to  provide  more diversification  within the portfolio and to compensate  for continued weak loan demand in other sectors of our loan portfolio,  as well as our business strategy in the third quarter of 2005 to retain  additional  mortgage loan  production in our residential real estate mortgage  portfolio,  including  15-year fixed rate, conforming  conventional  adjustable rate mortgages and other similar  products, contributed to this increase.           As components of acquired loan portfolios  decreased,  we replaced them with  higher  yielding  loans that were  internally  generated  by our  business development   function.   With  our  acquisitions,   we  expanded  our  business development  function into the newly acquired market areas. We have continued to grow  through  internal  growth and  acquisitions,  and  completed  the  largest acquisition  in  our  history  in  November  2004.  Consequently,  in  spite  of relatively large reductions in certain acquired  portfolios,  our aggregate loan portfolio,  net of  unearned  discount,  increased  47.7% from $4.75  billion at December 31, 2000, to $7.02 billion at December 31, 2005.           Our  business   development   efforts  are  primarily  focused  on  the origination  of  loans  in  three  general  types:  commercial,   financial  and agricultural loans,  including lease financing,  which totaled $1.62 billion, or 23.1% of total  loans,  at December 31, 2005;  commercial  real estate  mortgage loans,  which totaled $2.11  billion,  or 30.1% of total loans,  at December 31, 2005; and real estate  construction  and land development  loans,  which totaled $1.56  billion,  or 22.3% of total loans,  at December  31,  2005.  We have also focused our efforts on retaining certain  residential real estate mortgage loans in our loan portfolio.  Such loans totaled approximately $1.21 billion, or 17.3% of total loans, at December 31, 2005.           The primary component of commercial,  financial and agricultural  loans is  commercial  loans,  which are made based on the  borrowers'  general  credit strength and ability to generate cash flows for repayment  from income  sources. Most of these loans are made on a secured basis,  generally involving the use of company equipment, inventory and/or accounts receivable, and, from time to time, real estate, as collateral.  Regardless of collateral,  substantial  emphasis is placed on the borrowers' ability to generate cash flow sufficient to operate the business and provide coverage of debt servicing  requirements.  Commercial loans are frequently  renewable  annually,  although some terms may be as long as five years.  These loans typically require the borrower to maintain certain operating covenants  appropriate for the specific  business,  such as profitability,  debt service  coverage and current  asset and leverage  ratios,  which are  generally reported and monitored on a quarterly  basis and subject to more detailed annual reviews.           Commercial  loans  are made to  customers  primarily  located  in First Bank's  geographic trade areas of California,  Illinois,  Missouri and Texas who are engaged in  manufacturing,  retailing,  wholesaling and service  businesses. This portfolio is not concentrated in large specific  industry segments that are characterized  by  sufficient  homogeneity  that  would  result  in  significant concentrations of credit exposure.  Rather, it is a highly diversified portfolio that  encompasses  many  industry  segments.  Within  both our real  estate  and commercial  lending  portfolios,  we strive for the highest  degree of diversity that  is  practicable.  We also  emphasize  the  development  of  other  service relationships with our commercial borrowers, particularly deposit accounts.           Commercial  real  estate  loans  include  loans for which the  intended source of  repayment  is rental  and other  income  from the real  estate.  This includes  commercial real estate developed for lease to third parties as well as   the owner's occupancy. The underwriting of owner occupied commercial real estate loans generally  follows the procedures for commercial  lending described above, except that the collateral is real estate,  and the loan term may be longer. The primary emphasis in underwriting  loans for which the source of repayment is the performance  of the  collateral is the projected  cash flow from the real estate and its  adequacy  to cover  the  operating  costs of the  project  and the debt service requirements. Secondary emphasis is placed on the appraised value of the real estate,  with the requirement that the appraised  liquidation  value of the collateral must be adequate to repay the debt and related  interest in the event the cash flow becomes insufficient to service the debt. Generally,  underwriting terms require the loan principal not to exceed 80% of the appraised value of the collateral and the loan maturity not to exceed ten years. Commercial real estate loans are made for  commercial  office space,  retail  properties,  hospitality, industrial  and warehouse  facilities  and  recreational  properties.  We rarely finance  commercial  real  estate or rental  properties  that do not have  lease commitments for a majority of the rentable space.           Construction  and  land  development  loans  include   commitments  for construction  of both  residential  and commercial  properties.  Commercial real estate  projects often require  commitments  for permanent  financing from other lenders  upon  completion  of the project  and,  more  typically,  may include a short-term amortizing component of the financing from the bank.  Commitments for construction of multi-tenant  commercial and retail projects  generally  require lease  commitments  from a  substantial  primary  tenant  or  tenants  prior  to commencement of construction.  We typically engage in multi-phase,  multi-tenant projects,  as opposed to large vertical projects,  that allow us to complete the projects  in phases and limit the number of tenant  building  starts  based upon successful  lease and/or sale of the tenant units.  We finance some projects for borrowers  whose home  office is within our trade area for which the  particular project  may be outside our normal  trade area.  However,  we  generally  do not engage in developing  commercial and residential  construction  lending business outside of our trade  area,  although  certain of the loans  acquired  in recent acquisitions   have  resulted  in  this  situation.   Residential   real  estate construction  and  development  loans  are  made  based  on  the  cost  of  land acquisition  and  development,  as well as the  construction  of the residential units.  Although we finance the cost of display units and units held for sale, a substantial portion of the loans for individual  residential units have purchase commitments prior to funding. Residential condominium projects are funded as the building  construction  progresses,  but funding of unit  finishing is generally based on firm sales contracts.           In  addition to  underwriting  based on  estimates  and  projection  of financial  strength,  collateral  values and future  cash  flows,  most loans to borrowing  entities other than  individuals  require the guarantee of the parent company or entity  sponsor,  or in the case of smaller  entities,  the  personal guarantees of the principals.           Our commercial  leasing portfolio totaled $3.0 million and $5.9 million at December 31, 2005 and 2004,  respectively,  reflecting significant reductions from $124.1  million at December 31, 2000.  This  portfolio  consisted of leases originated by our former subsidiary, First Capital Group, Inc., headquartered in Albuquerque,   New  Mexico,  primarily  through  third  parties,  on  commercial equipment  including  aircraft parts and equipment.  During 2002, we changed the nature of this business,  ultimately  deciding to discontinue  the operations of First Capital  Group,  Inc. and transfer all  responsibilities  for the existing portfolio to a new leasing staff in St. Louis,  Missouri.  Furthermore,  in June 2004, we completed the sale of a significant  portion of our commercial  leasing portfolio, resulting in a reduction of the commercial leasing portfolio by $33.1 million to $9.6 million.  The portfolio has been further reduced to $3.0 million at December 31, 2005.           Our  nonperforming  loans were $97.2  million,  $85.8 million and $75.4 million at December 31, 2005, 2004  and 2003, respectively,  representing 1.38%, 1.40% and 1.41%,  respectively,  of total loans.  These levels of  nonperforming loans  are  higher  than  our  historical  averages  which we  attribute  to our acquisitions,   total  portfolio   growth  and  increased   commercial   lending activities.  During 2005, we experienced  continued improvement in our portfolio of  nonperforming  assets  through the first nine  months of the year,  however, further  deterioration  of certain  acquired loans in the fourth quarter of 2005 contributed  to an  overall  increase  in  nonperforming  loans for 2005 and the decision to sell certain  loans and transfer  them to loans held for sale.  This increase was primarily  associated with the  deterioration of a few large credit relationships in the Midwest region during the fourth quarter of 2005, including two large credit  relationships  of $14.9  million and $16.6  million,  or $31.5 million in aggregate.  As a result,  on December 31, 2005,  we  recognized  $7.6 million of loan  charge-offs in conjunction  with the transfer of  approximately $59.7 million of nonperforming loans to our held for sale portfolio. These loans included the two large credit  relationships  that had  deteriorated  during the fourth  quarter of 2005 and one credit  relationship  of $12.4  million that was included  in  nonperforming  loans at  December  31,  2004 with a value of $14.5 million,  all of which were  acquired  in the  purchase  of CIB Bank.  The $59.7 million  represents the estimated fair value, net of costs,  that is expected to be realized at the time of sale. In January 2006, we received a payoff on one of the  nonperforming  loans in our held for sale portfolio,  reducing the held for sale  portfolio  by $12.4  million and  resulting in the  recognition  of a $5.0 million loan  recovery.  Furthermore,  in March 2006, we completed the sale of a majority  of the  remaining  nonaccrual  loans in our  held for sale  portfolio, reducing the held for sale portfolio by $32.5  million.  We continue to actively market the remaining loans held for sale through an independent third party. The overall  increase  in  nonperforming  loans  in 2005  was  partially  offset  by    significant  improvement of 21.0% in the level of nonperforming loans during the first  three  quarters  of 2005  resulting  from  the sale of  certain  acquired nonperforming  loans,  strengthening  of certain loans,  and loan payoffs and/or external refinancing of various credits. A portion of the loan payoffs and sales during the first quarter of 2005  pertaining to certain  acquired  nonperforming loans  that were  classified  as loans  held for sale as of  December  31,  2004 contributed  to a reallocation  of the purchase price on our  acquisition of CIB Bank, as further discussed in Note 2 to our Consolidated Financial Statements.           The  level of  nonperforming  loans  associated  with our  acquisitions completed in 2005 was not significant.  Our nonperforming  assets,  exclusive of the  2004  acquisitions,  exhibited  substantial  improvement  throughout  2004, primarily as a result of significant  loan payoffs,  the  liquidation of certain real property that had been acquired through foreclosure,  the sale of a portion of our commercial leasing portfolio,  the sale of certain acquired nonperforming loans, the  strengthening of certain loans and our continued  efforts to improve asset  quality.  However,  as we  continued  to  further  analyze  the CIB  Bank acquisition,  we  determined  the level of  problem  loans that we  expected  to acquire with this acquisition  would, when combined with our existing  portfolio of such  loans,  result in a level of  problem  loans that was  unacceptable  to management.  Consequently,  during the fourth  quarter of 2004, we completed the sale of approximately $50.2 million of problem loans, including $19.1 million of nonperforming  loans,  which include loans on nonaccrual status and restructured loans.  Additionally,  at  December  31,  2004,  we had $12.9  million  of loans classified  as  held  for  sale  that  we  acquired  from  CIB  Bank  that  were subsequently  sold in early  2005,  as  previously  discussed.  The  increase in nonperforming  loans  in 2002 and 2003 was  primarily  attributable  to  general economic  conditions,  additional  problems  identified in certain acquired loan portfolios  and the  continued  deterioration  of the portfolio of leases in our commercial  leasing  portfolio,  particularly the segment related to the airline industry.  Furthermore,  in January 2003,  we  foreclosed  on a residential  and recreational  development  property  that had been placed on  nonaccrual  status during the second quarter of 2002. The relationship related to a residential and recreational development project that had significant financial difficulties and experienced  inadequate  project  financing,  project  delays  and weak  project management.  We sold this  property  in  February  2004,  thereby  reducing  our nonperforming  assets by $9.2  million,  and  realizing a gain of $2.7  million, before  applicable  income taxes.  We believe these  increases in  nonperforming assets, while partially attributable to our acquisitions and the overall risk in our loan  portfolio,  are reflective of cyclical trends  experienced  within the banking industry as a result of economic  conditions within our market areas. We continue  our efforts to improve  asset  quality  through an ongoing  process of problem loan work-out,  loan payoffs and external refinancings,  and the sale of certain  nonperforming  loans. Loans past due 90 days or more and still accruing interest showed significant improvement during 2005, decreasing $23.1 million to $5.6 million at December 31, 2005,  from $28.7  million at December 31, 2004 and $2.8  million  at  December  31,  2003.  Loan  charge-offs,  net of  recoveries, decreased  to $13.4  million for 2005,  compared  to $24.8  million for 2004 and $32.7 million for 2003, as further  discussed  under  "--Loans and Allowance for Loan Losses."           The results of our due diligence  reviews of the loan portfolios of CMC and CIB Bank prior to their  acquisition  indicated  significant  asset  quality problems and, particularly with respect to CIB Bank, a significant concentration in  commercial  real estate loans  outstanding  to a relatively  small number of borrowers.  The  acquisition  of CMC in July  2004  resulted  in a $2.5  million increase in our nonperforming  loans,  which have subsequently  declined to $1.9 million and  $400,000 at December  31, 2004 and 2005,  respectively.  Also,  the acquisition of CIB Bank resulted in a significant  increase in our nonperforming loans. As of the date of the acquisition,  November 30, 2004, CIB Bank had $60.3 million of nonperforming  loans,  which  represented  approximately  8.8% of CIB Bank's  total  loan  portfolio.  As a  result  of loan  payoffs,  the  level  of nonperforming  loans  related  to our CIB  Bank  acquisition  declined  to $50.5 million at December 31, 2004,  representing  58.8% of  nonperforming  loans. The level  of  nonperforming  loans  related  to our CIB  Bank  acquisition  further declined to $32.8  million,  or 48.4% of  nonperforming  loans at September  30, 2005,  resulting from sales of loans and additional loan payoffs.  However, as a result of  further  deterioration  of a few credit  relationships  in the fourth quarter  of 2005,  the  level of  nonperforming  loans  related  to our CIB Bank acquisition  increased to $55.0 million,  or 56.6% of  nonperforming  loans,  at December  31,  2005.  We had  anticipated  these  problems  in  negotiating  the acquisition  price of CIB Bank.  In 2004,  we  transferred  $18.3 million of CIB Bank's  nonperforming  loans to loans held for sale and recorded a corresponding charge of $5.4 million to our allowance for loan losses to reduce the loans held for sale to their  estimated fair value,  net of costs,  that was expected to be realized  at the time of the  sale.  While  CIB Bank had  utilized  a  long-term workout  strategy to address certain  nonperforming  assets,  our strategy is to address problem assets in a more accelerated manner.  Accordingly, we elected to hold  for  sale  a  portion  of the  problem  assets  acquired  from  CIB  Bank. Furthermore,  we increased  the  allowance  for loan losses by $15.7  million to reflect the additional  reserves  associated with the loans transferred to loans held  for sale  and the  application  of our loss  factors  to CIB  Bank's  loan portfolio  risk  ratings.  This  reflects our use of  strategies  for more rapid disposition  and  recovery  of certain  acquired  classified  and  nonperforming assets. As further described in Note 2 to our Consolidated Financial Statements, we  completed  the sale of these loans  during the first and second  quarters of 2005. We recorded a $10.0 million reduction in goodwill to adjust loans held for sale,  net  of  the  related  tax  effect,  as a  result  of  loan  payoffs  and    significantly  higher sales prices  received over the original  third-party  bid estimates for certain loans held for sale. At December 31, 2005, we  transferred an  additional  $56.1  million  of  nonperforming   loans  associated  with  our acquisition  of CIB Bank to loans  held for  sale and  recorded  a $6.0  million charge-off to our allowance for loan losses to reduce the loans held for sale to their estimated fair value, net of costs, that is expected to be realized at the time of the sale. We are actively  marketing  these loans through an independent third party.  These  nonperforming  loans will continue to be a primary focus of members  of our  Credit  Administration  function  as we  work  to  resolve  the individual  issues  surrounding  these  credit  relationships  that led to their deterioration.           SBLS  LLC's  purchase  of  substantially  all of the  assets of SBLS in August 2004  resulted in an increase  to  nonperforming  loans of $8.8  million, which  represented  approximately  36.7% of SBLS's loan portfolio at the time of acquisition. SBLS LLC held a significant concentration of assets associated with the shrimping  vessel  industry,  reflected in both loans and other  repossessed assets.  The shrimping  vessel industry  concentration  and its depressed status were reflected in our net asset purchase price. SBLS LLC's  nonperforming  loans have declined  since the date of acquisition to $6.2 million and $1.8 million at December  31,  2004 and  2005,  respectively.  SBLS  LLC's  asset  concentration associated with the distressed  shrimping vessels industry further  deteriorated in 2005 due to higher  interest  rates,  increased fuel costs,  and the physical damage to several of the  vessels by  Hurricane  Katrina.  As a result,  the SBA agreed to repurchase SBLS LLC's entire shrimping  vessels  portfolio,  and these loans  were  placed  in  liquidation  status  resulting  in the  recognition  of substantial  loan  losses in 2005.  SBLS  LLC's net loan  charge-offs  were $3.8 million for 2005, compared to $690,000 for 2004.           During 2001 and 2002,  the nation  generally  experienced  a relatively mild, but prolonged  economic slow down that affected us and much of the banking industry.  This was  exacerbated  by the terrorist  attacks in late 2001 and the effects the attacks and related governmental responses had on economic activity. In 2003,  we continued to  experience  weak  economic  conditions  in our market areas, despite some slight economic improvements in certain sectors. The overall effects  of  the  economic  downturn  have  been  inconsistent  between  various geographic areas of the country,  as well as different  segments of the economy. To us, the effects of the downturn can be observed in generally  lower  interest rates,  which  have a negative  impact on our net  interest  income,  and on the performance of our loan portfolio,  which is reflected in higher  delinquencies, nonperforming  assets,  charge-offs  and provisions for loan losses,  as well as reduced  loan  demand from  customers.  The impact of lower  interest  rates was significantly   reduced  through  the  use  of  various   derivative   financial instruments that provide hedges of this interest rate risk. However, the benefit of these derivative financial instruments was substantially reduced in late 2004 and 2005  with the  maturity  and  termination  of  certain  interest  rate swap agreements  and increases in the overall  interest  rates that began in mid-2004 and continued  throughout 2005, as further discussed under "--Interest Rate Risk Management."  During 2002 and 2003, we incurred  continued  asset quality issues that were at least partially  attributable to economic  conditions.  During 2004 and 2005,  certain sectors of the economy have stabilized,  which contributed to the overall improvement in our asset quality,  exclusive of our 2004 acquisition transactions.  During 2005, our asset quality reflected substantial  improvement during  the  first  nine  months  as a result  of the sale of  certain  acquired nonperforming  loans,  the  strengthening of certain loans, and loan payoffs and external  refinancing  of  various  credits.  However,  as a result  of  further deterioration  of a few large  relationships  in the fourth quarter of 2005, our overall level of nonperforming assets increased during 2005.           Within our market areas,  the impact of the economy has become  evident at  different  times.  In our Midwest  market,  a  perceptible  increase in loan delinquencies began in late 2000 and continued throughout 2001, with some modest improvement  in 2002 and 2003.  The  increase  in  delinquencies  was  primarily focused in commercial,  financial and agricultural  loans, lease financing loans and, to a lesser extent,  commercial real estate loans,  and initially  involved borrowers that had already encountered some operating problems that continued to deteriorate as the economy became weaker.  Included in this were loans on hotels and leases to the commercial airline industry.  In both instances,  the industry had been suffering from overcapacity prior to 2001, which then became much worse with  the  economic  downturn  and the  effects  of  terrorist  attacks.  As the recession  continued,  the effects expanded to companies that had been stronger, but  succumbed to the ongoing  effects of slowed  economic  activity.  We sold a significant  portion of the remaining leases in our commercial leasing portfolio in June 2004.  While we  recognized  a trend in asset  quality  improvement,  we recorded  a  significant  increase  in  the  level  of our  nonperforming  loans associated with our acquisition of CIB Bank.  Nonperforming loans and leases for the Midwest  region were $82.8  million at December 31, 2005,  compared to $76.0 million  and  $56.2  million  at  December  31,  2004  and  2003,  respectively. Nonperforming  loans  associated  with our  acquisition  of CIB Bank were  $55.0 million and $50.5  million at  December  31,  2005 and 2004,  respectively.  The significant  improvement in nonperforming  assets that was reflected during most of 2004 was offset by the previously  discussed increase in nonperforming assets resulting  from  our  acquisitions  of CMC and CIB  Bank.  We saw a  significant improvement in nonperforming  loans during the first nine months of 2005, which, however,  was offset by  further  deterioration  of a few credit  relationships, primarily  associated  with CIB Bank,  during  the fourth  quarter  of 2005,  as previously  discussed.  We  continue to address the  significant  asset  quality issues  that we  inherited  with our  acquisition  of CIB Bank and expect  these issues to improve over time through our efforts to improve  nonperforming loans.    Net loan  charge-offs for our Midwest  banking region  decreased to $8.7 million for the year ended  December  31,  2005,  compared  to $11.2  million  and $25.7 million  for the years  ended  December  31,  2004 and 2003,  respectively.  The decrease in 2005 is primarily attributable to the strengthening of asset quality related to our core portfolio  throughout  most of 2005. The decrease in 2004 is attributable to a $14.7 million decrease in net loan charge-offs associated with our commercial leasing business,  partially offset by a $3.0 million increase in net loan  charge-offs  associated with our CMC loan portfolio.  The increase for 2003 is attributable to a $6.4 million  increase in net loan  charge-offs in our commercial leasing portfolio.           Our  California  banking  region  recognized  net  loan  recoveries  of $704,000  and  $680,000  for  the  years  ended  December  31,  2005  and  2003, respectively.  In 2004, we  experienced  certain  problems with two  significant commercial  credit  relationships  concentrated  in a single lending unit in the southern  California region. As a result, net loan charge-offs in our California banking  region for the year ended  December  31,  2004 were $8.6  million,  and included  $6.9  million  of   charge-offs   related  to  these  two   individual relationships.  Nonperforming  loans for our California banking region were $8.7 million at December  31,  2005,  compared to $1.6  million and $13.0  million at December 31, 2004 and 2003,  respectively.  Generally,  the effects on us of the economic downturn in California have been primarily limited to the San Francisco Bay area,  including  the area known as  "Silicon  Valley."  Although  we have a substantial  banking  presence in the San Francisco Bay area, we have relatively little  direct  exposure to the high  technology  companies.  Consequently,  the decline  in that  industry  beginning  in 2000 had little  direct  effect on our California  operations.  However,  as the  magnitude of the problems in the high technology sector increased, the effects spread to companies that were suppliers and servicers of the high  technology  sector,  and to commercial real estate in the  area.  As a result,  our  asset  quality  issues  in  California  have been primarily  concentrated  within the San Francisco Bay area, and generally do not involve  Southern  California  or  the  Sacramento-Roseville  area  in  Northern California.           Our Texas banking  operation  represents a somewhat  smaller portion of our overall lending  function.  The Texas economy has generally  continued to be fairly  strong,   resulting  in  relatively  few  asset  quality  issues.  Total nonperforming  loans for this  region  were $5.7  million  and $8.2  million  at December  31,  2005 and  2004,  respectively,  of which  $1.8  million  and $6.2 million,  respectively,  were  associated  with SBLS LLC,  whose loan  portfolio included a significant  concentration  of assets  associated with the distressed shrimping vessels industry,  as previously  discussed.  Net loan charge-offs for the Texas  region were $5.4 million for the year ended  December  31, 2005,  and included $3.8 million of net loan charge-offs associated with SBLS LLC. Net loan charge-offs  for 2004 were $4.9 million and included  $3.4 million on two credit relationships  and $690,000 of net loan  charge-offs  related to our purchase of assets from SBLS. We recorded net loan  charge-offs for our Texas region of $7.7 million for the year ended  December  31,  2003,  which  included  $6.6  million associated with three credit relationships.           In addition to restructuring  our loan portfolio,  we also have changed the  composition  of our deposit  base.  The deposit  mix of 2005  reflects  our continued  efforts  in this  regard as a  majority  of our  deposit  development programs are directed toward increased transaction accounts,  such as demand and savings  accounts,  rather  than  time  deposits.  We  have  also  expanded  our development  of  multiple  account   relationships  with  individual  customers, expanding our  relationship  with existing  customers and expanding the products provided to our customers.  This growth is accomplished by cross-selling various products  and  services,  packaging  account  types and offering  incentives  to deposit customers on other deposit or non-deposit services. The expansion of our small business market lending  provides  additional  opportunities to cross sell other financial  services such as investment,  trust,  insurance and traditional personal  banking  services to small business  owners.  In addition,  commercial borrowers are encouraged to maintain their operating  deposit  accounts with us. Although  time  deposits  have  increased to $3.15 billion at December 31, 2005, they represented 41.8% of total deposits, as compared to $2.31 billion, or 46.0% of total deposits at December 31, 2000.  Total demand and savings  accounts have increased to $4.39 billion,  or 58.2% of total  deposits,  at December 31, 2005, from $2.70 billion, or 54.0% of total deposits, at December 31, 2000, reflecting our  continued  focus  on  transactional   accounts  and  full  service  deposit relationships with our customers.           Despite the significant expenses we incurred in the amalgamation of the acquired entities into our corporate  culture and systems,  and in the expansion of our  organizational  capabilities,  the earnings of the acquired entities and the  increased  net  interest  income  resulting  from  the  transition  in  the composition of our loan and deposit portfolios have contributed to improving net income.  For the years ended  December  31, 2005 and 2004,  net income was $96.9 million  and $82.9  million,  respectively,  compared  to $62.8  million,  $45.2 million and $64.5  million in 2003,  2002 and 2001,  respectively.  The negative provision  for loan  losses  of $4.0  million  in 2005  reflects  a  significant reduction in net loan charge-offs  and,  exclusive of a deterioration of certain credit relationships during the fourth quarter of 2005 that were associated with our acquisition of CIB Bank, an overall improvement in asset quality and reduced levels of  nonperforming  loans during the first nine months of 2005, as further discussed  under  "--Comparison  of  Results of  Operations  for 2005 and 2004 -    Provision  for Loan Losses" and under  "--Loans and  Allowance for Loan Losses." The  higher-than-historical  provision for loan losses in 2003 reflects the then current  economic  environment  and  significantly  increased  loan  charge-off, delinquency and nonperforming  trends.  The reduced provision for loan losses in 2004 reflects loan sales of problem credits and,  exclusive of 2004  acquisition activity,   an  overall   improvement  in  asset  quality,   reduced  levels  of nonperforming  loans and lower net loan charge-offs,  as further discussed under "--Comparison  of Results of  Operations  for 2004 and 2003 - Provision for Loan Losses."  Although  we  anticipate  certain  short-term  adverse  effects on our operating  results  associated  with  acquisitions,  we  believe  the  long-term benefits  of  our  acquisition   program  will  exceed  the  short-term   issues encountered with some acquisitions. Accordingly, in addition to concentrating on internal  growth  through  continued  efforts to further  develop our  corporate infrastructure  and  product  and  service  offerings,  we expect to continue to identify and pursue  opportunities  for further growth through  acquisitions and expansionary de novo branch activities.  Acquisitions.  In  the  development  of  our  banking  franchise,  we  emphasize acquiring  other  financial  institutions  as one means of achieving  our growth objectives. Acquisitions may serve to enhance our presence in a given market, to expand  the  extent  of  our  market  area  or to  enable  us to  enter  new  or noncontiguous  market areas.  After we consummate an  acquisition,  we expect to enhance the franchise of the acquired entity by supplementing  the marketing and business  development  efforts  to broaden  the  customer  bases,  strengthening particular  segments  of the  business or filling  voids in the  overall  market coverage.  We have  primarily  utilized  cash,  borrowings  and the  issuance of subordinated debentures through our various statutory and business trusts, which serve as financing entities, to meet our growth objectives under our acquisition program.               During the three  years ended  December  31,  2005,  we  completed  six acquisitions of banks,  one branch office  purchase and purchased  substantially all of the assets and assumed certain  liabilities of a company that originates, sells and services SBA loans to small business concerns.  As demonstrated in the following table, our acquisitions during the three years ended December 31, 2005 have primarily served to significantly increase our presence in the metropolitan Chicago,  Illinois  market and to further  augment our existing  markets and our California and Midwest banking franchises. These transactions, which are further described in Note 2 to our Consolidated Financial Statements,  are summarized as follows:                                                   Loans,                                                     Number                                                 Net of                                                       of            Entity /                  Total     Unearned  Investment               Purchase                 Banking          Closing Date                Assets    Discount  Securities    Deposits     Price      Goodwill   Locations          ------------                ------    --------  ----------    --------     -----      --------   ---------                                                          (dollars expressed in thousands)     2005     ----       Northway State Bank       Grayslake, Illinois               October 31, 2005           $    50,400     41,800         --       45,200     10,300        3,800        1        International Bank of       California       Los Angeles, California       September 30, 2005             151,600    113,500     14,700      132,100     33,700       12,000        5        Bank and Trust Company       Roodhouse, Illinois       Branch Office (1)       September 23, 2005               5,000         --         --        5,100         --           --       --        FBA Bancorp, Inc.       Chicago, Illinois       April 29, 2005                  73,300     54,300      5,400       55,700     10,500        2,800        3                                  -----------    -------    -------    ---------    -------      -------       --                                  $   280,300    209,600     20,100      238,100     54,500       18,600        9                                  ===========    =======    =======    =========    =======      =======       ==       2004     ----       Hillside Investors, Ltd.       Hillside, Illinois       November 30, 2004          $ 1,196,700    683,300    393,200    1,102,000     67,400           --       16        Small Business Loan       Source, Inc. (2)       Houston, Texas       August 31, 2004                 47,100     24,000         --           --     45,600        5,900       --        Continental Mortgage       Corporation - Delaware       Aurora, Illinois       July 30, 2004                  140,700     73,600     44,800      104,600      4,200 (3)      100        2                                  -----------    -------    -------    ---------    -------      -------       --                                  $ 1,384,500    780,900    438,000    1,206,600    117,200        6,000       18                                  ===========    =======    =======    =========    =======      =======       ==      2003     ----       Bank of Ste. Genevieve       Ste. Genevieve, Missouri       March 31, 2003             $   115,100     43,700     47,800       93,700     15,400 (4)      900        2                                  ===========    =======    =======    =========    =======      =======       ==     ---------------     (1)  The Roodhouse,  Illinois branch of Bank  and Trust Company 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.     (2)  SBLS LLC, a Nevada-based  limited  liability company and subsidiary of First Bank,  purchased  substantially          all of  the  assets  and  assumed  certain  liabilities of SBLS. In conjunction with this  transaction,  on          August 30, 2004,  First Bank  granted to First Capital America, Inc., or  FCA, a corporation   owned  by our          Chairman and members of his immediate family, an option to purchase Membership  Interests  of  SBLS LLC. FCA          exercised  this  option  on June 30,  2005 and paid First  Bank  $7.4 million in cash.  As a  result of this          transaction,  SBLS LLC  became 51.0% owned by First Bank and 49.0% owned by FCA.     (3)  In conjunction with the acquisition of CMC, First Banks redeemed in full all of the outstanding subordinated          promissory  notes of CMC, including  accumulated  accrued  and unpaid  interest,  totaling  $4.5  million in          aggregate.     (4)  First  Banks  completed  its acquisition  of  BSG  in exchange for approximately 974,150 shares of Allegiant          Bancorp, Inc., or Allegiant,  common stock previously  held  based  upon an  agreed-upon  purchase  price of          $18.375 per share, or $17.9 million. However, in  conjunction  with a  litigation settlement related to this          transaction that occurred during the fourth quarter of 2005,  First Banks received 75,758 shares of   common          stock of National  City  Corporation,  successor to  Allegiant,  with a  fair  value of  approximately  $2.5          million  at  the  time  of  the  settlement,  as  further described in Note 2 to our Consolidated  Financial          Statements.             We funded the completed  acquisitions  from  available  cash  reserves, borrowings  under our term loan and revolving credit  agreements,  proceeds from the issuance of subordinated  debentures,  dividends from  subsidiaries,  and/or exchanges of available-for-sale investment securities.           Pending  Acquisitions.  On August 1, 2005, we executed an Agreement and Plan of  Reorganization,  which was restated as a Stock Purchase  Agreement with certain  shareholders of FNBS on October 28, 2005, that provided for First Banks to acquire  the  outstanding  common  stock of FNBS for  $45.62 per share.  FNBS operated one banking office in Sachse,  Texas,  located in the northeast  Dallas metropolitan area. As further described in Note 25 to our Consolidated Financial Statements, we completed our acquisition of FNBS on January 3, 2006. At the time of the  acquisition,  FNBS had assets of $76.1 million,  loans,  net of unearned discount,  of $49.3 million,  deposits of $66.2 million and stockholders' equity of $9.9 million.           On November 18,  2005,  we executed a Branch  Purchase  and  Assumption Agreement that provided for First Bank to acquire the East Renner Branch located at 4251 East Renner Road, in Richardson,  Texas. As further described in Note 25 to our Consolidated  Financial Statements,  First Bank completed its purchase of assets and  assumption of  liabilities  of the East Renner Branch on January 20, 2006.  At the time of the  acquisition,  the East  Renner  Branch  had assets of approximately   $667,000,   including  loans,  net  of  unearned  discount,   of approximately $144,000, and deposits of approximately $1.1 million.           On  December   19,  2005,   we  executed  an  Agreement   and  Plan  of Reorganization  providing for the  acquisition of Bancorp,  and its wholly owned banking  subsidiary,   Pittsfield,  for  approximately  $4.9  million  in  cash. Pittsfield is  headquartered  in  Pittsfield,  Illinois and operates two banking offices, one in Pittsfield,  Illinois, and one in Mount Sterling,  Illinois. The transaction,  which is  subject  to  regulatory  approvals,  is  expected  to be completed  during the second  quarter of 2006. At December 31, 2005,  Pittsfield reported assets of approximately $17.0 million, loans, net of unearned discount, of  approximately  $10.7 million,  deposits of  approximately  $13.7 million and stockholders' equity of approximately $2.7 million. As further described in Note 25 to our  Consolidated  Financial  Statements,  on March 7,  2006,  First  Bank executed a  Purchase  and  Assumption  Agreement  providing  for the sale of the banking office located in Mount Sterling,  Illinois to Beardstown Savings,  s.b. following the completion of our acquisition of Bancorp.           Subsequent  to December  31,  2005,  we entered  into three  agreements related to acquisition  transactions,  as more fully described in Note 25 to our Consolidated Financial Statements.           Other Corporate Transactions. During the three years ended December 31, 2005, we opened the following five de novo branch offices:              Branch Office Location                    Date Opened             ----------------------                    -----------              Houston, Texas                        February 9, 2004              Wildwood, Missouri                    February 20, 2004              McKinney, Texas                         July 19, 2004              San Diego, California                  August 16, 2004              Farmington, Missouri                  January 18, 2005           On March 31, 2003, we completed the merger of our two wholly owned bank subsidiaries,  First  Bank and First  Bank & Trust,  or FB&T,  to allow  certain administrative  and  operational  economies  not  available  while the two banks maintained separate charters.           On October 17, 2003,  First Bank  completed  its  divestiture  of three branch offices in the northern and central Illinois market area, and on December 5, 2003,  First Bank  completed its  divestiture of one branch office in eastern Missouri.  These  branch  divestitures  resulted in a reduction  of First Bank's deposit base of approximately $88.3 million, and a pre-tax gain of approximately $4.0 million.           On February 6, 2004, First Bank completed its divestiture of one branch office  in  rural  Missouri.  On  April  16,  2004,  First  Bank  completed  its divestiture of one branch office in southern Illinois. These branch divestitures resulted in a reduction of First  Bank's  deposit  base of  approximately  $23.4 million, and a pre-tax gain of approximately $1.0 million.           On June 30,  2004,  First  Bank  completed  the  sale of a  significant portion of the leases in its commercial leasing portfolio.  The sale reduced our commercial  leasing portfolio by approximately  $33.1 million to $9.6 million at June 30, 2004. No gain or loss was recorded on the  transaction.  In conjunction with the transaction, First Bank established a $2.0 million liability associated with the related  recourse  obligations  for  certain  leases  sold,  as further described in Note 24 to our Consolidated  Financial  Statements.  Our commercial leasing portfolio has further declined to $3.0 million at December 31, 2005 from $5.9 million at December 31, 2004,  reflecting our overall business  strategy to reduce commercial leasing activities.            On March 25,  2005,  we completed  the merger of two branch  offices in Hillside, located in the Chicago, Illinois metropolitan area.           Acquisition and Integration  Costs. We accrue certain costs  associated with our acquisitions,  as applicable,  as of the respective  consummation dates that relate to adjustments to the staffing levels of the acquired entities or to the costs of  terminating  existing  information  technology or item  processing contracts of the acquired entities prior to their stated contractual  expiration dates.  The most significant  costs that we incur 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 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 our existing operations are normally paid to the recipients  within 90 days of the respective consummation  date and are expensed in our consolidated  statements of income as incurred.  Our accrued  severance  balance of  $542,000 at December  31, 2005 is comprised of contractual obligations under salary continuation agreements to six individuals with remaining terms ranging from  approximately one to ten years. A summary of the cumulative  acquisition and integration costs attributable to the Company's  acquisitions,  which were accrued as of the consummation dates of the respective  acquisition,  is  included in Note 2 to our  Consolidated  Financial Statements. These acquisition and integration costs are reflected in accrued and other liabilities in our consolidated  balance sheets. As the obligation to make payments  under  these  agreements  is accrued at the  consummation  date,  such payments do not have any impact on our  consolidated  statements  of income.  As further  discussed and quantified  under  "--Comparison of Results of Operations for 2005 and 2004," and  "--Comparison  of  Results of  Operations  for 2004 and 2003," we also incur costs associated with our acquisitions that are expensed in our  consolidated  statements  of income.  These  costs  relate  principally  to additional  costs  incurred  in  conjunction  with  the  information  technology conversions of the respective entities.  Market Area. As of December 31, 2005,  First Bank's 177 banking  facilities were located in California, Illinois, eastern Missouri and Texas. First Bank operates in the St. Louis metropolitan area, in eastern Missouri and throughout Illinois, including Chicago.  First Bank also operates in southern  California,  including the greater Los Angeles metropolitan area,  including Ventura County,  Riverside County and Orange  County;  in Santa  Barbara  County;  in northern  California, including the greater San Francisco, San Jose and Sacramento metropolitan areas; and in Texas in the Houston and Dallas  metropolitan  areas and in McKinney  and Denton.  Our larger  networks  of branch  offices  are  located  in high  growth markets,  specifically, Los Angeles, Orange County, Chicago and metropolitan St. Louis.  Through our recent expansion in the Los Angeles area, our largest market area is southern  California.  Our second and third largest market areas are the St. Louis, Missouri metropolitan area and northern Illinois, primarily resulting from our expansion  activities in the Chicago  metropolitan area during 2004 and 2005, and our fourth largest market area is northern California.           The  following  table  lists  the  market  areas  in which  First  Bank operates,  total  deposits,  deposits as a percentage of total  deposits and the number of locations as of December 31, 2005:                                                                              Total          Deposits        Number                                                                          Deposits      as a Percentage      of                                Geographic Area                         (in millions)  of Total Deposits  Locations                                ---------------                         -------------  -----------------  ---------      Southern California..................................................    $ 1,771.5           23.5%          38 St. Louis, Missouri metropolitan area................................      1,482.3           19.7           29 Northern Illinois....................................................      1,317.8           17.5           34 Northern California..................................................      1,135.6           15.0           16 Central and southern Illinois........................................      1,009.7           13.4           34 Eastern Missouri.....................................................        475.5            6.3           16 Texas................................................................        349.4            4.6           10                                                                          ---------          -----          ---      Total deposits..................................................    $ 7,541.8          100.0%         177                                                                          =========          =====          ===   Competition  and  Branch  Banking.  First  Bank  engages  in highly  competitive activities. Those activities and the geographic markets served primarily involve competition  with other banks,  some of which are affiliated with large regional or  national  holding  companies.  Financial  institutions  compete  based  upon interest rates offered on deposit accounts,  interest rates charged on loans and other  credit and  service  charges,  the  quality  of  services  rendered,  the convenience of banking  facilities and, in the case of loans to large commercial borrowers, relative lending limits.           Our principal  competitors  include  other  commercial  banks,  savings banks,  savings and loan associations,  mutual funds,  finance companies,  trust companies,  insurance  companies,  leasing  companies,  credit unions,  mortgage companies, private issuers of debt obligations and suppliers of other investment alternatives,  such as securities firms and financial holding companies. Many of our non-bank  competitors  are not subject to the same degree of  regulation  as that imposed on bank holding companies,  federally insured banks and national or    state chartered  banks.  As a result, such non-bank  competitors have advantages over us in providing  certain  services.  We also compete with major  multi-bank holding  companies,  which are  significantly  larger  than us and have  greater access to capital and other resources.           We believe we will continue to face  competition in the  acquisition of independent banks, savings banks and other financial companies. We often compete with larger financial  institutions  that have  substantially  greater resources available for making acquisitions.           Subject  to  regulatory   approval,   commercial   banks  operating  in California,  Illinois,  Missouri and Texas are  permitted to establish  branches throughout  their  respective   states,   thereby  creating  the  potential  for additional competition in our service areas.  Supervision and Regulation  General.  Along with First Bank,  we are  extensively  regulated  by Federal and state laws and  regulations  which are designed to protect  depositors  of First Bank  and  the  safety  and  soundness  of the  U.S.  banking  system,  not  our stockholders.  To the extent this  discussion  refers to statutory or regulatory provisions, it is not intended to summarize all such provisions and is qualified in  its  entirety  by  reference  to  the  relevant   statutory  and  regulatory provisions.  Changes in applicable laws,  regulations or regulatory policies may have a material  effect on our business and prospects.  We are unable to predict the  nature or extent of the  effects  on our  business  and  earnings  that new federal and state  legislation  or  regulation  may have.  The  enactment of the legislation  described  below has  significantly  affected the banking  industry generally  and is likely to have  ongoing  effects  on First  Bank and us in the future.           As a registered bank holding company under the Bank Holding Company Act of 1956, as amended,  we are subject to regulation and  supervision of the Board of Governors of the Federal Reserve System,  or Federal Reserve.  We file annual reports with the Federal Reserve and provide to the Federal  Reserve  additional information as it may require.           Since First Bank is an  institution  chartered by the State of Missouri and a member of the  Federal  Reserve,  both the State of  Missouri  Division of Finance and the Federal  Reserve  supervise,  regulate  and examine  First Bank. First Bank is also regulated by the Federal Deposit  Insurance  Corporation,  or FDIC,  which  provides  deposit  insurance  of up to $100,000  for each  insured depositor.  Bank Holding Company  Regulation.  The activities of bank holding  companies are generally limited to the business of banking, managing or controlling banks, and other  activities  that the  Federal  Reserve  has  determined  to be so closely related to banking or managing or  controlling  banks as to the proper  incident thereto. In addition,  under the  Gramm-Leach-Bliley  Act, or GLB Act, which was enacted in November 1999 and is further discussed below, a bank holding company, whose control depository  institutions are "well-capitalized" and "well-managed" (as defined in Federal Banking  Regulations),  and which obtains  "satisfactory" Community Reinvestment Act (discussed briefly below) ratings, may declare itself to be a "financial holding company" and engage in a broader range of activities. As of this date, we are not a "financial holding company."           We are also subject to capital  requirements  applied on a consolidated basis, which are substantially  similar to those required of First Bank (briefly summarized  below).  The Bank Holding  Company Act also  requires a bank holding company to obtain approval from the Federal Reserve before:           >>  acquiring,  directly  or  indirectly,  ownership or  control of any              voting  shares of  another bank  or bank holding  company if, after              such  acquisition,  it would own or control  more  than 5% of  such              shares  (unless it  already  owns or  controls a  majority  of such              shares);           >>  acquiring  all  or substantially  all of the assets of another bank              or bank holding company; or           >>  merging or consolidating with another bank holding company.           The  Federal  Reserve  will not  approve  any  acquisition,  merger  or consolidation that would have a substantially  anti-competitive  result,  unless the anti-competitive  effects of the proposed transaction are clearly outweighed by a  greater  public  interest  in  meeting  the  convenience  and needs of the community to be served.  The Federal Reserve also considers capital adequacy and other financial and managerial factors in reviewing acquisitions and mergers.  Safety  and  Soundness  and  Similar  Regulations.  We are  subject  to  various regulations and regulatory policies directed at the financial soundness of First Bank.  These include,  but are not limited to, the Federal  Reserve's  source of strength  policy,  which  obligates a bank holding company such as us to provide financial and managerial  strength to its subsidiary banks;  restrictions on the nature and size of certain affiliate transactions between a bank holding company    and its subsidiary  depository  institutions  and  restrictions on extensions of credit by its  subsidiary  banks to  executive  officers,  directors,  principal stockholders and the related interests of such persons.  Regulatory Capital Standards.  The federal bank regulatory agencies have adopted substantially  similar  risk-based and leverage  capital  guidelines for banking organizations.  Risk-based  capital ratios are determined by classifying  assets and specified  off-balance  sheet  obligations  and financial  instruments  into weighted categories, with higher levels of capital being required for categories deemed to represent  greater  risk.  Federal  Reserve  policy also provides that banking  organizations  generally,  and particularly those that are experiencing internal  growth or  actively  making  acquisitions,  are  expected  to maintain capital positions that are substantially  above the minimum  supervisory levels, without significant reliance on intangible assets.           Under the risk-based capital standard,  the minimum  consolidated ratio of total capital to risk-adjusted  assets required for bank holding companies is 8%. At least  one-half of the total  capital must be composed of common  equity, retained earnings, qualifying noncumulative perpetual preferred stock, a limited amount of qualifying cumulative perpetual preferred stock and minority interests in the equity accounts of consolidated subsidiaries,  less certain items such as goodwill and certain  other  intangible  assets,  which amount is referred to as "Tier I  capital."  The  remainder  may  consist of  qualifying  hybrid  capital instruments,  perpetual debt, mandatory  convertible debt securities,  a limited amount of  subordinated  debt,  preferred  stock that does not qualify as Tier I capital  and a limited  amount of loan and lease loss  reserves,  which  amount, together with Tier I capital, is referred to as "Total Risk-Based Capital."           In  addition  to the  risk-based  standard,  we are  subject to minimum requirements  with  respect  to the ratio of our Tier I capital  to our  average assets less goodwill and certain other intangible assets, or the Leverage Ratio. Applicable  requirements  provide  for a minimum  Leverage  Ratio of 3% for bank holding companies that have the highest supervisory rating, while all other bank holding  companies must maintain a minimum  Leverage Ratio of at least 4% to 5%. The Office of the  Comptroller  of the  Currency  and the FDIC have  established capital  requirements  for banks under their respective  jurisdictions  that are consistent with those imposed by the Federal Reserve on bank holding companies.           Information  regarding  our  capital  levels and First  Bank's  capital levels  under the federal  capital  requirements  is contained in Note 21 to our Consolidated Financial Statements appearing elsewhere in this report. As further described in Note 21 to our Consolidated Financial Statements, on March 1, 2005, the Federal Reserve adopted a final rule,  Risk-Based Capital  Standards:  Trust Preferred  Securities  and the  Definition  of  Capital,  which  allows  for the continued inclusion, on a limited basis, of trust preferred securities in Tier I capital.  Under the final rule, trust preferred  securities and other restricted core  capital  elements  will be subject to stricter  quantitative  limits.  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.  Prompt  Corrective  Action.  The FDIC  Improvement Act requires the federal bank regulatory  agencies to take prompt  corrective  action in respect to depository institutions  that  do not  meet  minimum  capital  requirements.  A  depository institution's  status under the prompt corrective action provisions depends upon how its capital levels compare to various  relevant  capital  measures and other factors as established by regulation.           The federal regulatory agencies have adopted  regulations  establishing relevant capital measures and relevant capital levels. Under the regulations,  a bank will be:           >>  "well  capitalized" if it has a  total risk-based  capital ratio of              10% or  greater,  a Tier I capital  ratio  of 6%  or greater  and a              Leverage  Ratio of 5% or greater  and is  not subject to  any order              or written directive by any such regulatory  authority to  meet and              maintain a specific capital level for any capital measure;           >>  "adequately  capitalized"  if  it  has a total  risk-based  capital              ratio of  8% or  greater,  a Tier I capital  ratio of 4% or greater              and  a   Leverage   Ratio  of  4%  or   greater   (3%   in  certain              circumstances);           >>  "undercapitalized"  if  it has a total risk-based capital  ratio of              less  than  8%,  a  Tier I  capital  ratio  of  less  than 4%  or a              Leverage Ratio of less than 4% (3% in certain circumstances);           >>  "significantly  undercapitalized"  if  it has  a  total  risk-based              capital  ratio  of less  than 6%, a  Tier I  capital  ratio of less              than 3% or a Leverage Ratio of less than 3%; and           >>  "critically  undercapitalized" if  its  tangible equity is equal to              or less than 2% of its average quarterly tangible assets.           Under certain circumstances, a depository institution's primary federal regulatory  agency  may use its  authority  to lower the  institution's  capital category.  The banking  agencies are permitted to establish  individual  minimum capital  requirements   exceeding  the  general  requirements  described  above.    Generally,  failing to maintain the status of "well  capitalized" or "adequately capitalized"  subjects a bank to  restrictions  and  limitations on its business that become progressively more severe as the capital levels decrease.           A bank is prohibited  from making any capital  distribution  (including payment of a dividend) or paying any  management  fee to its holding  company if the  bank  would  thereafter  be   "undercapitalized."   Limitations  exist  for "undercapitalized"  depository institutions regarding, among other things, asset growth, acquisitions,  branching, new lines of business,  acceptance of brokered deposits and borrowings from the Federal Reserve System.  These institutions are also  required to submit a capital  restoration  plan that  includes a guarantee from  the  institution's  holding  company.   "Significantly   undercapitalized" depository  institutions  may  be  subject  to  a  number  of  requirements  and restrictions,  including  orders  to sell  sufficient  voting  stock  to  become "adequately  capitalized,"  requirements to reduce total assets and cessation of receipt of deposits from  correspondent  banks. The appointment of a receiver or conservator may be required for "critically undercapitalized" institutions.  Dividends.  Our primary source of funds in the future is the dividends,  if any, paid by First  Bank.  The ability of First Bank to pay  dividends  is limited by federal laws, by regulations  promulgated by the bank regulatory agencies and by principles  of prudent  bank  management.  Under the most  restrictive  of these requirements,  the  future  payment of  dividends  from First Bank is limited to approximately $81.5 million at December 31, 2005, unless prior permission of the regulatory authorities is obtained.  Customer Protection. First Bank is also subject to consumer laws and regulations intended to protect consumers in transactions with depository  institutions,  as well as other laws or regulations affecting customers of financial  institutions generally.  These laws and regulations  mandate various disclosure  requirements and substantively  regulate the manner in which financial institutions must deal with their customers.  First Bank must comply with numerous  regulations in this regard and is subject to periodic  examinations  with respect to its  compliance with the requirements.  Community  Reinvestment  Act. The  Community  Reinvestment  Act of 1977 requires that, in connection  with  examinations of financial  institutions  within their jurisdiction,  the  federal  banking  regulators  evaluate  the  record  of  the financial  institutions in meeting the credit needs of their local  communities, including low and moderate  income  neighborhoods,  consistent with the safe and sound  operation  of  those  financial  institutions.  These  factors  are  also considered in evaluating mergers, acquisitions and other applications to expand.  The  Gramm-Leach-Bliley  Act. The GLB Act, enacted in 1999, amended and repealed portions  of the  Glass-Steagall  Act and other  federal  laws  restricting  the ability of bank holding companies,  securities firms and insurance  companies to affiliate  with  each  other and to enter  new  lines of  business.  The GLB Act established a comprehensive  framework to permit  financial  companies to expand their activities, including through such affiliations, and to modify the federal regulatory  structure  governing  some  financial  services   activities.   This authority of financial firms to broaden the types of financial  services offered to customers and to affiliates with other types of financial  services companies may lead to further  consolidation in the financial services industry.  However, it may lead to  additional  competition  in the  markets  in which we operate by allowing new entrants  into various  segments of those  markets that are not the traditional competitors in those segments. Furthermore, the authority granted by the GLB Act may encourage the growth of larger competitors.           The  GLB  Act  also  adopted  consumer  privacy  safeguards   requiring financial services providers to disclose their policies regarding the privacy of customer  information  to  their  customers  and,  subject  to some  exceptions, allowing  customers  to "opt  out" of  policies  permitting  such  companies  to disclose confidential financial information to non-affiliated third parties.  The  Sarbanes-Oxley  Act.  In July  2002,  the  Sarbanes-Oxley  Act of 2002  was enacted.  The  Sarbanes-Oxley  Act imposes a myriad of corporate  governance and accounting  measures  designed  to ensure  that the  shareholders  of  corporate America  are treated  fairly and have full and  accurate  information  about the public companies in which they invest. All public companies, including companies such as First Banks, that file periodic reports with the Securities and Exchange Commission, or SEC, are affected by the Sarbanes-Oxley Act.           Certain   provisions  of  the   Sarbanes-Oxley   Act  became  effective immediately,  while other  provisions  will become  effective  as the SEC adopts rules to implement  those  provisions.  Some of the principal  provisions of the Sarbanes-Oxley Act which may affect us include:           >>  the  creation of  an  independent  accounting  oversight  board  to              oversee  the  audit of public  companies  and  auditors who perform              such audits;           >>  auditor independence  provisions  which restrict non-audit services              that independent accountants may provide to their audit clients;            >>  additional  corporate  governance and responsibility measures which              (i)  require  the  chief  executive  officer  and  chief  financial              officer to  certify  financial statements and to forfeit salary and              bonuses  in certain  situations,  and  (ii) protect  whistleblowers              and informants;           >>  expansion of  the  audit committee's  authority and  responsibility              by requiring that  the  audit  committee (i) have direct control of              the outside  auditor,  (ii)  be able  to hire and fire the auditor,              and (iii) approve all non-audit services;           >>  mandatory  disclosure  by   analysts  of   potential  conflicts  of              interest; and           >>  enhanced penalties for fraud and other violations.           The  Sarbanes-Oxley Act has and is expected to continue to increase the administrative costs of doing business for public companies;  however, we cannot predict the significance of such increase.  The USA Patriot  Act. The Patriot Act was enacted in October 2001 in response to the  terrorist  attacks in New York,  Pennsylvania  and  Washington,  D.C.  that occurred on September 11, 2001.  The Patriot Act is intended to  strengthen  the ability of U.S. law  enforcement  agencies and the  intelligence  communities to work cohesively to combat terrorism on a variety of fronts. The potential impact of the Patriot Act on financial  institutions  of all kinds is  significant  and wide  ranging.  The Patriot Act  contains  sweeping  anti-money  laundering  and financial transparency laws and imposes various regulations, including standards for verifying client  identification  at account  opening,  and rules to promote cooperation  among  financial  institutions,   regulators  and  law  enforcement entities in  identifying  parties  that may be involved  in  terrorism  or money laundering. The Patriot Act is expected to increase the administrative costs and burden of doing business for financial  institutions;  however,  while we cannot predict the full impact of such an increase,  we do not expect it to differ from that of other financial institutions.  Reserve Requirements;  Federal Reserve System and Federal Home Loan Bank System. The Federal Reserve  requires all depository  institutions to maintain  reserves against their transaction accounts and non-personal time deposits.  The balances maintained to meet the reserve  requirements  imposed by the Federal Reserve may be used to satisfy liquidity requirements. Institutions are authorized to borrow from the Federal Reserve Bank discount window,  but Federal Reserve  regulations require  institutions to exhaust other reasonable  alternative sources of funds, including  advances  from Federal  Home Loan Banks,  before  borrowing  from the Federal Reserve Bank.           First Bank is a member of the  Federal  Reserve  System and the Federal Home Loan Bank System.  As a member,  First Bank is required to hold investments in regional banks within those systems.  First Bank was in compliance with these requirements at December 31, 2005, with investments of $10.3 million in stock of the  Federal  Home Loan Bank of Des  Moines  and $22.2  million  in stock of the Federal  Reserve Bank of St. Louis.  First Bank also holds an investment of $2.0 million in stock of the Federal Home Loan Bank of Chicago,  as a  nonmember,  to collateralize  certain  Federal Home Loan Bank advances  assumed in  conjunction with certain acquisition transactions.  Monetary  Policy and  Economic  Control.  The  commercial  banking  business  is affected by legislation,  regulatory policies and general economic conditions as well as the  monetary  policies  of the  Federal  Reserve.  The  instruments  of monetary policy available to the Federal Reserve include the following:           >>  changes in the discount  rate  on  member bank  borrowings  and the              targeted federal funds rate;           >>  the availability of credit at the discount window;           >>  open market operations;           >>  the  imposition  of   changes   in  reserve   requirements  against              deposits of domestic banks;           >>  the   imposition  of   changes  in  reserve   requirements  against              deposits and assets of foreign branches; and           >>  the  imposition  of  and  changes in reserve  requirements  against              certain borrowings by banks and their affiliates.           These monetary  policies are used in varying  combinations to influence overall growth and  distributions of bank loans,  investments and deposits,  and this use may affect interest rates charged on loans or paid on liabilities.  The monetary  policies of the Federal  Reserve have had a significant  effect on the operating  results of commercial  banks and are expected to do so in the future. Such  policies  are  influenced  by  various   factors,   including   inflation, unemployment,  and short-term and long-term changes in the  international  trade balance and in the fiscal policies of the U.S. Government. We cannot predict the effect that changes in monetary  policy or in the  discount  rate on member bank borrowings will have on our future business and earnings or those of First Bank.       Employees           As of March 27, 2006, we employed  approximately 2,530 employees.  None of the employees are subject to a collective bargaining  agreement.  We consider our relationships with our employees to be good.
Readers  of our Annual  Report on Form 10-K  should  consider  the risk factors  described below in conjunction with the other  information  included in this Annual Report on Form 10-K, including Management's  Discussion and Analysis of Financial  Condition and Results of Operations,  our Selected Financial Data, our  Consolidated  Financial  Statements and the related notes thereto,  and the financial and other data contained  elsewhere in this report.  See also "Special Note Regarding  Forward-Looking  Statements"  appearing at the beginning of this report.           We pursue acquisitions to supplement our internal growth.  Acquisitions involve  varying  degrees of inherent risk that could affect our  profitability. Acquisitions  of other  banks  or  businesses  may  expose  us to asset  quality problems,  higher than anticipated expenses,  operational problems or unknown or contingent  liabilities  of the  entities we acquire.  If the  quantity of these problems  exceeds our  estimates,  our earnings and  financial  condition may be adversely affected.  Furthermore,  acquisitions generally require integration of the  acquired  entity's  systems and  procedures  with ours in order to make the transaction  economically feasible.  This integration process is complicated and time  consuming  and can also be  disruptive  to the  customers  of the acquired business.  If the  integration  process is not conducted  successfully  and with minimal  effect  on the  business  and its  customers,  we may not  realize  the anticipated  economic  benefits of particular  acquisitions  within the expected time  frame,  and we may lose  higher  than  expected  numbers of  customers  or employees of the acquired business.           Competition for acquisitions in the financial services industry and our status as a privately held company make our efforts to grow through acquisitions difficult.  We face intense  competition  from other  financial  institutions in pursuing   acquisitions,   particularly   related  to  price.  Prices  at  which acquisitions can be made fluctuate with market  conditions.  We have experienced times during which  acquisitions could not be made in specific markets at prices our  management  considered  acceptable,  and we expect that this situation will happen again.  Because of our intention to remain a closely held company,  we do not use our common stock to make  acquisitions.  Our use of cash as  acquisition consideration   can  be  a  disadvantage  in  acquisitions   relative  to  other prospective  acquirers in those instances in which selling stockholders desire a tax-free exchange.           Geographic  distance between our operations  increases  operating costs and makes efforts to standardize  operations more difficult.  We operate banking offices in California, Illinois, Missouri and Texas. The noncontiguous nature of many of our  geographic  markets  increases  operating  costs  and makes it more difficult for us to  standardize  our business  practices and  procedures.  As a result of our  geographic  dispersion,  we face the  following  challenges:  (a) operation of  information  technology  and item  processing  functions at remote locations including the transportation of documents and increased communications line  charges  from  various  service  providers;  (b) control of  correspondent accounts,  reserve  balances and wire  transfers in  different  time zones;  (c) familiarizing  personnel with our business  environment,  banking  practices and customer   requirements  at   geographically   dispersed  areas;  (d)  providing administrative   support,   including   accounting,   human  resources,   credit administration,  loan servicing, internal audit and credit review at significant distances;  and (e)  establishing  and monitoring  compliance with our corporate policies and procedures in different areas.           Our  emphasis  on  commercial  real  estate  lending  and  real  estate construction and development lending has increased our credit risk. Our expanded level of commercial real estate and construction and development lending carries with it greater  credit risk than the credit risk  associated  with  residential real  estate  lending.  A  substantial  portion  of our  loans  are  secured  by commercial real estate.  Commercial real estate and real estate construction and development  loans  were  $2.11  billion  and $1.56  billion,  respectively,  at December  31,  2005,  representing  31.5% and 23.3%,  respectively,  of our loan portfolio,  excluding loans held for sale.  During 2004 and 2005, we experienced increasing amounts of nonperforming  loans within our commercial real estate and real estate construction and development loan portfolios.  Adverse  developments affecting  real estate in one or more of our markets could further  increase the credit risk  associated  with our loan  portfolio,  as further  discussed  under "Management's  Discussion  and  Analysis of Financial  Condition  and Results of Operations -- Lending  Activities" and "Management's  Discussion and Analysis of Financial  Condition  and Results of  Operations -- Loans and Allowance for Loan Losses." On January 13, 2006,  the Department of the Treasury,  Federal  Reserve and FDIC collectively issued proposed guidance entitled,  "Interagency  Guidance on  Concentrations  in Commercial  Real Estate  Lending,  Sound Risk  Management Practices." This proposed  guidance focuses on financial  institutions that have high and  increasing  concentrations  of  commercial  real estate loans on their balance sheets that make them more vulnerable to cyclical commercial real estate markets,  and  is  intended  to  reinforce  the  institution's  risk  management practices and appropriate  capital levels associated with these  concentrations. The comment period ends April 13, 2006.            Decreases  in  interest  rates  could  have a  negative  impact  on our profitability. Our earnings are principally dependent on our ability to generate net interest  income.  Net interest  income is affected by many factors that are partly or completely beyond our control, including competition, general economic conditions  and the policies of regulatory  authorities,  including the monetary policies of the Federal Reserve.  Under our current interest rate risk position, our net interest  income could be  negatively  affected by a decline in interest rates,  as further  discussed  under  "Management's  Discussion  and Analysis of Financial Condition and Results of Operations -- Interest Rate Risk Management."           Our interest rate risk hedging  activities  may increase  volatility in earnings.  To offset the risks  associated with the effects of changes in market interest rates, we periodically  enter into  transactions  designed to hedge our interest  rate risk.  The  accounting  for such  hedging  activities  under U.S. generally accepted accounting  principles requires our hedging instruments to be recorded at fair  value.  The effect of certain of our  hedging  strategies  may result in  volatility in our  quarterly  and annual  earnings as interest  rates change or as the volatility in the underlying  derivatives  markets increases or decreases. The volatility in earnings is primarily a result of marking to market certain of our hedging  instruments and/or modifying our overall hedge position, as further  discussed under  "Management's  Discussion and Analysis of Financial Condition and Results of Operations -- Interest Rate Risk Management."           The  financial  services  business is highly  competitive,  and we face competitive  disadvantages  because  of our  size  and  the  nature  of  banking regulation. We encounter strong direct competition for deposits, loans and other financial  services in all of our market areas.  Our larger  competitors,  which have significantly  greater resources,  may have advantages over us in providing certain  services.  Our principal  competitors  include other commercial  banks, savings banks,  savings and loan associations,  mutual funds, finance companies, trust companies, insurance companies, leasing companies, credit unions, mortgage companies, private issuers of debt obligations and suppliers of other investment alternatives,  such as securities firms and financial holding companies. Many of our non-bank  competitors  are not subject to the same degree of  regulation  as that imposed on bank holding companies,  federally insured banks and national or state  chartered  banks.  As  a  result,  such  non-bank  competitors  may  have advantages over us in providing certain services.           We may not be able to implement  technological change as effectively as our competitors.  The financial  services industry has in the past and continues to undergo rapid  technological  change related to delivery and  availability of products  and   services  and   operating   efficiencies.   In  many   instances technological improvements require significant capital expenditures, and many of our larger  competitors have  significantly  greater  resources than we may have available.           We  operate  in  a  highly  regulated  environment.  Recently  enacted, proposed and future  legislation  and regulations may increase our cost of doing business.  We and our  subsidiaries  are subject to extensive  federal and state legislation,  regulation and supervision.  Recently enacted, proposed and future legislation  and  regulations  have had and are  expected  to continue to have a significant impact on the financial  services industry.  Some of the legislative and regulatory  changes,  including the  Sarbanes-Oxley  Act and the USA Patriot Act, have and are expected to continue to increase our costs of doing  business, particularly  personnel and technology expenses necessary to maintain compliance with the expanded  regulatory  requirements.  Additionally,  the legislative and regulatory  changes could reduce our ability to compete in certain  markets,  as further discussed under "--Business -- Supervision and Regulation."
We are not an  accelerated  filer  or a  large  accelerated  filer,  as defined in Rule 12b-2 of the  Securities  Exchange Act of 1934,  or the Exchange Act,  nor are we a  well-known seasoned  issuer  as  defined  in Rule 405 of the Securities Act. Consequently, Item 1B is not applicable to us.
We own our  office  building,  which  houses  our  principal  place  of business, located at 135 North Meramec, Clayton, Missouri 63105. The property is in good  condition  and consists of  approximately  60,353 square feet, of which approximately  9,970 square feet is currently leased to others. Of our other 177 offices and three operations and administrative  facilities,  101 are located in buildings that we own and 79 are located in buildings that we lease.           We  consider  the  properties  at  which we do  business  to be in good condition generally and suitable for our business conducted at each location. To the extent our properties or those acquired in connection  with our  acquisition of other entities  provide space in excess of that  effectively  utilized in the operations  of First Bank,  we seek to lease or  sub-lease  any excess  space to third  parties.  Additional  information  regarding  the premises and  equipment utilized  by  First  Bank  appears  in  Note  7 to  our  Consolidated  Financial Statements appearing elsewhere in this report.
In the ordinary  course of  business,  we and our  subsidiaries  become involved  in legal  proceedings.  Our  management,  in  consultation  with legal counsel,  believes the ultimate resolution of existing proceedings will not have a material  adverse  effect on our business,  financial  condition or results of operations.
None.                                         PART II
Market Information. There is no established public trading market for our common stock. Various trusts, which were created by and are administered by and for the benefit of Mr. James F. Dierberg,  our Chairman of the Board, and members of his immediate family, own all of our voting stock.  Dividends.  In recent  years,  we have  paid  minimal  dividends  on our Class A Convertible  Adjustable  Rate  Preferred  Stock and our Class B  Non-Convertible Adjustable Rate Preferred Stock, and have paid no dividends on our Common Stock. Our  ability to pay  dividends  is limited by  regulatory  requirements  and our credit agreement, and by the receipt of dividend payments from First Bank, which is also subject to regulatory requirements. The dividend limitations are further described  in  Note  11 and  Note 22 to our  Consolidated  Financial  Statements appearing elsewhere in this report.
The selected  consolidated  financial  data set forth below are derived from our  consolidated  financial  statements.  This information is qualified by reference to our Consolidated  Financial  Statements appearing elsewhere in this report.  This information  should be read in conjunction with such  Consolidated Financial Statements, the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations."                                                                      As of or For the Year Ended December 31, (1)                                                           ------------------------------------------------------------                                                              2005         2004        2003         2002        2001                                                              ----         ----        ----         ----        ----                                                         (dollars expressed in thousands, except share and per share data)  Income Statement Data:           Interest income.....................................  $  493,940     394,782     391,153      425,721     445,385     Interest expense....................................     168,259      94,767     104,026      157,551     210,246                                                           ----------   ---------   ---------    ---------   ---------     Net interest income.................................     325,681     300,015     287,127      268,170     235,139     Provision for loan losses...........................      (4,000)     25,750      49,000       55,500      23,510                                                           ----------   ---------   ---------    ---------   ---------     Net interest income after provision for loan losses.     329,681     274,265     238,127      212,670     211,629     Noninterest income..................................      94,743      83,486      87,708       67,511      89,095     Noninterest expense.................................     276,296     229,505     227,069      210,812     202,157                                                           ----------   ---------   ---------    ---------   ---------     Income before provision for income taxes,       minority interest in (loss) income of       subsidiary and cumulative effect of change       in accounting principle...........................     148,128     128,246      98,766       69,369      98,567     Provision for income taxes..........................      52,509      45,338      35,955       22,771      30,048                                                           ----------   ---------   ---------    ---------   ---------     Income before minority interest in (loss)       income of subsidiary and cumulative effect       of change in accounting principle.................      95,619      82,908      62,811       46,598      68,519     Minority interest in (loss) income of subsidiary....      (1,287)         --          --        1,431       2,629                                                           ----------   ---------   ---------    ---------   ---------     Income before cumulative effect of change in       accounting principle..............................      96,906      82,908      62,811       45,167      65,890     Cumulative effect of change in accounting       principle, net of tax.............................          --          --          --           --      (1,376)                                                           ----------   ---------   ---------    ---------   ---------     Net income..........................................  $   96,906      82,908      62,811       45,167      64,514                                                           ==========   =========   =========    =========   =========  Dividends:     Preferred stock.....................................  $      786         786         786          786         786     Common stock........................................          --          --          --           --          --     Ratio of total dividends declared to net income.....        0.81%       0.95%       1.25%        1.74%       1.22%  Per Share Data:     Earnings per common share:       Basic:          Income before cumulative effect of change            in accounting principle......................  $ 4,062.36    3,470.80    2,621.39     1,875.69    2,751.54          Cumulative effect of change in accounting            principle, net of tax........................          --          --          --           --      (58.16)                                                           ----------   ---------   ---------    ---------   ---------           Basic..........................................  $ 4,062.36    3,470.80    2,621.39     1,875.69    2,693.38                                                           ==========   =========   =========    =========   =========        Diluted:          Income before cumulative effect of change            in accounting principle......................  $ 4,007.46    3,421.58    2,588.31     1,853.64    2,684.93          Cumulative effect of change in accounting            principle, net of tax........................          --          --          --           --      (58.16)                                                           ----------   ---------   ---------    ---------   ---------           Diluted........................................  $ 4,007.46    3,421.58    2,588.31     1,853.64    2,626.77                                                           ==========   =========   =========    =========   =========       Weighted average shares of common       stock outstanding.................................      23,661      23,661      23,661       23,661      23,661   Balance Sheet Data:     Investment securities...............................  $1,340,783   1,813,349   1,049,714    1,145,670     638,644     Loans, net of unearned discount.....................   7,020,771   6,137,968   5,328,075    5,432,588   5,408,869     Total assets........................................   9,170,333   8,732,841   7,106,940    7,351,177   6,786,045     Total deposits......................................   7,541,831   7,151,970   5,961,615    6,172,820   5,683,904     Notes payable.......................................     100,000      15,000      17,000        7,000      27,500     Subordinated debentures.............................     215,461     273,300     209,320      278,389     243,457     Common stockholders' equity.........................     665,875     587,830     536,752      505,978     435,594     Total stockholders' equity..........................     678,938     600,893     549,815      519,041     448,657  Earnings Ratios:     Return on average assets............................        1.10%       1.10%       0.87%        0.64%       1.08%     Return on average stockholders' equity..............       15.11       14.44       11.68         9.44       15.96     Efficiency ratio (2)................................       65.72       59.84       60.58        62.80       62.35     Net interest margin (3).............................        4.01        4.36        4.45         4.23        4.34  Asset Quality Ratios:     Allowance for loan losses to loans..................        1.93        2.46        2.19         1.83        1.80     Nonperforming loans to loans (4)....................        1.38        1.40        1.41         1.38        1.24     Allowance for loan losses to       nonperforming loans (4)...........................      139.23      175.65      154.52       132.29      144.36     Nonperforming assets to loans and       other real estate (5).............................        1.41        1.46        1.62         1.52        1.32     Net loan charge-offs to average loans...............        0.21        0.45        0.61         1.01        0.45  Capital Ratios:     Average total stockholders' equity to       average total assets..............................        7.28        7.61        7.48         6.78        6.74     Total risk-based capital ratio......................       10.14       10.61       10.27        10.68       10.53     Leverage ratio......................................        8.13        7.89        7.62         6.45        7.24 - ---------------- (1)  The  comparability of the selected data presented is affected  by the acquisitions of ten banks, a loan origination      business and two branch offices during the five-year period ended December 31, 2005. The selected data includes the      financial  position  and  results of  operations  of  each  acquired  entity only for the periods subsequent to its      respective date of acquisition. (2)  Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income. (3)  Net interest rate  margin is  the ratio  of net  interest  income (expressed on a tax-equivalent basis) to  average      interest-earning assets. (4)  Nonperforming loans consist of nonaccrual loans and certain loans with restructured terms. (5)  Nonperforming assets consist of nonperforming loans and other real estate.
The  following  presents  management's  discussion  and analysis of our financial  condition  and  results  of  operations  as of the  dates and for the periods  indicated.  This  discussion  should  be read in  conjunction  with our "Selected Financial Data," our Consolidated Financial Statements and the related notes thereto, and the other financial data contained elsewhere in this report.           This  discussion set forth in  Management's  Discussion and Analysis of Financial   Condition  and  Results  of  Operations   contains   forward-looking statements  with respect to our financial  condition,  results of operations and business.  These  forward-looking  statements  are subject to certain  risks and uncertainties, not all of which can be predicted or anticipated. Various factors may cause our actual results to differ materially from those contemplated by the forward-looking  statements herein. We do not have a duty to and will not update these  forward-looking  statements.  Readers of our  Annual  Report on Form 10-K should   therefore   consider  these  risks  and   uncertainties  in  evaluating forward-looking   statements   and   should   not  place   undue   reliance   on forward-looking   statements.   See  "Special  Note  Regarding   Forward-Looking Statements"  appearing  at the  beginning  of this  report  and  "Item 1A - Risk Factors," appearing elsewhere in this report.  RESULTS OF OPERATIONS  Overview           Net income was $96.9  million,  $82.9 million and $62.8 million for the years  ended  December  31,  2005,  2004 and 2003,  respectively.  Our return on average  assets and our return on average  stockholders'  equity  were 1.10% and 15.11%,  respectively,  for the year ended December 31, 2005,  compared to 1.10% and 14.44%,  respectively,  for 2004,  and 0.87% and 11.68%,  respectively,  for 2003.  Results for 2005 reflect  increased net interest  income and  noninterest income, and a negative provision for loan losses,  partially offset by increased noninterest expense and an increased provision for income taxes.           The increase in net income for 2005 over 2004  reflects our  continuing efforts to  strengthen  earnings  while  simultaneously  focusing on growing our banking  franchise  and  continuing  our efforts to improve asset  quality.  The increase  in net income for 2005 was  primarily  attributable  to a  significant reduction in our provision for loan losses. A negative provision for loan losses of $8.0 million was recorded during the first nine months of 2005 as a result of overall improvement in nonperforming loans during this period due to significant loan  payoffs  and/or  external  refinancing  of  various  credits,  a  sizeable reduction in net loan charge-offs and the sale of certain  nonperforming  loans. However,  the improvement in our nonperforming  loans was subsequently offset by deterioration  of certain  large  credits  during  the  fourth  quarter of 2005, resulting in a fourth  quarter  provision  for loan losses of $4.0  million,  as further  discussed  below.  The  increase  in  net  income  for  2005  was  also attributable   to   increased   net   interest   income   resulting   from   net interest-earning   assets   provided   by  our  2004   and  2005   acquisitions, higher-yielding  investment  securities,  and internal loan growth  coupled with higher  interest  rates on loans.  However,  net interest  income was  adversely affected  by a  decline  in  earnings  on  our  interest  rate  swap  agreements associated with our interest rate risk management  program,  primarily resulting from  increasing  prevailing  interest rates and the maturity and termination of certain interest rate swap agreements,  as further  discussed under  "--Interest Rate Risk  Management." In addition,  our interest expense increased as a result of higher interest rates on deposits and a  redistribution  of deposit  balances toward  higher-yielding  products  primarily  related to the mix of the CIB Bank deposit base  acquired,  which  included  higher cost time  deposits,  including brokered and internet  deposits;  increased  levels of  borrowings  coupled with increased rates on such borrowings, including our term loan; and the issuance of additional   subordinated   debentures  late  in  2004  to  partially  fund  our acquisition of CIB Bank. Our net interest income increased $25.7 million in 2005 to $325.7  million  for the year ended  December  31,  2005,  compared to $300.0 million for 2004. Despite the increase in net interest income and the increasing interest rate  environment,  our net interest margin  decreased to 4.01% for the year ended  December  31,  2005,  compared  to 4.36% for 2004  primarily  due to overall  conditions within our markets and the impact of the decline in earnings on our interest rate swap  agreements,  both of which continue to exert pressure on our net interest income and net interest margin. Noninterest income increased 13.5% in 2005 to $94.7 million, from $83.5 million in 2004. Our efficiency ratio was 65.72% in 2005 compared to 59.84% in 2004, reflecting a significant increase in our level of noninterest  expenses,  largely attributable to overall expenses associated  with  our  2004  and  2005  acquisitions,  as  well  as  significant charitable  contributions  expense  incurred in 2005. The increase in net income for 2004 was primarily  attributable to a significant reduction in our provision for  loan  losses  as well as  increased  net  interest  income  resulting  from higher-yielding  investment  portfolio  securities  and reduced  deposit  rates, partially  offset by decreased  earnings on our loan portfolio  attributable  to reduced  earnings  on our  interest  rate swap  agreements  associated  with our interest rate risk management program.  Results for 2004 also included a gain of $2.7 million, before applicable income taxes, recorded in February 2004 relating    to the sale of a  residential  and  recreational  development  property that was foreclosed  on in  January  2003,  and gains,  net of  expenses,  totaling  $1.0 million,  before applicable income taxes, recorded in February and April 2004 on the sale of two Midwest branch banking offices.           We recorded a negative  provision  for loan losses of $4.0  million for the year ended December 31, 2005. While we had recorded a negative provision for loan  losses of $8.0  million for the first nine  months of 2005,  reflecting  a 21.0%  improvement  in  nonperforming  loans during this period from the sale of certain acquired  nonperforming  loans, the strengthening of certain loans, loan payoffs and /or  external  refinancing  of various  credits,  and a  significant reduction in net loan  charge-offs,  the level of nonperforming  loans increased during the fourth quarter of 2005 as a result of further  deterioration of a few large credit  relationships  in our Midwest  region,  which resulted in a fourth quarter  provision  for  loan  losses  of $4.0  million.  Net  loan  charge-offs decreased to $13.4 million in 2005 from $24.8 million in 2004, and included $7.6 million in loan  charge-offs  associated  with the transfer of $59.7  million of nonperforming  loans to our held for sale  portfolio on December  31, 2005.  The $59.7  million  represents  the  estimated  fair  value,  net of costs,  that is expected to be realized at the time of sale. Several of the credit relationships that had  deteriorated  during the fourth  quarter of 2005 were  included in the loans transferred to our held for sale portfolio.  Our provision for loan losses of $25.8  million for the year ended  December 31, 2004  reflected a significant reduction  from a provision for loan losses of $49.0 million for the  comparable period in 2003, and was primarily  attributable to loan sales of problem credits completed  in  late  2004  and,  exclusive  of our  2004  acquisition  activity, substantial improvement in asset quality,  reduced levels of nonperforming loans and lower net loan charge-offs.  We continue to closely monitor the level of our nonperforming assets and our focus of further reducing these assets.  Financial Condition and Average Balances           Our average total assets were $8.81 billion for the year ended December 31,  2005,  compared  to $7.54  billion  and $7.18  billion  for the years ended December 31, 2004 and 2003,  respectively.  Our total assets were $9.17 billion, $8.73  billion  and  $7.11  billion  at  December  31,  2005,   2004  and  2003, respectively.  We attribute the $437.5 million  increase in total assets in 2005 primarily to internal loan growth within our  commercial  and  residential  real estate lending portfolios,  our acquisition of CIB Bank late in 2004, as further discussed  below,  and our  acquisitions  of FBA, IBOC and NSB,  which  provided assets  of  $275.3  million,  in  aggregate,  as well as the  intangible  assets associated with these  transactions.  We attribute the $1.63 billion increase in total assets in 2004  primarily to our  acquisition  of CIB Bank on November 30, 2004,  which provided assets of $1.20 billion,  and our  acquisitions of CCB and SBLS in the third quarter of 2004,  which provided assets of $187.8 million,  in aggregate,  as well as the intangible assets associated with those transactions. Additionally,   exclusive  of  the  loans  provided  by  the  acquisitions,  our commercial and  residential  real estate  lending  portfolios  increased  $124.1 million in 2004, reflecting internal growth within these portfolios. The overall increase  in  total  assets  in 2004 was  partially  offset  by a $44.6  million decrease  in the fair value of our  derivative  instruments  to $4.7  million at December 31, 2004 from $49.3 million at December 31, 2003,  primarily  resulting from the maturity of a  significant  notional  amount of our interest  rate swap agreements in March and September 2004.           The increase in our average assets for 2005 was primarily  funded by an increase  in average  deposits  of $1.04  billion to $7.20  billion for the year ended  December  31,  2005;  an increase in average  other  borrowings  of $85.7 million; an increase in average notes payable of $33.2 million;  and an increase in average  subordinated  debentures of $38.8  million.  The increase in average assets for 2004 was  primarily  funded by an  increase  in average  deposits  of $114.8  million to $6.17  billion for the year ended  December 31, 2004,  and an increase of $266.7 million in average other borrowings to $486.0 million for the year  ended  December  31,  2004,  primarily  attributable  to  term  repurchase agreements.  Funds available from maturities and sales of investment  securities during 2005 were primarily used to fund loan growth,  resulting in a decrease in our investment securities portfolio.  A portion of the remaining funds available from  maturities of investment  securities  were  reinvested in  higher-yielding available-for-sale investment securities. Interest-earning assets averaged $8.15 billion for the year ended  December  31,  2005,  compared to $6.91  billion and $6.49  billion for the years  ended  December  31, 2004 and 2003,  respectively, while  interest-bearing  liabilities  averaged  $6.82 billion for the year ended December 31,  2005,  compared to $5.78  billion and $5.53  billion for the years ended December 31, 2004 and 2003, respectively.           Average loans,  net of unearned  discount,  were $6.44  billion,  $5.51 billion and $5.39 billion for the years ended December 31, 2005,  2004 and 2003, respectively.  The acquisitions we completed during 2004 and 2005 provided total loans,  net  of  unearned  discount,  of  $780.9  million  and  $209.6  million, respectively.  Our 2005 acquisitions of FBA, IBOC and NSB provided loans, net of unearned  discount,  of  $54.3  million,   $113.5  million  and  $41.8  million, respectively.  Internal  loan growth of $687.5  million  for 2005 was  primarily generated from a $286.8 million  increase in our real estate mortgage  portfolio resulting from management's business decision to retain additional mortgage loan    product production in our residential real estate mortgage portfolio, and a home equity product line campaign that we held in mid-2004, a $241.9 million increase in our real estate construction and development portfolio,  and a $194.8 million increase in our loans held for sale  portfolio,  including  approximately  $59.7 million of nonperforming  loans that were transferred to the loans held for sale portfolio  at  December  31,  2005,  as further  discussed  under  "--Loans  and Allowance for Loan Losses." This increase was partially  offset by reductions in a  portion  of our  nonperforming  loan  portfolio  due to the  sale of  certain nonperforming  loans in early 2005, loan payoffs and/or external  refinancing of various credits. Our 2004 acquisitions of CIB Bank, CCB and SBLS provided loans, net of unearned  discount,  of $683.3 million,  $73.6 million and $24.0 million, respectively.  Additionally, internal loan growth in 2004 contributed to a $91.8 million increase in commercial loans and a $32.3 million increase in residential real estate mortgage loans,  partially offset by a decrease in consumer loans of $11.9 million.  The overall  increase in our loan portfolio was partially offset by a decrease in our loan portfolio of $83.2 million  resulting from the sale of a portion of our commercial leasing portfolio and management's business decision to  reduce  our  level of  nonperforming  assets  through  the  sale of  certain nonperforming loans in November and December 2004.           Investment securities averaged $1.64 billion,  $1.28 billion and $957.4 million for the years ended  December  31,  2005,  2004 and 2003,  respectively, reflecting  increases of $361.8  million and $325.6  million for the years ended December  31, 2005 and 2004,  respectively.  We  attribute  the increase in 2005 primarily  to  our  2004  and  2005  acquisitions,   which  provided  investment securities,  in aggregate,  of $438.0 million and $20.1  million,  respectively. Funds available from maturities of investment securities,  deposit growth and an increase  in our other  borrowings  were used to fund  loan  growth  and for the reinvestment  in  additional   higher-yielding   available-for-sale   investment securities.  Additionally,  throughout 2005, short-tem investments were utilized to fund an  anticipated  level of attrition  associated  with our  acquisitions, primarily time deposits acquired with CIB Bank. Average  short-term  investments declined  $49.1 million to $70.3  million for the year ended  December 31, 2005, from $119.4 million in 2004. The increase in 2004 was primarily  associated with the  investment  of  additional  funds  provided  by an  increase  in our  other borrowings as well as our  acquisitions  of CIB Bank and CCB,  which provided us with $393.2  million and $44.8 million of investment  securities,  respectively. Additionally,  a portion  of excess  short-term  investments  were  utilized  to purchase higher-yielding  available-for-sale investment securities, resulting in a decline in average  short-term  investments of $23.7 million to $119.4 million for the year ended December 31, 2004, from $143.0 million in 2003.           Nonearning  assets averaged  $662.4 million,  $633.2 million and $698.7 million for the years ended December 31, 2005, 2004 and 2003, respectively.  Our derivative  financial  instruments  averaged ($3.1)  million,  $25.9 million and $78.7  million  for  the  years  ended   December  31,  2005,   2004  and  2003, respectively.  This  reflects a decline in the fair value of certain  derivative financial  instruments  and the  maturity of $200.0  million and $800.0  million notional  amount  of  interest  rate  swap  agreements  during  2005  and  2004, respectively,  as further  discussed under "--Interest Rate Risk Management" and Note 5 to our Consolidated  Financial  Statements.  In 2005, the acquisitions of FBA, IBOC and NSB increased our capital  expenditures,  thus  contributing to an overall  increase in bank premises and equipment,  which was partially offset by continued depreciation and amortization.  Intangible assets,  primarily goodwill and core deposit  intangibles  associated  with our  acquisitions,  and deferred income taxes also  contributed to the increase in our  nonearning  assets during 2005 and 2004.  In 2004,  the  acquisitions  of CIB Bank and CCB, the opening of four de novo branch banking offices,  partially offset by continued depreciation and amortization and the divestiture of two branch banking offices,  contributed to an  overall  increase  in bank  premises  and  equipment.  In  addition,  our liquidation of certain parcels of other real estate,  as further discussed under "--Loans and  Allowance  for Loan Losses,"  further  contributed  to the overall decline in our average nonearning assets in 2004.           We use deposits as our primary  funding  source and acquire them from a broad base of local markets,  including both individual and corporate customers. Deposits  averaged $7.20 billion,  $6.17 billion and $6.05 billion for the years ended December 31, 2005, 2004 and 2003,  respectively.  Our actual deposits were $7.54  billion,  $7.15 billion and $5.96 billion at December 31, 2005,  2004 and 2003,  respectively,  reflecting  increases of $389.9 million for 2005 and $1.19 billion for 2004.  The  increase in 2005 is primarily  attributable  to internal growth stemming from our deposit  development  programs and our  acquisitions of FBA, IBOC and NSB, which provided deposits of $233.0 million, in aggregate.  The increase in 2004 is primarily  attributable to our  acquisitions of CIB Bank and CCB, which provided deposits of $1.10 billion and $104.6 million,  respectively, as well as the  expansion of our banking  franchise  with the opening of four de novo branch offices in 2004, in West St. Louis County, Missouri, Houston, Texas, McKinney, Texas and San Diego, California.  The increase was partially offset by a $23.4 million reduction in our deposit base associated with our divestiture of two Midwest branch banking offices during the first and second quarters of 2004. Although our overall  deposit  levels have increased as a result of our 2004 and   2005  acquisitions,  the overall  increase in our average deposits was partially offset by a  significant  decrease in deposits  due to an  anticipated  level of attrition  associated  with the deposits  acquired  from CIB Bank,  particularly savings and time deposits,  including brokered and internet deposits.  Excluding the impact of our acquisitions,  the change in our average deposit mix reflects: (a) our continued  efforts to restructure the composition of our deposit base as the majority of our deposit development  programs are directed toward increasing transactional  accounts,  such  as  demand  and  savings  accounts,  while  more selectively growing time deposits;  and (b) expanding our relationships with our existing customers by increasing the number and types of products provided.           Other  borrowings  averaged $571.7  million,  $486.0 million and $219.3 million for the years ended December 31, 2005, 2004 and 2003, respectively.  The increase in the average  balances  for 2005 and 2004 reflect  $250.0  million of term  securities  sold under  agreements to  repurchase  that we entered into in conjunction with our interest rate risk management  program during the first and second  quarters  of 2004,  as  further  discussed  in Note 5 and Note 10 to our Consolidated  Financial  Statements.  The average balance for 2005 also reflects the  termination of $50.0 million of term  securities  sold under  agreements to repurchase in November 2005. The increase in average  balances for 2005 and 2004 also  reflect  an  increase  in  daily   securities  sold  under  agreements  to repurchase, principally in connection with the cash management activities of our commercial  deposit  customers,  as well as an increase in average  Federal Home Loan Bank advances, primarily associated with our acquisitions, to $44.2 million for  2005,  compared  to $21.0  million  and  $12.5  million  for 2004 and 2003, respectively.           Our notes  payable  averaged  $36.8  million,  $3.7  million  and $15.4 million for the years ended December 31, 2005, 2004 and 2003, respectively.  Our notes  payable were $100.0  million at December 31, 2005. On August 11, 2005, we entered into an Amended and Restated  Secured Credit  Agreement and restructured our overall financing arrangement,  the most significant change representing the addition of a term loan,  as further  discussed  in Note 11 to our  Consolidated Financial  Statements.  In conjunction with this transaction,  we borrowed $80.0 million on the term loan on August 11, 2005 and  borrowed  the  remaining  $20.0 million on November  14,  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, or First Preferred II, as further  discussed below. Our note payable was $15.0 million at December 31, 2004 and resulted  from a single  advance drawn under our revolving credit line on November 30, 2004 to partially fund our  acquisition of CIB Bank. As of June 30, 2005, this advance had been repaid in full through dividends from our  subsidiary  bank.  The balance of our note  payable at December 31, 2003 of $17.0  million was repaid in April 2004 through  dividends  from our  subsidiary bank.           Subordinated  debentures  issued to our statutory  and business  trusts averaged $259.2  million,  $220.4 million and $249.1 million for the years ended December  31,  2005,  2004 and 2003,  respectively.  The increase in our average subordinated   debentures   for  2005   reflects  our  issuance  of   additional subordinated  debentures  late in 2004, as further  discussed  below,  partially offset by the  repayment of certain  subordinated  debentures  at the end of the third  quarter  of  2005.  On  September  30,  2005,  we paid in full all of the outstanding  $59.3 million of 10.24%  subordinated  debentures that we issued to First  Preferred  II in October  2000,  as further  described  in Note 12 to our Consolidated   Financial   Statements.   The  repayment  of  these  subordinated debentures  was  funded  by  the  term  loan.   During  2004,  our   outstanding subordinated  debentures  increased  $61.9  million due to the issuance of $20.6 million  of  subordinated  debentures  to FBST  II,  a newly  formed  affiliated statutory  trust,  in  September  2004,  and the  issuance  of $41.2  million of subordinated  debentures to FBST III, a newly formed affiliated statutory trust, in November 2004, as further discussed in Note 12 to our Consolidated  Financial Statements. The proceeds from the issuance of these subordinated debentures were utilized to partially fund our acquisition of CIB Bank.           Stockholders' equity averaged $641.5 million, $574.3 million and $537.6 million for the years ended December 31, 2005, 2004 and 2003,  respectively.  We primarily  attribute  the  increase  for 2005 to net  income  of $96.9  million, partially  offset by dividends paid on our Class A and Class B preferred  stock, and an $18.1 million decrease in accumulated other comprehensive  income,  which was  comprised of $13.8  million  associated  with the change in our  unrealized gains and losses on  available-for-sale  investment  securities and $4.3 million associated  with the  change  in the  fair  value  of our  derivative  financial instruments.  These  decreases are reflective of changes in prevailing  interest rates, a decline in the fair value of our derivative financial instruments,  and the  maturity  of  $200.0  million  notional  amount of our  interest  rate swap agreements  designated  as cash flow hedges  during 2005,  as further  discussed under "--Interest Rate Risk Management" and Note 5 to our Consolidated Financial Statements.  We primarily attribute the increase for 2004 to net income of $82.9 million, partially offset by dividends paid on our Class A and Class B preferred stock, and a $31.0 million decrease in accumulated other  comprehensive  income, which was  comprised  of $25.2  million  associated  with the change in the fair value of our derivative  financial  instruments and $5.8 million associated with the change in our unrealized gains and losses on  available-for-sale  investment securities.  These  decreases are  reflective of changes in prevailing  interest rates, a decline in the fair value of our derivative financial instruments,  and the  maturity  of  $750.0  million  notional  amount of our  interest  rate swap agreements designated as cash flow hedges during 2004.              The following  table sets forth,  on a  tax-equivalent  basis,  certain information  relating to our average  balance  sheets,  and reflects the average yield  earned  on  our   interest-earning   assets,  the  average  cost  of  our interest-bearing  liabilities  and the  resulting  net  interest  income for the periods presented.                                                                          Years Ended December 31,                                         ---------------------------------------------------------------------------------------                                                     2005                           2004                         2003                                         ---------------------------- ----------------------------- ----------------------------                                                     Interest                      Interest                      Interest                                           Average   Income/   Yield/    Average   Income/   Yield/   Average    Income/  Yield/                                           Balance   Expense    Rate     Balance   Expense    Rate    Balance    Expense   Rate                                           -------   -------    ----     -------   -------    ----    -------    -------   ----                                                                   (dollars expressed in thousands)                     ASSETS                    ------  Interest-earning assets:     Loans: (1)(2)(3)                  Taxable........................  $6,422,341   423,361   6.59%  $5,493,867  340,660    6.20% $5,369,046   354,649   6.61%        Tax-exempt (4).................      14,629     1,129   7.72       15,187    1,260    8.30      16,317     1,266   7.76     Investment securities:        Taxable........................   1,599,161    65,895   4.12    1,245,226   50,170    4.03     914,357    32,442   3.55        Tax-exempt (4).................      45,626     2,675   5.86       37,775    2,292    6.07      43,074     2,672   6.20     Short-term investments............      70,251     2,211   3.15      119,370    1,643    1.38     143,046     1,502   1.05                                         ----------   -------          ----------  -------          ----------   -------          Total interest-earning            assets.....................   8,152,008   495,271   6.08    6,911,425  396,025    5.73   6,485,840   392,531   6.05                                                      -------                      -------                       -------  Nonearning assets.....................     662,396                       633,154                      698,740                                         ----------                    ----------                   ----------          Total assets.................  $8,814,404                    $7,544,579                   $7,184,580                                         ==========                    ==========                   ==========                 LIABILITIES AND             STOCKHOLDERS' EQUITY             --------------------  Interest-bearing liabilities:     Interest-bearing deposits:        Interest-bearing demand          deposits.....................  $  905,613     4,398   0.49%  $  856,765    3,472    0.41% $  852,104     5,470   0.64%        Savings deposits...............   2,135,156    29,592   1.39    2,175,425   20,128    0.93   2,147,573    23,373   1.09        Time deposits (3)..............   2,906,601    93,167   3.21    2,036,323   49,467    2.43   2,046,741    54,276   2.65                                         ----------   -------          ----------  -------          ----------   -------          Total interest-bearing            deposits...................   5,947,370   127,157   2.14    5,068,513   73,067    1.44   5,046,418    83,119   1.65     Other borrowings..................     571,717    18,240   3.19      485,994    6,102    1.26     219,264     2,243   1.02     Notes payable (5).................      36,849     2,305   6.26        3,657      506   13.84      15,418       785   5.09     Subordinated debentures (3).......     259,214    20,557   7.93      220,428   15,092    6.85     249,146    17,879   7.18                                         ----------   -------          ----------  -------          ----------   -------          Total interest-bearing            liabilities................   6,815,150   168,259   2.47    5,778,592   94,767    1.64   5,530,246   104,026   1.88                                                      -------                      -------                       -------  Noninterest-bearing liabilities:     Demand deposits...................   1,257,277                     1,100,072                    1,007,400     Other liabilities.................     100,462                        91,660                      109,357                                         ----------                    ----------                   ----------          Total liabilities............   8,172,889                     6,970,324                    6,647,003 Stockholders' equity..................     641,515                       574,255                      537,577                                         ----------                    ----------                   ----------          Total liabilities and            stockholders' equity.......  $8,814,404                    $7,544,579                   $7,184,580                                         ==========                    ==========                   ========== Net interest income...................               327,012                      301,258                       288,505                                                      =======                      =======                       ======= Interest rate spread..................                         3.61                          4.09                         4.17 Net interest margin (6)...............                         4.01%                         4.36%                        4.45%                                                                ====                         =====                         ==== - -------------------------------- (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 $1.3 million, $1.2 million and $1.4 million for the years ended December 31, 2005, 2004 and 2003, respectively. (5)   Interest expense on our  notes  payable  includes  commitment, arrangement  and  renewal  fees.  Exclusive of these fees, the       interest rates paid were 4.93%, 2.87% and 2.35% for the years ended December 31, 2005, 2004 and 2003, respectively. (6)   Net interest margin  is  the  ratio of net  interest income (expressed on a tax-equivalent basis) to average interest-earning       assets.              The following table indicates,  on a tax-equivalent  basis, the changes in interest  income and  interest  expense that are  attributable  to changes in average  volume and changes in average rates,  in comparison  with the preceding year. The change in interest due to the combined  rate/volume  variance has been allocated to rate and volume  changes in proportion to the dollar amounts of the change in each.                                                               Increase (Decrease) Attributable to Change in:                                                ------------------------------------------------------------------                                                  December 31, 2005 Compared          December 31, 2004 Compared                                                     to December 31, 2004               to December 31, 2003                                                ------------------------------      ------------------------------                                                                          Net                                Net                                                 Volume       Rate      Change      Volume       Rate      Change                                                 ------       ----      ------      ------       ----      ------                                                                  (dollars expressed in thousands)  Interest earned on:     Loans: (1)(2)(3)               Taxable.............................    $60,269      22,432     82,701       8,189     (22,178)   (13,989)        Tax-exempt (4)......................        (45)        (86)      (131)        (91)         85         (6)     Investment securities:        Taxable.............................     14,579       1,146     15,725      12,906       4,822     17,728        Tax-exempt (4)......................        464         (81)       383        (325)        (55)      (380)     Short-term investments.................       (888)      1,456        568        (277)        418        141                                                -------     -------     ------      ------     -------    -------            Total interest income...........     74,379      24,867     99,246      20,402     (16,908)     3,494                                                -------     -------     ------      ------     -------    ------- Interest paid on:     Interest-bearing demand deposits.......        209         717        926          29      (2,027)    (1,998)     Savings deposits.......................       (381)      9,845      9,464         294      (3,539)    (3,245)     Time deposits (3)......................     24,956      18,744     43,700        (278)     (4,531)    (4,809)     Other borrowings.......................      1,253      10,885     12,138       3,234         625      3,859     Notes payable (5)......................      2,219        (420)     1,799        (915)        636       (279)     Subordinated debentures (3)............      2,882       2,583      5,465      (1,993)       (794)    (2,787)                                                -------     -------     ------      ------     -------    -------            Total interest expense..........     31,138      42,354     73,492         371      (9,630)    (9,259)                                                -------     -------     ------      ------     -------    -------            Net interest income.............    $43,241     (17,487)    25,754      20,031      (7,278)    12,753                                                =======     =======     ======      ======     =======    ======= - ------------------------ (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 effect of interest rate swap agreements. (4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%. (5) Interest expense on our notes payable includes commitment, arrangement and renewal fees.   Net Interest Income           The primary source of our income is net interest  income.  Net interest income (expressed on a tax-equivalent basis) increased to $327.0 million for the year ended  December 31, 2005,  from $301.3  million and $288.5  million for the years ended December 31, 2004 and 2003,  respectively.  Our net interest  margin was 4.01% for the year ended December 31, 2005,  compared to 4.36% and 4.45% for the years ended December 31, 2004 and 2003, respectively. Net interest income is the difference between the interest earned on our interest-earning  assets, such as  loans   and   investment   securities,   and  the   interest   paid  on  our interest-bearing  liabilities,  such as deposits  and  borrowings.  Net interest income is  affected  by the level and  composition  of assets,  liabilities  and stockholders' equity, as well as the general level of interest rates and changes in interest  rates.  Interest  income on a  tax-equivalent  basis  includes  the additional  amount  of  interest  income  that  would  have  been  earned if our investment in certain tax-exempt interest-earning assets had been made in assets subject to federal,  state and local  income taxes  yielding the same  after-tax income.  Net interest  margin is determined by dividing net interest income on a tax-equivalent  basis by average  interest-earning  assets.  The  interest  rate spread  is the  difference  between  the  average  equivalent  yield  earned  on interest-earning   assets  and  the  average   rate  paid  on   interest-bearing liabilities.            We  primarily  credit the  increase in net  interest  income in 2005 to interest-earning assets provided by our acquisitions completed in 2004 and 2005, internal   loan   growth   coupled   with  higher   interest   rates  on  loans, higher-yielding   investment   securities   and  the  repayment  of  our  10.24% subordinated  debentures  in  September  2005.  The overall  increase in our net interest income was partially offset by increased  interest  expense  associated with  deposit   growth,   higher   interest  rates  paid  on  deposits,   and  a redistribution of deposit balances toward  higher-yielding  products; the mix of the CIB Bank deposit base acquired;  and increased  levels of other  borrowings, including  our  term  loan,  coupled  with  increased  interest  rates  on  such borrowings;  and the issuance of additional subordinated debentures in late 2004 to partially  fund our  acquisition  of CIB Bank.  We credit the  increased  net interest income for 2004 primarily to the net  interest-earning  assets provided by our 2003 and 2004 acquisitions;  increased average investment securities with higher yields,  partially offset by increased rates on other  borrowings;  lower rates  paid on  deposits;  a $63.1  million  net  reduction  in our  outstanding subordinated debentures during 2003 as well as reduced rates associated with our outstanding  subordinated  debentures;  increased average investment  securities with higher  yields;  and increased  average loan balances  associated  with our acquisitions  and  internal  growth.  As more fully  described in Note 12 to our Consolidated Financial Statements, in September 2004, we issued $20.6 million of subordinated debentures to FBST II and in November 2004, we issued $41.2 million of subordinated debentures to FBST III. On September 30, 2005, we repaid in full $59.3 million of our  outstanding  subordinated  debentures  that were issued in October 2000. These transactions,  coupled with our use of derivative  financial instruments,  have allowed us to reduce our overall interest expense  associated with our subordinated  debentures as the additional subordinated debentures have been  issued  at  significantly  lower  interest  rates.   Derivative  financial instruments  that were entered into in  conjunction  with our interest rate risk management  program  to  mitigate  the  effects  of  decreasing  interest  rates contributed $2.2 million, $50.1 million and $64.6 million,  respectively, to net interest  income for the years  ended  December  31,  2005,  2004 and 2003.  The decreased  earnings on our interest rate swap agreements for 2005 contributed to a reduction in our net interest  margin of  approximately  59 basis points,  and reflects higher interest rates and maturities of $750.0 million of interest rate swaps  designated  as cash flow hedges and $50.0  million of interest  rate swap agreements  designated as fair value hedges during 2004;  the maturity of $200.0 million of interest rate swap agreements designated as cash flow hedges in March 2005; and the  termination of $150.0 million and $101.2 million of interest rate swap  agreements  designated  as fair value  hedges in February  and May,  2005, respectively.  However,  the  earnings  on our  interest  rate  swap  agreements contributed  to the  level of our net  interest  margin  in 2004.  Although  the Company has implemented  other methods to mitigate the reduction in net interest income  resulting  from  the  decreased  earnings  on  our  interest  rate  swap agreements,  including the funding of investment  security purchases through the issuance of term repurchase agreements,  the reduction of our interest rate swap agreements  has resulted in a substantial  reduction of our net interest  income and further  compression  of our net interest  margin,  which has been partially offset by the impact of the rising  rate  environment  experienced  in 2005,  as further discussed below.           The yield on our loan  portfolio was 6.59% for the year ended  December 31, 2005, compared to 6.21% and 6.61% for 2004 and 2003,  respectively.  Average loans, net of unearned discount,  were $6.44 billion for the year ended December 31, 2005,  in  comparison to $5.51 billion and $5.39 billion for the years ended December 31, 2004 and 2003,  respectively.  We attribute the overall increase in yields on our loan portfolio in 2005 to increases in prevailing  interest rates. During 2005, the Federal Reserve increased the targeted federal funds rate eight times,  resulting in eight increases in the prime rate of interest from 5.25% at December  31, 2004 to 7.25% at  December  31,  2005.  The prime rate of interest increased  from 4.00% at January 1, 2004 to 5.25% at December 31, 2004.  This is reflected  not only in the rate of interest  earned on loans that are indexed to the prime  rate,  but also in other  assets and  liabilities  which  either have variable or  adjustable  rates,  or which have  matured or repriced  during this period. Although the rising interest rate environment contributed to an increase in loan  yields,  total  interest  income on our loan  portfolio  was  adversely impacted by decreased  earnings on our interest rate swap agreements  designated as cash flow hedges.  The earnings on these swap  agreements  were $2.6 million, $38.3 million and $49.4 million for the years ended December 31, 2005, 2004, and 2003,  respectively.  Higher  interest rates and the maturities of interest rate swap  agreements  designated  as cash flow hedges of $750.0  million in 2004 and $200.0  million  in  March  2005  resulted  in  decreased  earnings  on our swap agreements, thereby contributing to a reduction in yields on our loan portfolio, and a compression of our net interest income of approximately  $35.7 million for 2005  compared  to 2004,  as  further  discussed  under  "--Interest  Rate  Risk Management." During 2004, increased  competition and general economic conditions within our market areas  contributed to continued weak loan demand and generally low prevailing  interest rates resulting in a lower yield on our loan portfolio, despite the  increases in the prime  lending rate  experienced  in the third and fourth quarters of 2004.            For the years ended  December 31, 2005,  2004 and 2003,  the  aggregate weighted average rate paid on our interest-bearing  deposit portfolio was 2.14%, 1.44% and 1.65%, respectively.  We attribute the increase in 2005 to the current rising  interest  rate  environment  and the mix of the CIB  Bank  deposit  base acquired in November 2004,  which included higher cost time deposits,  including brokered and internet deposits. In addition,  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  notional  of fair value  hedges in February  2005,   resulted  in  a  decrease  in  our  net  interest   income  of approximately  $8.5 million for 2005,  compared to 2004, as further discussed in Note 5 to our Consolidated  Financial  Statements.  The decline in the aggregate weighted  average rate paid in 2004 was primarily  attributable to significantly decreased  rates paid on our  savings  and time  deposits,  which  continued  to decline in conjunction with the interest rate reductions  previously  discussed. However, the continued  competitive pressures on deposits within our market area precluded us from fully  reflecting  the general  interest rate decreases in our deposit  pricing while still  providing an adequate  funding source for our loan portfolio.  The  earnings  associated  with  certain of our  interest  rate swap agreements  designated as fair value hedges  further  contributed to the overall reduction  in  deposit  rates  paid  on time  deposits;  however,  the  earnings associated with certain of our interest rate swap agreements were  significantly reduced  in 2004 due to a  substantially  increasing  level  of  ineffectiveness experienced in the hedging  relationships as the underlying  hedged  liabilities neared maturity that  ultimately led to  management's  decision to terminate the remaining $150.0 million of fair value hedges that hedged a portion of our other time deposits  effective  February 2005, as discussed above and in Note 5 to our Consolidated Financial Statements.           The  aggregate  weighted  average rate on our notes  payable was 6.26%, 13.84%  and  5.09%  for the  years  ended  December  31,  2005,  2004 and  2003, respectively.  The weighted  average rates paid reflect changing market interest rates during these periods,  in addition to unused credit  commitment and letter of  credit  facility  fees on our  secured  credit  agreement  with a  group  of unaffiliated financial  institutions,  as well as other fees paid in conjunction with the annual renewal of this financing arrangement. Amounts outstanding under our term loan bear  interest  at a floating  rate equal to the London  Interbank Offering  Rate,  or LIBOR,  plus a margin  determined  by the  outstanding  loan balances and our profitability for the preceding four calendar quarters. Amounts outstanding  under our revolving line of credit bear interest at a floating rate equal to the lead bank's  prime rate or, at our  option,  at LIBOR plus a margin determined  by the  outstanding  loan  balances  and our  profitability  for the preceding four calendar quarters.  Thus, our secured credit agreement represents a relatively  high-cost funding source as increased  advances have the effect of increasing the weighted average rate of our non-deposit liabilities. The overall cost of this funding source during 2004 was higher due to fees  associated  with the credit facility  coupled with minimal  borrowings under the revolving credit line  during  2004 as  compared  to 2003.  The  balance  of our note  payable at December  31,  2004 was $15.0  million  and  resulted  from an advance  drawn in November 2004 to partially fund our acquisition of CIB Bank. In January 2005, we reduced this advance by $11.0  million  through  dividends  from our  subsidiary bank, and we fully repaid the advance in June 2005. As further described in Note 11 to our Consolidated  Financial  Statements,  we borrowed $80.0 million on our term loan in August 2005 and $20.0  million on our term loan in  November  2005. The proceeds of the term loan were  primarily  used to fund our  acquisition  of IBOC and to partially fund the repayment of our 10.24% subordinated  debentures, as well as for general corporate purposes and pending acquisitions.           The aggregate  weighted  average rate paid on our other  borrowings was 3.19% for the year ended  December 31, 2005,  as compared to 1.26% and 1.02% for the years ended December 31, 2004 and 2003, respectively,  reflecting changes in the current interest rate environment during these periods.  The increase in the aggregate  weighted  average rate paid on our other  borrowings in 2005 was also attributable to the $250.0 million of term  securities sold under  agreements to repurchase  that we entered  into in  conjunction  with our  interest  rate risk management  program  during the first and  second  quarters  of 2004,  partially offset  by the  termination  of $50.0  million  of term  securities  sold  under agreements to repurchase  in November  2005, as further  discussed in Note 5 and Note 10 to our Consolidated Financial Statements.            The aggregate weighted average rate paid on our subordinated debentures was 7.93%, 6.85% and 7.18% for the years ended December 31, 2005, 2004 and 2003, respectively.  The  aggregate  weighted  average  rates reflect the repayment of $59.3 million of 10.24% subordinated  debentures in September 2005, the issuance of $61.9 million of  subordinated  debentures in late 2004  associated  with our acquisition  of CIB Bank,  and the repayment of $136.3  million of  subordinated debentures and the related issuance of $73.2 million of subordinated  debentures at lower  interest  rates in 2003.  The  aggregate  weighted  average rates also reflect the earnings impact of our interest rate swap agreements entered into in March  2003,  and the two  entered  into in May  2002  and  April  2003  that we terminated  in May  2005,  as  further  discussed  under  "--Interest  Rate Risk Management" and in Note 5 to our Consolidated Financial Statements.  Comparison of Results of Operations for 2005 and 2004           Net Income.  Net income was $96.9  million for the year ended  December 31, 2005,  compared to $82.9 million for 2004.  Our return on average assets and our return on average stockholders' equity were 1.10% and 15.11%,  respectively, for  the  year  ended   December  31,  2005,   compared  to  1.10%  and  14.44%, respectively,  for 2004.  Results for 2005 reflect increased net interest income and  noninterest  income,  and a negative  provision for loan losses,  partially offset by increased  noninterest  expense and an increased  provision for income taxes.  The  increase in 2005  reflects  our  continuing  efforts to  strengthen earnings and simultaneously  improve asset quality. Net interest-earning  assets provided  by  our  2004  and  2005  acquisitions,   higher-yielding   investment securities, and internal loan growth coupled with higher interest rates on loans contributed to increased interest income in 2005.  However,  net interest income was  adversely  affected  by a decline in  earnings  on our  interest  rate swap agreements associated with our interest rate risk management program,  primarily resulting  from  increasing  prevailing  interest  rates  and the  maturity  and termination of certain interest rate swap agreements; increased interest expense as a result of higher interest rates on deposits and a redistribution of deposit balances  toward  higher-yielding  products  in  conjunction  with  the CIB Bank deposit base acquired in November 2004;  increased levels of borrowings  coupled with  increased  rates  on such  borrowings;  and  the  issuance  of  additional subordinated  debentures  late in 2004 to partially fund our  acquisition of CIB Bank, as further discussed under "--Net Interest Income." Despite 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 our net  interest  margin.  The increase in net income in 2005 also resulted from a significant reduction in our provision  for  loan  losses  as  a  result  of  overall   improvement   in  our nonperforming loans during 2005, exclusive of a deterioration of certain credits in the  fourth  quarter of 2005 that we  transferred  to our loans held for sale portfolio,  as  further  discussed  under  "--Provision  for  Loan  Losses."  We primarily attribute the increased  noninterest income to additional  noninterest income  associated  with  our 2004 and  2005  acquisitions,  increased  gains on mortgage  loans  sold and held for sale,  increased  investment  management  fee income,  and increased  service charges on deposit accounts and customer service fees related to higher deposit balances; partially offset by net losses on sales of available-for-sale investment securities and the recognition of impairment on our SBA servicing assets, as further discussed under "--Noninterest Income." The overall increase in our operating  expenses for 2005, as further discussed under "--Noninterest  Expense,"  primarily reflects increased expense levels resulting from our 2004 and 2005  acquisitions  and the  addition  of five de novo  branch offices  in 2004 and 2005,  significant  charitable  contributions  expense  and increases in salaries and employee benefits expenses.            Provision  for  Loan  Losses.  We  recorded  a  $4.0  million  negative provision for loan losses for the year ended December 31, 2005, in comparison to a provision  for loan losses of $25.8  million for the year ended  December  31, 2004. Our net loan charge-offs  declined to $13.4 million from $24.8 million for the years ended December 31, 2005 and 2004,  respectively.  As further discussed under "--Lending  Activities" and "--Loans and Allowance for Loan Losses," while we had  recorded a negative  provision  for loan losses of $8.0  million for the first nine months of 2005,  reflecting a 21.0%  improvement in our nonperforming loans  during  this  period  as  a  result  of  the  sale  of  certain  acquired nonperforming  loans,  the  strengthening  of certain  loans,  loan  payoffs and external refinancing of various credits, and a significant reduction in net loan charge-offs,  the level of  nonperforming  loans  increased  during  the  fourth quarter  of  2005  following  further   deterioration  of  a  few  large  credit relationships in our Midwest region, resulting in a fourth quarter provision for loan losses of $4.0 million.  Our nonperforming loans, which had decreased 21.0% to $67.8  million at September 30, 2005 from $85.8 million at December 31, 2004, increased  $29.4  million  during the fourth  quarter  of 2005,  resulting  in a balance of $97.2  million at December  31, 2005.  The increase in  nonperforming loans  in the  fourth  quarter  of 2005 is  primarily  attributable  to  further deterioration  of a small number of credit  relationships in our Midwest region, including two large credit  relationships  associated with our CIB Bank purchase of $14.9 million and $16.6 million,  or $31.5 million in aggregate.  On December 31, 2005, we recognized $7.6 million of loan  charge-offs to reduce the loans to their estimated fair value, net of costs, that is expected to be realized at the time of the sale, and transferred  approximately  $59.7 million of nonperforming loans  to  our  held  for  sale  portfolio,   which  included   several  of  the relationships that deteriorated  during the fourth quarter of 2005.  Included in the loan  charge-offs and loans  transferred to our held for sale portfolio were $6.0  million  of  loan   charge-offs   and   approximately   $49.6  million  of nonperforming loans that were associated with our CIB Bank purchase.  In January 2006,  we  received a payoff of one of the  nonperforming  loans in our held for sale  portfolio that had a carrying value of $12.4 million at December 31, 2005, and  recorded a $5.0  million  loan  recovery.  Furthermore,  in March 2006,  we completed the sale of a majority of the remaining  nonaccrual  loans in our held for sale portfolio that had a carrying value of  approximately  $32.5 million in aggregate,  at  December  31,  2005,  as  further  described  in  Note 25 to our Consolidated Financial Statements.           Our loan policy requires all loans to be placed on a nonaccrual  status once  principal  or  interest  payments  become 90 days past  due.  Our  general procedures for monitoring these loans allow individual loan officers to submit a written  request for  approval to continue the accrual of interest on loans that become  90 days  past  due.  These  requests  must  be  submitted  for  approval consistent with the authority  levels provided in our credit approval  policies, and they are only  granted if an  expected  near term  future  event,  such as a pending renewal or expected payoff,  exists at the time the loan becomes 90 days past due. If the expected near term future event does not occur as  anticipated, the loan is placed on nonaccrual status.  Management considers the nonperforming assets  trends 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  and  Expense.   The  following  table  summarizes noninterest income and noninterest expense for the years ended December 31, 2005 and 2004:                                                                                     December 31,       Increase (Decrease)                                                                              -------------------    -------------------                                                                                2005        2004      Amount        %                                                                                ----        ----      ------       ---                                                                                   (dollars expressed in thousands)       Noninterest income:              Service charges on deposit accounts and customer service fees.....  $  39,776     38,230      1,546       4.04%         Gain on loans sold and held for sale..............................     20,804     18,497      2,307      12.47         Net (loss) gain on sales of available-for-sale            investment securities..........................................     (2,873)       257     (3,130) (1,217.90)         Gain on sales of branches, net of expenses........................         --      1,000     (1,000)   (100.00)         Bank-owned life insurance investment income.......................      4,860      5,201       (341)     (6.56)         Investment management income......................................      8,573      6,870      1,703      24.79         Other.............................................................     23,603     13,431     10,172      75.74                                                                             ---------    -------     ------               Total noninterest income....................................  $  94,743     83,486     11,257      13.48                                                                             =========    =======     ======  =========      Noninterest expense:         Salaries and employee benefits....................................  $ 139,764    117,492     22,272      18.96%         Occupancy, net of rental income...................................     22,081     19,882      2,199      11.06         Furniture and equipment...........................................     16,015     17,017     (1,002)     (5.89)         Postage, printing and supplies....................................      5,743      5,010        733      14.63         Information technology fees.......................................     35,472     32,019      3,453      10.78         Legal, examination and professional fees..........................      9,319      7,412      1,907      25.73         Amortization of intangibles associated with the            purchase of subsidiaries.......................................      4,850      2,912      1,938      66.55         Communications....................................................      2,012      1,866        146       7.82         Advertising and business development..............................      7,043      5,493      1,550      28.22         Charitable contributions..........................................      5,922        577      5,345     926.34         Other.............................................................     28,075     19,825      8,250      41.61                                                                             ---------    -------     ------               Total noninterest expense...................................  $ 276,296    229,505     46,791      20.39                                                                             =========    =======     ======  =========            Noninterest  Income.  Noninterest income was $94.7 million for the year ended  December 31, 2005, in  comparison to $83.5 million for 2004.  Noninterest income consists  primarily of service  charges on deposit  accounts and customer service fees, mortgage-banking revenues, management income and other income.           Service charges on deposit accounts and customer service fees increased to $39.8  million from $38.2  million for the years ended  December 31, 2005 and 2004, respectively. The increase in service charges and customer service fees is primarily attributable to:           >>    increased  demand  deposit  account   balances   associated  with                internal  growth  and  our  acquisitions  of  CCB  and  CIB  Bank                completed in 2004, and FBA, IBOC and NSB completed in 2005;           >>    additional  products and services  available  and utilized by our                retail and commercial customer base;           >>    increased   fee  income  from   customer   service   charges  for                non-sufficient  fund and  returned  check fee rates  coupled with                enhanced control of fee waivers;           >>    higher earnings allowances on commercial deposit accounts;           >>    increased fee income  associated  with  automated  teller machine                services and debit cards; and           >>    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  increased  to $20.8  million from $18.5 million for the years ended December 31, 2005 and 2004, respectively. The increase in 2005 is partially attributable to an increase of $2.0 million of gains on SBA loans sold by SBLS LLC.  The  increase is also  attributable  to an increase  in gains on  mortgage  loans sold  resulting  from an  increase in the volume of mortgage loan sales in the  secondary  market as a result of increased loan origination  volumes. In general,  new residential mortgage loan production of 15-year fixed rate,  conforming  conventional  adjustable  rate mortgages and other similar  products is being retained in our  portfolio,  while other loans, primarily  20 and 30-year  fixed rate  loans,  are  typically  being sold in the secondary loan markets.           Noninterest  income includes a net loss on sales of  available-for-sale securities  of $2.9 million for the year ended  December 31, 2005, in comparison to a net gain on sales of available-for-sale securities of $257,000 in 2004. The net loss for 2005  resulted  from  the  sale of  certain  investment  securities associated with our termination of a $50.0 million term repurchase  agreement in the fourth  quarter of 2005, as further  discussed in Note 3, Note 5 and Note 10 to our  Consolidated  Financial  Statements.  The net  gain  for  2004  resulted primarily  from the sales of  certain  investment  securities  held by  acquired institutions that did not meet our overall investment objectives.           Gains,  net of expenses,  on the sale of two Midwest banking offices in 2004 totaled $1.0 million and reflect a $390,000 gain,  net of expenses,  on the sale of one of our  Missouri  branch  banking  offices in February  2004,  and a $630,000  gain,  net of  expenses,  on the sale of one of our  Illinois  banking offices in April 2004. There were no sales of branch banking offices in 2005.           Bank-owned  life  insurance  income was $4.9 million for the year ended December  31,  2005,  in  comparison  to $5.2  million in 2004.  The decrease in investment income reflects a reduced return on the performance of the underlying securities  surrounding the insurance contracts which is primarily  attributable to the portfolio mix of investments and overall market conditions.           Investment  management  income  was $8.6  million  for the  year  ended December 31, 2005, in comparison to $6.9 million in 2004,  reflecting  increased portfolio  management fee income generated by our institutional money management subsidiary attributable to new business development and overall growth in assets under management.           Other  income was $23.6  million and $13.4  million for the years ended December 31, 2005 and 2004, respectively. We attribute the primary components of the increase in other income to:           >>    an increase of $3.6 million attributable to recoveries of certain                loan principal  balances that had been charged-off by the various                respective  financial  institutions prior to their acquisition by                First Banks;           >>    an increase of $3.1  million  attributable  to the  reversal of a                specific  reserve on a letter of credit assumed with the CIB Bank                acquisition and collection of the related fees resulting from the                cancellation of the letter of credit;           >>    a net  decrease  in losses on the  valuation  or sale of  certain                repossessed  assets,  primarily related to our commercial leasing                portfolio. Net gains for 2005 were $696,000 and included $464,000                of  gains on two  sales of  repossessed  leasing  equipment.  Net                losses  for 2004  were  $1.6  million  and  included  a  $750,000                write-down on repossessed  aircraft leasing  equipment and a $1.3                million  write-down  on  repossessed  equipment  unrelated to the                airline  industry,  partially  offset by gains of $350,000 on the                sale of other repossessed aircraft leasing equipment;           >>    an increase of $713,000  reflecting  reductions  of a  contingent                liability  established in conjunction  with the sale of a portion                of our commercial  leasing portfolio in June 2004. The reductions                of the contingent  liability in 2005 and 2004 of $1.1 million and                $375,000,  respectively, were the result of further reductions in                related lease  balances for the specific pools of leases sold, as                further  described  in  Note  24 to  our  Consolidated  Financial                Statements;           >>    a recovery  of agent loan  collection  expenses  of  $739,000  as                permitted under a loan participation  agreement prior to recovery                of  principal  and  interest,   from  funds  collected  from  the                liquidation of a portion of the collateral  that secured the loan                by the receiver;            >>    a $602,000 net increase in loan servicing  fees. The net increase                is primarily  attributable to: increased fees from loans serviced                for others,  primarily attributable to a $2.3 million increase in                SBLS LLC loan servicing fees,  offset by an $887,000  increase in                amortization  of SBA servicing  rights and the  recognition  of a                $2.4  million  impairment  charge  on  our SBA  servicing  rights                following  substantial damage to several shrimping vessels within                the  servicing  portfolio  caused  by the  effects  of  Hurricane                Katrina;  a $199,000  decrease in mortgage loan  servicing  fees,                including a lower level of interest  shortfall on mortgage loans,                offset by a $1.6  million  decrease in  amortization  of mortgage                servicing  rights;   and  increased  unused  commitment  fees  of                $281,000.  Interest  shortfall  is  the  difference  between  the                interest collected from a loan-servicing customer upon prepayment                of the loan and a full  month's  interest  that is required to be                remitted to the security owner;           >>    an increase of $584,000 in fees from fiduciary activities;           >>    a $448,000 decrease in net losses on our derivative  instruments;                and           >>    our  acquisitions of CCB and CIB Bank completed in 2004, and FBA,                IBOC and NSB completed in 2005; partially offset by           >>    a decline  of $1.2  million  in  rental  income  associated  with                reduced commercial leasing activities; and           >>    a net increase in losses,  net of gains,  on the  disposition  of                certain  assets,  primarily  attributable  to a $459,000 net loss                resulting from the demolition of a branch drive-thru facility and                a $277,000 net loss  resulting from the sale of a former CIB Bank                branch facility during 2005.           Noninterest  Expense.  Noninterest  expense was $276.3  million for the year ended  December 31, 2005,  in comparison  to $229.5  million for 2004.  Our efficiency  ratio was 65.72% for the year ended  December 31, 2005,  compared to 59.84% for 2004. The efficiency ratio is used by the financial services industry to  measure  an  organization's  operating  efficiency.   The  efficiency  ratio represents  the ratio of noninterest  expense to the sum of net interest  income and noninterest  income. The increases in noninterest expense and our efficiency ratio for 2005 were primarily  attributable  to increases in expenses  resulting from our 2004 and 2005  acquisitions  and the  addition  of five de novo  branch offices in 2004 and 2005,  and  increases  in  salaries  and  employee  benefits expense,  information  technology  expense,  charitable  contributions  expense, expenses and losses, net of gains, on other real estate, and other expense.           We  record  the  majority  of  integration  costs  attributable  to our acquisitions as of the consummation date of our purchase business  combinations. These costs include, but are not limited to, items such as:           >>    write-downs  and  impairment  of assets of the acquired  entities                that  will no longer be  usable  subsequent  to the  consummation                date, primarily data processing equipment,  incompatible hardware                and software,  bank signage, etc. These adjustments are generally                recorded  as of the  consummation  date as an  allocation  of the                purchase  price with the  offsetting  adjustment  recorded  as an                increase  to   goodwill.   For  all  periods   presented,   these                adjustments are not material to our operations;           >>    costs  associated  with a  planned  exit  of an  activity  of the                acquired entity that is not associated with or is not expected to                generate  revenues after the  consummation  date,  such as credit                card  lending.  These  costs  are  generally  recorded  as of the                consummation   date  through  the  establishment  of  an  accrued                liability with the offsetting  adjustment recorded as an increase                to goodwill.  These costs are  infrequently  encountered and, for                all periods presented, are not material to our operations;           >>    planned involuntary  employee  termination  benefits,  as further                discussed  under  "--Acquisitions  - Acquisition  and Integration                Costs" and Note 2 to our Consolidated Financial Statements; and            >>    contractual  obligations  of the acquired  entities  that existed                prior to the  consummation  date  that  either  have no  economic                benefit  to the  combined  entity or have a penalty  that we will                incur to cancel the  contractual  obligation.  These  contractual                obligations  generally relate to existing information  technology                and item  processing  contracts  of the  acquired  entities  that                include penalties for early termination.  In conjunction with the                merger and integration of our acquisitions, the acquired entities                are  converted to our existing  information  technology  and item                processing  systems.  Consequently,  the  costs  associated  with                terminating the existing  contracts of the acquired  entities are                generally  recorded  as of  the  consummation  date  through  the                establishment  of  an  accrued   liability  with  the  offsetting                adjustment  recorded  as  an  increase  to  goodwill  as  further                discussed  under  "--Acquisitions  - Acquisition  and Integration                Costs" and Note 2 to our Consolidated Financial Statements.           We make adjustments to the fair value of the acquired  entities' assets and liabilities for these items as of the consummation  date and include them in the allocation of the overall  acquisition  cost. We also incur costs associated with our  acquisitions  that are  expensed  in our  consolidated  statements  of income.  These  costs  relate  specifically  to  additional  costs  incurred  in conjunction with the information  technology and item processing  conversions of the acquired entities, as well as training of personnel on First Bank's systems, as further described and quantified below.           Salaries and  employee  benefits  increased by $22.3  million to $139.8 million for the year ended  December 31, 2005,  from $117.5  million in 2004. We attribute  the overall  increase to increased  salaries  and  employee  benefits expenses associated with an aggregate of 27 additional branches acquired in 2004 and 2005 and five de novo branches  opened in 2004 and 2005; and the addition of a regional  structure  in Chicago  following  our  significant  expansion in the Chicago market area, including credit administration, commercial real estate and commercial and industrial banking groups, branch  administration,  credit review and human resource and training functions.  The increase is also attributable to generally higher salary and employee benefit costs associated with employing and retaining  qualified  personnel,  including enhanced incentive  compensation and employee benefits plans. Our number of employees on a full-time equivalent basis increased to 2,288 at December 31, 2005, from 2,172 at December 31, 2004.           Occupancy,  net of rental income,  and furniture and equipment  expense totaled $38.1  million and $36.9  million for the years ended  December 31, 2005 and 2004, respectively.  The increase is primarily attributable to higher levels of expense  resulting  from our  acquisitions  in 2004 and 2005,  which added 27 branch offices, and the opening of five de novo branch offices in 2004 and 2005, as well as the formation of separate  small  business  banking loan  origination offices  in most of our market  areas.  The  increase  is also  attributable  to increased technology equipment expenditures,  continued expansion and renovation of certain  corporate and branch offices,  including  additional  production and administrative  offices,  and increased  depreciation  expense  associated  with acquisitions and capital expenditures.           Information  technology and item processing fees were $35.5 million and $32.0 million for the years ended December 31, 2005 and 2004,  respectively.  As more fully described in Note 19 to our Consolidated Financial Statements,  First Services,  L.P.,  a limited  partnership  indirectly  owned by our  Chairman and members of his immediate  family,  provides  information  technology and various operational support services to our subsidiaries and us. Information  technology fees also include fees paid to outside  servicers  associated  with our mortgage lending  division  and  our  small  business  lending  and  institutional  money management  subsidiaries.  The increased level of fees is primarily attributable to the additional branch offices provided by our acquisitions and de novo branch office openings;  certain  de-conversion  costs from other providers  associated with our acquisitions, growth and technological advancements consistent with our product  and  service  offerings;   and  continued  expansion  and  upgrades  to technological equipment,  networks and communication channels;  partially offset by expense reductions resulting from information  technology  conversions of our acquisitions   completed  in  2004,  as  well  as  the  achievement  of  certain efficiencies  associated with the implementation of various technology projects. The information  technology conversions of CCB, CIB Bank, FBA, IBOC and NSB were completed in September 2004, February 2005, June 2005, October 2005 and December 2005, respectively.            Legal,  examination  and  professional  fees were $9.3 million and $7.4 million  for the years  ended  December  31,  2005 and 2004,  respectively.  The continued expansion of overall corporate  activities,  the ongoing  professional services utilized by certain of our acquired entities,  and increased legal fees associated with commercial loan  documentation,  collection  efforts and certain defense litigation costs primarily related to our various acquired entities have all  contributed to the overall expense levels in 2004 and 2005. The increase in 2005 is also  attributable  to  $471,000 of fees paid for  accounting  and other services,  including operational and systems support,  provided by the seller of CIB Bank pursuant to a service  agreement to provide  services from the November 2004 sale date through the system conversion date in February 2005.           Amortization   of   intangibles   associated   with  the   purchase  of subsidiaries  was $4.9 million and $2.9 million for the years ended December 31, 2005 and 2004,  respectively.  The  increase  is  attributable  to core  deposit intangibles  associated  with our  acquisitions of CCB and CIB Bank completed in 2004 and our acquisitions of FBA, IBOC and NSB completed in 2005.           Communications and advertising and business  development  expenses were $9.1  million and $7.4  million for the years ended  December 31, 2005 and 2004, respectively.  The  expansion of our sales,  marketing and product group in 2004 and broadened  advertising campaigns have contributed to higher expenditures and are consistent with our continued  focus on expanding our banking  franchise and the  products  and  services  available  to our  customers.  Our spring and fall advertising  campaigns have contributed to the increase in 2005. We continue our efforts to manage these expenses through  renegotiation  of contracts,  enhanced focus on advertising  and  promotional  activities in markets that offer greater benefits, as well as ongoing cost containment efforts.           Charitable  contribution  expense was $5.9 million and $577,000 for the years ended  December 31, 2005 and 2004,  respectively.  The increase in 2005 is primarily  attributable  to First Bank  contributions  of $2.5  million and $1.5 million,  respectively,  in December  2005 to The  Dierberg  Foundation  and the Dierberg Operating  Foundation,  Inc.,  charitable  foundations created by First Banks' Chairman and member of his immediate family, as further described in Note 19 to our Consolidated  Financial Statements.  The increase is also attributable to  a  $1.5  million  contribution  in  May  2005  to  an  urban  revitalization development  project  located in the city of St.  Louis.  In  exchange  for this contribution,  we received  Missouri  state tax credits that will be utilized to reduce certain state income taxes.           Other  expense was $28.1  million and $19.8 million for the years ended December 31, 2005 and 2004,  respectively.  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:           >>    an increase of $4.0 million in  expenditures  and losses,  net of                gains,  on other real  estate.  Expenditures  and losses,  net of                gains,  on other real  estate  were  $644,000  for the year ended                December  31,  2005 and  included  expenses  of $1.1  million  in                preparation  for the  sale  of a  parcel  of  other  real  estate                acquired with the  acquisition  of CIB Bank.  These  expenditures                were partially offset by approximately $972,000 of gains recorded                on the sale of six holdings of other real estate.  Gains,  net of                losses and  expenses,  on other real estate were $3.3 million for                the year ended  December  31,  2004,  and included a $2.7 million                gain  recorded  in the  first  quarter  of 2004 on the  sale of a                residential  and  recreational   development  property  that  was                transferred   to  other   real   estate  in   January   2003  and                approximately  $390,000  of  gains  recorded  on the  sale of two                additional holdings of other real estate;           >>    increased losses and adjustments to the carrying value of certain                affordable housing credit partnership investments; and           >>    expenses  associated  with continued  growth and expansion of our                banking  franchise,  including  our de novo  branch  offices  and                acquisitions  completed  during 2004 and 2005,  particularly  CIB                Bank.            Provision  for Income  Taxes.  The provision for income taxes was $52.5 million for the year ended December 31, 2005,  representing an effective  income tax rate of 35.5%,  in comparison to $45.3  million,  representing  an effective income tax rate of 35.4%,  for the year ended December 31, 2004. The increase in our provision for income taxes  primarily  reflects our increased  earnings.  In 2005,  we reversed a $3.3 million  state tax reserve as it was no longer  deemed necessary  as a result  of the  resolution  of a  potential  tax  liability.  In addition,  we recorded a benefit of $3.1 million  relating to our utilization of federal and state tax credits. In the second quarter of 2004, we reversed a $2.8 million  tax  reserve  as it was not  longer  deemed  necessary  as a result  of resolution of a potential  tax  liability.  Excluding  these  transactions,  the effective  income tax rate was 38.4% and 37.5% for the years ended  December 31, 2005 and 2004, respectively.  Comparison of Results of Operations for 2004 and 2003           Net Income.  Net income was $82.9  million for the year ended  December 31, 2004,  compared to $62.8 million for 2003.  Our return on average assets and our return on average stockholders' equity were 1.10% and 14.44%,  respectively, for  the  year  ended   December  31,  2004,   compared  to  0.87%  and  11.68%, respectively,  for 2003.  Results for 2004 reflect increased net interest income and  a  reduced  provision  for  loan  losses,  partially  offset  by  decreased noninterest income, increased noninterest expense and an increased provision for income taxes.  The provision for loan losses for 2004,  which was  significantly lower than the  higher-than-historical  amount  reflected  in 2003,  reflects an overall improvement in asset quality,  reduced levels of nonperforming loans and lower  net loan  charge-offs  than  experienced  in  recent  years,  as  further discussed  under  "--Provision  for  Loan  Losses"  and  exclusive  of our  2004 acquisition. Increased net interest income is primarily attributable to our 2004 acquisitions,  reduced  deposit  rates and  earnings on our  interest  rate swap agreements, as further discussed under "--Net Interest Income." We attribute the decreased  noninterest  income  to a  nonrecurring  gain  on  the  sale  of  our investment  in  Allegiant  for a 100%  ownership  interest  in BSG in  2003  and decreased  gains on the  divestiture  of branch  offices in 2004 as  compared to 2003,  partially offset by increased service charges on deposit accounts,  gains on mortgage loans sold and held for sale, and investment  management  income, as further  discussed  under  "--Noninterest   Income."  The  overall  increase  in operating expenses for 2004, as further discussed under "--Noninterest Expense," was  primarily due to increases in salaries and employee  benefit  expenses that were  partially  offset  by  a  decrease  in  write-downs  on  operating  leases associated with our commercial  leasing  business and a nonrecurring  charitable contribution  expense  related to the  contribution  of our shares of  Allegiant common stock in the fourth quarter of 2003.           Provision  for Loan  Losses.  The  provision  for loan losses was $25.8 million  and $49.0  million  for the years  ended  December  31,  2004 and 2003, respectively.  Net loan charge-offs were $24.8 million and $32.7 million for the years ended December 31, 2004 and 2003,  respectively.  In 2003, we continued to experience the higher level of problem loans,  related  charge-offs and past due loans that we began to experience  in early 2002.  This was a result of economic conditions within our market areas,  additional  problems  identified in certain acquired loan portfolios and continuing  deterioration in our commercial leasing portfolio,  particularly  the segment of the  portfolio  relating to the airline industry.  These factors  necessitated higher provisions for loan losses than in prior periods.  The reduced provision for loan losses in 2004 resulted from loan sales completed late in the fourth quarter of 2004 and, exclusive of acquisition activity,   substantial   improvement  in  asset  quality,   reduced  levels  of nonperforming  loans,  primarily  resulting from significant  loan payoffs,  and lower net loan charge-offs,  as further  discussed under "--Lending  Activities" and "--Loans and Allowance for Loan Losses." Our  nonperforming  loans increased to $85.8  million at December 31, 2004 from $75.4  million at December 31, 2003, reflecting  the  acquisition  of a  significant  amount of  nonperforming  loans associated  with our 2004  acquisitions,  particularly  CIB Bank which  provided nonperforming loans of $60.3 million. In addition, our acquisitions of CCB, SBLS and  CIB  Bank  provided  $4.4   million,   $3.0  million  and  $26.4   million, respectively,  in additional  allowances  for loan losses.  Management  expected nonperforming  assets to remain at higher levels in 2005 because of our CIB Bank and CCB acquisitions  and considered  these trends 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  and  Expense.   The  following  table  summarizes noninterest income and noninterest expense for the years ended December 31, 2004 and 2003:                                                                                     December 31,       Increase (Decrease)                                                                               ------------------    -------------------                                                                                 2004       2003      Amount        %                                                                                 ----       ----      ------       ---                                                                                     (dollars expressed in thousands)       Noninterest income:              Service charges on deposit accounts and customer service fees.....   $ 38,230     36,113      2,117       5.86%         Gain on loans sold and held for sale..............................     18,497     15,645      2,852      18.23         Net gain on sales of available-for-sale investment securities.....        257      8,761     (8,504)    (97.07)         Gain on sales of branches, net of expenses........................      1,000      3,992     (2,992)    (74.95)         Bank-owned life insurance investment income.......................      5,201      5,469       (268)     (4.90)         Investment management income......................................      6,870      4,762      2,108      44.27         Other.............................................................     13,431     12,966        465       3.59                                                                              --------    -------    -------               Total noninterest income....................................   $ 83,486     87,708     (4,222)     (4.81)                                                                              ========    =======    =======    =======      Noninterest expense:         Salaries and employee benefits....................................   $117,492     95,441     22,051      23.10%         Occupancy, net of rental income...................................     19,882     20,940     (1,058)     (5.05)         Furniture and equipment...........................................     17,017     18,286     (1,269)     (6.94)         Postage, printing and supplies....................................      5,010      5,100        (90)     (1.76)         Information technology fees.......................................     32,019     32,136       (117)     (0.36)         Legal, examination and professional fees..........................      7,412      8,131       (719)     (8.84)         Amortization of intangibles associated with the purchase            of subsidiaries................................................      2,912      2,506        406      16.20         Communications....................................................      1,866      2,667       (801)    (30.03)         Advertising and business development..............................      5,493      4,271      1,222      28.61         Charitable contributions..........................................        577      5,334     (4,757)    (89.18)         Other.............................................................     19,825     32,257    (12,432)    (38.54)                                                                              --------    -------    -------               Total noninterest expense...................................   $229,505    227,069      2,436       1.07                                                                              ========    =======    =======    =======            Noninterest  Income.  Noninterest income was $83.5 million for the year ended December 31, 2004, compared to $87.7 million for 2003.  Noninterest income consists  primarily of service charges on deposit  accounts and customer service fees,  mortgage-banking  revenues,  net  gain  on  sales  of  available-for-sale investment securities,  bank-owned life insurance investment income,  investment management income and other income.           Service charges on deposit accounts and customer service fees increased to $38.2  million  for 2004,  from $36.1  million  for 2003.  We  attribute  the increase in service charges and customer service fees to:           >>    our acquisitions completed during 2003 and 2004;           >>    increased demand deposit account balances;           >>    additional  products and services  available  and utilized by our                retail and commercial customers;           >>    increased fee income resulting from revisions of customer service                charges for non-sufficient fund and returned check fee rates that                became  effective in December 2003,  and enhanced  control of fee                waivers; and           >>    increased fee income  associated  with  automated  teller machine                services and debit cards.           The gain on loans  sold and held for sale  increased  to $18.5  million from $15.6 million for the years ended December 31, 2004 and 2003, respectively. The change  reflects  the  continued  slowdown in 2004 in the volume of mortgage loans  originated and sold that was initially  experienced in the fourth quarter of  2003,  management's  decision  to  retain a  portion  of new  mortgage  loan production in the real estate  mortgage  portfolio in mid-2003 and a decrease in the  allocation  of direct  mortgage  loan  origination  costs  from  salary and employee  benefits  expense  to gain on loans  sold and held for sale since late 2003, and a change in the fallout percentage associated with the allocation. The fallout percentage  represents the percentage of the number of loan applications that do not result in the  ultimate  origination  of a loan divided by the total number of loan applications received.            Noninterest  income  for the years  ended  December  31,  2004 and 2003 includes  net  gains on sales of  available-for-sale  investment  securities  of $257,000  and  $8.8  million,  respectively.  The net  gain  for  2004  resulted primarily  from the sales of  certain  investment  securities  held by  acquired institutions that did not meet our overall investment  objectives.  The net gain for 2003  includes a $6.3 million gain on the exchange of our  Allegiant  common stock for a 100%  ownership  interest in BSG in the first  quarter of 2003 and a $2.3 million  gain  realized on the  subsequent  contribution  of our  remaining shares  of  Allegiant  common  stock  to  a  previously  established  charitable foundation  in the  fourth  quarter  of 2003,  partially  offset  by a  $431,000 impairment  loss  resulting  from a  permanent  decline  in the fair value of an equity fund investment.           Gains,  net of expenses,  on the sale of two Midwest banking offices in 2004 totaled $1.0  million and reflect a $392,000  gain,  net of expenses on the sale of one of our  Missouri  branch  banking  offices in February  2004,  and a $630,000  gain,  net of  expenses,  on the sale of one of our  Illinois  banking offices in April 2004. The additional  adjustment to gains, net of expenses,  in 2004 relates to an  adjustment  to the fourth  quarter 2003 gain recorded on the divestiture  of four  banking  offices  due to an  expense  incurred  to correct certain environmental issues associated with one of the banking offices.  During the fourth quarter of 2003, we recorded a $4.0 million gain, net of expenses, on the sale of four branch  offices in eastern  Missouri  and central and  northern Illinois.           Bank-owned  life  insurance  income was $5.2 million for the year ended December 31, 2004, in comparison to $5.5 million in 2003, and reflects a reduced return on this  product  primarily  associated  with the reduced  interest  rate environment and overall market conditions.           Investment  management  income  was $6.9  million  for the  year  ended December 31, 2004, in  comparison to $4.8 million in 2003.  The increase in 2004 reflects  increased   portfolio   management  fee  income  associated  with  our Institutional Money Management division.           Other  income was $13.4  million and $13.0  million for the years ended December 31, 2004 and 2003, respectively. We attribute the primary components of the increase in other income to:           >>    increased  loan   servicing   fees  of  $3.0  million   primarily                attributable  to increased  fees from loans  serviced for others,                including fees from the SBA assets purchased from SBLS, decreased                amortization  of mortgage  servicing  rights and a lower level of                interest shortfall. Loan servicing fees for 2004 also included an                impairment charge of $459,000 on our SBA servicing asset;           >>    an increase of $665,000 in fees from fiduciary activities,  which                were $2.8 million and $2.1  million for the years ended  December                31, 2004 and 2003, respectively;           >>    our acquisitions completed during 2003 and 2004;           >>    increased income of $512,000 from standby letters of credit; and           >>    an increase of $375,000  reflecting the reduction of a contingent                liability  recorded in conjunction  with the sale of a portion of                our leasing  portfolio as a result of reductions in related lease                balances  for the  specific  pools of  leases  sold,  as  further                discussed in Note 24 to our  Consolidated  Financial  Statements;                partially offset by           >>    decreased  net gains on derivative  instruments  of $2.0 million.                The net loss on derivative  instruments  was $1.5 million for the                year ended  December 31,  2004,  in  comparison  to a net gain of                $496,000  in 2003.  The  decrease  in the net gain on  derivative                instruments  reflects  changes in the fair value of our  interest                rate cap  agreements,  fair value  hedges and  underlying  hedged                liabilities. The decrease reflects the discontinuation,  in 2003,                of  hedge   accounting   treatment  on  two  interest  rate  swap                agreements that matured in January 2004,  resulting from the loss                of  our  highly  correlated  hedge  positions  between  the  swap                agreements and the underlying hedged liabilities;            >>    a decrease of $1.1 million in rental income  associated  with our                reduced commercial leasing activities;           >>    a  $282,000   write-off  of  fixed  assets  associated  with  the                remodeling of a branch  office  facility to  accommodate  our St.                Louis based mortgage banking operation;           >>    a decline of $265,000 in brokerage revenue  primarily  associated                with overall market conditions and reduced customer demand; and           >>    a net  increase of $643,000 in losses on sales or  reductions  in                valuations of repossessed  assets,  primarily  related to leasing                equipment  associated with our commercial  leasing business.  Net                losses  for 2004  were  $1.6  million  and  included  a  $750,000                write-down on repossessed  aircraft  equipment and a $1.3 million                write-down  on  repossessed  equipment  unrelated  to the airline                industry.  These  write-downs were partially offset by a $350,000                gain  on  the  sale  of  other  repossessed   aircraft  equipment                associated with our commercial leasing portfolio.  Net losses for                2003 were  $950,000 and included  write-downs  of $855,000 on the                disposition of certain aircraft and aircraft equipment parts.           Noninterest  Expense.  Noninterest  expense was $229.5  million for the year ended  December 31, 2004,  in comparison  to $227.1  million for 2003.  Our efficiency  ratio was 59.84% for the year ended  December 31, 2004,  compared to 60.58% for 2003.  The net  increase in  noninterest  expense for 2004  primarily reflects the noninterest  expense of our acquisitions  completed during 2003 and 2004, as well as increases in salaries and employee benefits expenses, partially offset  by  the  nonrecurring  $5.1  million  charitable   contribution  expense recognized in the fourth  quarter of 2003 on the  contribution  of our Allegiant common  stock,  a decline in expenses  and losses,  net of gains,  on other real estate owned, a decrease in write-downs on various  operating leases  associated with our commercial leasing business, and a decrease in occupancy, net of rental income, and furniture and equipment expense.           Salaries and  employee  benefits  increased by $22.1  million to $117.5 million for the year ended  December 31, 2004,  from $95.4  million in 2003.  We primarily  associate the overall  increase with our 2003 and 2004  acquisitions; generally higher salary and employee benefit costs associated with employing and retaining  qualified  personnel;  and  additions  to  staff  to  enhance  senior management  expertise  and  expand  our  product  lines.  The  increase  is also attributable  to a lower  allocation of direct mortgage loan  origination  costs from salaries and employee  benefits  expense to gain on loans sold and held for sale due to a slowdown  in the volume of  mortgage  loans  originated  and sold, management's decision to retain a portion of new mortgage loan production in our real  estate  mortgage  portfolio  in  mid-2003  and a  change  in  the  fallout percentage associated with the allocation.           Occupancy,  net of rental income,  and furniture and equipment  expense totaled $36.9  million and $39.2  million for the years ended  December 31, 2004 and 2003,  respectively.  We primarily  attribute the continued higher levels of expense to acquisitions,  technology equipment expenditures, continued expansion and  renovation of various  corporate and branch  offices and the  relocation of certain  branches  and  operational  areas.  The  decrease in 2004 is  partially attributable   to  decreased   rent  expense   associated   with  various  lease terminations  in 2003,  including a $1.0 million  lease  termination  obligation associated with the relocation of our San  Francisco-based  loan  administration department to southern  California  and a $200,000  lease buyout on a California branch  facility  recorded in the first quarter of 2003, a $979,000  decrease in depreciation  expense on leased equipment associated with our reduced commercial leasing  activities,  partially  offset by an increase  attributable to our 2004 acquisitions.           Information  technology  fees were $32.0  million and $32.1 million for the years ended December 31, 2004 and 2003, respectively. We attribute the level of fees to growth and technological advancements consistent with our product and service  offerings,  and  continued  expansion  and  upgrades  to  technological equipment,  networks and  communication  channels,  partially  offset by expense reductions resulting from the information technology conversion of BSG completed in 2003, as well as the achievement of certain efficiencies  associated with the implementation  of  various  technology  projects.  The  information  technology conversion of CCB was completed in September 2004.           Legal,  examination  and  professional  fees were $7.4 million and $8.1 million  for the years  ended  December  31,  2004 and 2003,  respectively.  The decrease in these fees in 2004 is  primarily  associated  with higher legal fees paid in 2003 related to an ongoing lawsuit that reached final  resolution in the second quarter of 2004. The continued expansion of overall corporate activities, the ongoing professional  services utilized by certain of our acquired entities, and  increased  legal  fees  associated  with  commercial  loan   documentation, collection  efforts and certain defense  litigation related to acquired entities have all contributed to the overall expense levels in 2003 and 2004.            Amortization   of   intangibles   associated   with  the   purchase  of subsidiaries  was $2.9 million and $2.5 million for the years ended December 31, 2004 and 2003,  respectively.  We  attribute  the  increase to the core  deposit intangibles associated with our 2003 and 2004 acquisitions.           Communications and advertising and business  development  expenses were $7.4  million and $6.9  million for the years ended  December 31, 2004 and 2003, respectively.  The  expansion of our sales,  marketing and product group in 2004 and broadened  advertising campaigns have contributed to higher expenditures and are consistent with our continued  focus on expanding our banking  franchise and the products and services available to our customers. We continue our efforts to manage these  expenses  through  renegotiation  of contracts,  enhanced focus on advertising and promotional  activities in markets that offer greater  benefits, as well as ongoing cost containment efforts.           Charitable  contribution  expense was $577,000 and $5.3 million for the years ended December 31, 2004 and 2003,  respectively.  We recorded contribution expense  of  $5.1  million  in  the  fourth  quarter  of  2003  related  to  the contribution  of our  remaining  shares of Allegiant  common  stock,  as further discussed under "--Overview" and "--Acquisitions - Completed Acquisitions."           Other  expense was $19.8  million and $32.3 million for the years ended December 31, 2004 and 2003,  respectively.  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.  We attribute the majority of the decrease in other expense for 2004, as compared to 2003, to:           >>    a decrease of $5.2  million on  expenditures  and losses,  net of                gains,  on other real  estate.  Expenditures  and losses,  net of                gains,  on other real estate  reflected net gains of $3.3 million                for the year  ended  December  31,  2004,  in  comparison  to net                expenses and losses of $1.9  million in 2003.  Net gains on sales                of other real estate in 2004  include a $2.7  million gain on the                sale of a residential and recreational  development property that                was  transferred to other real estate in January 2003, as further                discussed  under  "--Loans and  Allowance  for Loan  Losses," and                approximately  $454,000  in  gains  recorded  on the  sale of two                additional  holdings of other real estate.  Net  expenditures  on                other  real  estate  for  2003  primarily  included  expenditures                associated with the operation of the residential and recreational                development  property that was sold in February 2004 as well as a                $200,000  expenditure  associated  with an unrelated  residential                real estate property located in the northern California region;           >>    decreased write-downs of $6.1 million on various operating leases                associated  with our  commercial  leasing  business,  which  were                primarily a result of reductions in estimated residual values. We                recorded  write-downs of $664,000 for the year ended December 31,                2004, compared to $6.8 million in 2003; and           >>    a $1.0 million specific reserve  established in December 2003 for                the estimated loss associated with a $5.3 million unfunded letter                of credit that we subsequently  funded as a loan in January 2004;                partially offset by           >>    higher expenses associated with our acquisitions completed during                2003  and   2004,   including   increased   travel,   meals   and                entertainment expenses incurred by our conversion team members in                anticipation of the information technology conversion of CIB Bank                that  occurred  in February  2005;  and           >>    continued growth and expansion of our banking franchise.           Provision  for Income  Taxes.  The provision for income taxes was $45.3 million for the year ended December 31, 2004,  representing an effective  income tax rate of 35.4%,  in comparison to $36.0  million,  representing  an effective income tax rate of 36.4%,  for the year ended December 31, 2003. The decrease in the  effective  income tax rate is primarily  attributable  to the reversal of a $2.8 million tax reserve in the second quarter of 2004 that was no longer deemed necessary as a result of the resolution of a potential tax liability.  Excluding this  transaction,  the  effective  income tax rate was 37.5% for the year ended December 31, 2004,  reflecting  higher  taxable income and the merger of our two bank charters in March 2003, which resulted in higher taxable income allocations in states where we file separate tax returns.   Interest Rate Risk Management           For financial institutions,  the maintenance of a satisfactory level of net interest income is a primary factor in achieving  acceptable  income levels. However,  the maturity and repricing  characteristics  of the institution's loan and investment portfolios may differ significantly from those within its deposit structure.  The nature of the loan and deposit  markets within which a financial institution  operates and its objectives for business  development  within those markets at any point in time influence these  characteristics.  In addition, the ability of borrowers to repay loans and  depositors  to withdraw  funds prior to stated maturity dates introduces  divergent option  characteristics that operate primarily as interest rates change.  These factors cause various elements of the institution's balance sheet to react in different manners and at different times relative to changes in  interest  rates,  potentially  leading to  increases  or decreases in net interest  income over time.  Depending  upon the  direction and magnitude of interest rate movements and their effect on the specific components of the  institution's  balance sheet,  the effects on net interest income can be substantial.   Consequently,   managing   a   financial   institution   requires establishing  effective  control over the exposure of the institution to changes in interest rates.           We strive to manage our interest rate risk by:           >>    maintaining an Asset Liability Committee, or ALCO, responsible to                our Board of Directors,  to review the overall interest rate risk                management activity and approve actions taken to reduce risk;           >>    employing a financial  simulation model to determine our exposure                to changes in interest rates;           >>    coordinating  the  lending,   investing  and   deposit-generating                functions to control the assumption of interest rate risk; and           >>    utilizing various financial  instruments,  including derivatives,                to offset inherent interest rate risk should it become excessive.           The objective of these  procedures is to limit the adverse  impact that changes in interest rates may have on our net interest income.           The ALCO has overall  responsibility  for the  effective  management of interest rate risk and the approval of policy guidelines.  The ALCO includes our President and Chief Executive  Officer,  Chief Operating  Officer,  Chief Credit Officer,  Chief  Financial  Officer,  Chief  Investment  Officer  and the senior officers of finance and risk management,  and certain other officers.  The Asset Liability  Management  Group,  which monitors  interest rate risk,  supports the ALCO,  prepares analyses for review by the ALCO and implements  actions that are either specifically directed by the ALCO or established by policy guidelines.           In  managing  sensitivity,  we strive to reduce the  adverse  impact on earnings by managing interest rate risk within internal policy constraints.  Our policy is to  manage  exposure  to  potential  risks  associated  with  changing interest  rates by  maintaining  a balance  sheet  posture  in which  annual net interest income is not significantly  impacted by reasonably  possible near-term changes in interest  rates.  To measure the effect of interest rate changes,  we project  our net  income  over a  two-year  horizon  on a pro forma  basis.  The analysis assumes various scenarios for increases and decreases in interest rates including both instantaneous and gradual,  and parallel and non-parallel  shifts in the yield curve, in varying  amounts.  For purposes of arriving at reasonably possible  near-term  changes in interest  rates,  we include  scenarios based on actual changes in interest  rates,  which have occurred over a two-year  period, simulating both a declining and rising interest rate scenario.            We are  "asset-sensitive,"  indicating  that our assets would generally reprice with changes in interest  rates more rapidly than our  liabilities,  and our simulation  model  indicates a loss of projected net interest  income should interest rates decline. While a decline in interest rates of less than 100 basis points  has  a  relatively  minimal  impact  on  our  net  interest  income,  an instantaneous  parallel  decline in the interest yield curve of 100 basis points indicates a pre-tax projected loss of approximately 6.4% of net interest income, based on assets  and  liabilities  at  December  31,  2005.  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.           We also prepare and review a more traditional interest rate sensitivity position in conjunction with the results of our simulation  model. The following table  presents the  projected  maturities  and periods to repricing of our rate sensitive  assets and  liabilities as of December 31, 2005,  adjusted to account for anticipated prepayments:                                                                       Over       Over                                                                    Three      Six        Over                                                       Three       through    through     One       Over                                                       Months        Six      Twelve    through     Five                                                       or Less     Months     Months   Five Years   Years      Total                                                       -------     ------     ------   ----------   -----      -----                                                                     (dollars expressed in thousands)  Interest-earning assets:           Loans (1)......................................  $4,453,237    318,688    479,676  1,563,896    205,274  7,020,771    Investment securities..........................     151,245     96,943    248,610    655,604    188,381  1,340,783    Short-term investments.........................      65,000         --         --         --         --     65,000                                                     ----------  ---------  ---------  ---------  ---------  ---------        Total interest-earning assets..............   4,669,482    415,631    728,286  2,219,500    393,655  8,426,554    Effect of interest rate swap agreements........    (300,000)   100,000         --    200,000         --         --                                                     ----------  ---------  ---------  ---------  ---------  ---------        Total interest-earning assets after          the effect of interest          rate swap agreements.....................  $4,369,482    515,631    728,286  2,419,500    393,655  8,426,554                                                     ==========  =========  =========  =========  =========  ========= Interest-bearing liabilities:    Interest-bearing demand accounts...............  $  363,279    225,822    147,275    108,002    137,459    981,837    Money market accounts..........................   1,416,912         --         --         --         --  1,416,912    Savings accounts...............................     117,225     96,538     82,747    117,225    275,823    689,558    Time deposits..................................     906,633    474,495    954,027    793,049     25,970  3,154,174    Other borrowings...............................     199,874      4,000      4,000    330,300      1,000    539,174    Notes payable..................................       5,000      5,000     10,000     80,000         --    100,000    Subordinated debentures........................          --         --         --         --    215,461    215,461                                                     ----------  ---------  ---------  ---------  ---------  ---------        Total interest-bearing liabilities.........   3,008,923    805,855  1,198,049  1,428,576    655,713  7,097,116    Effect of interest rate swap agreements........      25,000         --         --         --    (25,000)        --                                                     ----------  ---------  ---------  ---------  ---------  ---------        Total interest-bearing liabilities          after the  effect of interest          rate swap agreements.....................  $3,033,923    805,855  1,198,049  1,428,576    630,713  7,097,116                                                     ==========  =========  =========  =========  =========  ========= Interest-sensitivity gap:    Periodic.......................................  $1,335,559   (290,224)  (469,763)   990,924   (237,058) 1,329,438                                                                                                             =========    Cumulative.....................................   1,335,559  1,045,335    575,572  1,566,496  1,329,438                                                     ==========  =========  =========  =========  ========= Ratio of interest-sensitive assets to    interest-sensitive liabilities:        Periodic...................................        1.44       0.64       0.61       1.69       0.62       1.19                                                                                                             =========        Cumulative.................................        1.44       1.27       1.11       1.24       1.19                                                     ==========  =========  =========  =========  ========= - --------------- (1) Loans are presented net of unearned discount.            Management made certain  assumptions in preparing the foregoing  table. These assumptions included:           >>    loans will repay at projected repayment rates;           >>    mortgage-backed  securities,  included in investment  securities,                will repay at projected repayment rates;           >>    interest-bearing demand accounts and savings accounts will behave                in  a  projected  manner  with  regard  to  their  interest  rate                sensitivity; and           >>    fixed maturity deposits will not be withdrawn prior to maturity.           A  significant  variance  in actual  results  from one or more of these assumptions could materially affect the results reflected in the table.           Our asset-sensitive position at December 31, 2005 on a cumulative basis through the twelve-month time horizon remained relatively consistent,  at $575.6 million, or 6.28% of our assets, in comparison to our  asset-sensitive  position on a cumulative basis through the  twelve-month  time horizon of $571.4 million, or 6.54% of our assets, at December 31, 2004.           The interest-sensitivity position is one of several measurements of the impact of interest  rate  changes on net  interest  income.  Its  usefulness  in assessing the effect of potential changes in net interest income varies with the constant  change in the composition of our assets and liabilities and changes in interest  rates.  For this reason,  we place greater  emphasis on our simulation model for monitoring our interest rate risk exposure.           As previously discussed, 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 December 31, 2005 and 2004 are summarized as follows:                                                                               December 31,                                                       ---------------------------------------------------                                                                 2005                        2004                                                       ------------------------     ----------------------                                                        Notional       Credit        Notional     Credit                                                         Amount       Exposure        Amount     Exposure                                                         ------       --------        ------     --------                                                                  (dollars expressed in thousands)                Cash flow hedges............................ $ 300,000         114          500,000      1,233          Fair value hedges...........................    25,000         748          276,200      9,609          Interest rate floor agreements..............   100,000          70               --         --          Interest rate lock commitments..............     5,900          --            5,400         --          Forward commitments to sell            mortgage-backed securities................    47,000          --           34,000         --                                                       =========         ===          =======      =====            The notional  amounts of our  derivative  financial  instruments do not represent amounts exchanged by the parties and, therefore,  are not a measure of our credit exposure  through our use of these  instruments.  The credit exposure represents  the  loss we would  incur in the  event  the  counterparties  failed completely  to  perform  according  to the  terms  of the  derivative  financial instruments  and the  collateral  held to support the credit  exposure was of no value.           For the years ended  December 31, 2005,  2004 and 2003, we realized net interest income of $2.2 million, $50.1 million and $64.6 million,  respectively, on our derivative  financial  instruments.  The decreased  earnings for 2005 and 2004 are primarily attributable to an increase in prevailing interest rates that began in mid-2004 and continued  throughout 2005, the maturity of $800.0 million notional amount of interest rate swap agreements  during 2004 and $200.0 million in March 2005,  and the  termination  of $150.0  million  and $101.2  million of interest rate swap  agreements  designated as fair value hedges in February 2005 and May 2005,  respectively.  Although  we have  implemented  other  methods  to mitigate the reduction in our net interest income,  the maturity and termination of the swap  agreements has resulted in a compression of our net interest margin of  approximately  59 basis  points for the year ended  December  31,  2005,  in comparison to 2004, and will result in a reduction of future net interest income and  further  compression  of our net  interest  margin  unless  interest  rates increase. We recorded net losses on derivative  instruments,  which are included in noninterest income in our consolidated  statements of income, of $1.1 million and $1.5 million for the years ended  December 31, 2005 and 2004,  respectively, in  comparison  to a net gain of $496,000 for the year ended  December 31, 2003. The net losses  recorded in 2005 reflect  changes in the value of our fair value hedges and the underlying hedged  liabilities  during 2005 until the termination of the $150.0 million of interest rate swap agreements  designated as fair value hedges in February  2005, and the change in the value of our interest rate floor agreement entered into in September 2005.  Information  regarding our derivative financial instruments outlined in the table above is further described in Note 5 to our Consolidated Financial Statements appearing elsewhere in this report.   Mortgage Banking Activities           Our mortgage banking  activities  consist of the origination,  purchase and servicing of residential  mortgage  loans.  The purchase of loans to be held for sale is primarily  limited to loans that we acquire in conjunction  with our acquisition of other financial  institutions.  Generally, we sell our production of  residential  mortgage  loans in the  secondary  loan  markets.  However,  in mid-2003, as a result of continued weak loan demand in other sectors of our loan portfolio,  we made a  business  strategy  decision  to retain a portion  of new residential  mortgage  loan  production in our real estate  mortgage  portfolio, generally  represented  by  production  originated  in our St. Louis  production offices  with the  exception  of 20 and  30-year  fixed  rate  loans  which  are typically sold in the secondary loan markets.  Furthermore, in the third quarter of 2005, we revised our strategy and began  retaining  additional  mortgage loan production in our residential real estate mortgage portfolio,  including 15-year fixed rate, conforming  conventional adjustable rate mortgages and other similar products,  as further  discussed in "--Loans  and  Allowance  for Loan  Losses." Servicing   rights  may  either  be  retained  or  released   with   respect  to conventional,  FHA and VA conforming fixed-rate and conventional adjustable rate residential mortgage loans.           For the  three  years  ended  December  31,  2005,  2004 and  2003,  we originated  residential  mortgage  loans  held for  sale and held for  portfolio totaling $1.60 billion, $1.14 billion and $2.16 billion,  respectively, and sold residential  mortgage  loans  totaling  $1.14  billion,  $1.03 billion and $2.19 billion,  respectively.  The  origination  and purchase of residential  mortgage loans and the related sale of the loans provides us with  additional  sources of income including the gain or loss realized upon sale, the interest income earned while the loan is held  awaiting sale and the ongoing loan  servicing  fees from the loans sold with  servicing  rights  retained.  Mortgage  loans  serviced for investors aggregated $1.01 billion,  $1.06 billion and $1.22 billion at December 31, 2005, 2004 and 2003, respectively.           The gain on mortgage loans originated for resale,  including loans sold and held for sale,  was $18.1  million,  $17.8 million and $15.6 million for the years ended December 31, 2005, 2004 and 2003,  respectively.  We determine these gains,  net of  losses,  on a lower of cost or  market  basis.  These  gains are realized at the time of sale.  The cost basis  reflects both the  adjustments of the  carrying  values of loans held for sale to the lower of cost,  adjusted  to include the cost of hedging the loans held for sale, or current  market  values, as well as the adjustments for any gains or losses on loan commitments for which the  interest  rate  has  been  established,  net  of  anticipated  underwriting "fallout,"  adjusted  for the cost of hedging  these loan  commitments.  Fallout represents  loans not funded due to issues  discovered  during the  underwriting process or  withdrawal  of the loan request by the  customer.  The increases for 2004 and 2005 are primarily attributable to the continued growth of our mortgage banking  activities and the relatively high volume of loans  originated and sold commensurate with the prevailing interest rate environment  experienced in 2003, partially  offset by the slowdown in the volume of mortgage loans originated and sold that began in the fourth quarter of 2003 and continued  throughout 2004 and into the first  quarter of 2005,  coupled with  management's  decision to retain additional loan volume in our residential  real estate  mortgage  portfolio,  as discussed above.           Interest  income on loans held for sale was $11.7  million for the year ended December 31, 2005, in comparison to $8.8 million and $17.0 million for the years ended  December  31, 2004 and 2003,  respectively.  The amount of interest income  realized on loans held for sale is a function of the average  balance of loans held for sale,  the period for which the loans are held and the prevailing interest  rates when the loans are made.  The average  balance of loans held for sale was $184.1  million,  $133.3 million and $273.0 million for the years ended December 31, 2005,  2004 and 2003,  respectively.  On an annualized  basis,  our yield on the portfolio of loans held for sale was 6.36%, 6.61% and 6.21% for the years ended December 31, 2005, 2004 and 2003,  respectively.  This compares with our cost of funds, as a percentage of average interest-bearing  liabilities,  of 2.47%,  1.64% and 1.88% for the years ended  December 31,  2005,  2004 and 2003, respectively.           We report mortgage loan servicing fees in other  noninterest  income in our consolidated statements of income, net of amortization of mortgage servicing rights,  interest shortfall and mortgage-backed  security guarantee fee expense. Interest  shortfall equals the difference  between the interest collected from a loan-servicing  customer upon prepayment of the loan and a full month's interest that is required to be remitted to the  security  owner.  Although  net mortgage loan servicing fees increased  throughout these periods,  they contributed to an overall reduction in our other noninterest income of $1.2 million,  $2.6 million and $4.8  million  for the  years  ended  December  31,  2005,  2004  and  2003, respectively,  including the recognition of  amortization of mortgage  servicing rights of $5.0  million,  $6.5  million  and $7.5  million  for the years  ended December 31, 2005, 2004 and 2003, respectively. We attribute the increase in net loan  servicing  fees in 2005 to  reduced  amortization  of  mortgage  servicing rights,  partially  offset by a reduction in fees associated with a lower volume of loans  serviced for others and the retention of a portion of loan  production in  our  residential  mortgage  loan  portfolio,  as  previously  discussed.  We attribute  the increase in net loan  servicing  fees in 2004 to  increased  fees associated  with a  lower  level  of  interest  shortfall  as  well  as  reduced amortization expense.             Our interest  rate risk  management  policy  provides  certain  hedging parameters  to reduce the interest  rate risk  exposure  arising from changes in loan prices from the time of commitment  until the sale of the security or loan. To  reduce  this  exposure,  we  use  forward  commitments  to  sell  fixed-rate mortgage-backed  securities at a specified  date in the future.  At December 31, 2005,  2004 and 2003, we had $47.7  million,  $35.3  million and $58.2  million, respectively,  of loans held for sale and related commitments,  net of committed loan sales and estimated  underwriting  fallout,  of which $47.0 million,  $34.0 million and $58.5  million,  respectively,  were hedged  through the use of such forward commitments.  Investment Securities           We classify the securities within our investment  portfolio as trading, available  for  sale or held to  maturity.  Our  investment  security  portfolio consists  primarily of securities  designated as available for sale.  During the fourth  quarter  of 2005,  we began  to  engage  in the  trading  of  investment securities,  which were $3.4  million  at  December  31,  2005.  The  investment security  portfolio  was $1.34  billion at December 31, 2005,  compared to $1.81 billion and $1.05  billion at December  31, 2004 and 2003,  respectively.  Funds available from  maturities of investment  securities  during 2005 were primarily used to fund loan growth, resulting in the decrease in our investment securities portfolio in 2005. A portion of the remaining funds available from maturities of investment  securities  were  reinvested in  higher-yielding  available-for-sale investment  securities.  The decrease also  reflects the sale of the  underlying available-for-sale  investment  securities  associated with the termination of a $50.0 million term repurchase  agreement in November 2005, as further  discussed in Note 3,  Note 5 and Note 10 to our  Consolidated  Financial  Statements.  The significant  increase  in  the  investment   securities  portfolio  in  2004  is attributable to securities  acquired through  acquisitions and funds provided by an increase in other borrowings,  primarily term repurchase agreements, combined with the overall level of loan demand within our market areas, which affects the amount of funds available for investment.  Loans and Allowance for Loan Losses           Interest earned on our loan portfolio  represents the principal  source of income for First Bank. Interest and fees on loans were 85.9%, 86.5% and 90.9% of total interest  income for the years ended December 31, 2005,  2004 and 2003, respectively.  We  recognize  interest  and fees on loans as  income  using  the interest method of accounting.  Loan  origination fees are deferred and accreted to interest  income  over the  estimated  life of the loans  using the  interest method of accounting.  The accrual of interest on loans is discontinued  when it appears  that  interest or principal  may not be paid in a timely  manner in the normal course of business.  We generally record payments  received on nonaccrual and  impaired  loans as  principal  reductions,  and  defer the  recognition  of interest  income on loans until all principal has been repaid or an  improvement in the condition of the loan has occurred  which would warrant the resumption of interest accruals.           Loans, net of unearned discount,  represented 76.6% of our assets as of December 31, 2005,  compared to 70.3% of our assets at December 31, 2004. Loans, net of unearned discount,  increased $882.8 million to $7.02 billion at December 31, 2005 from $6.14 billion at December 31, 2004. Our  acquisitions of FBA, IBOC and NSB provided  loans,  net of unearned  discount,  of $54.3  million,  $113.5 million  and $41.8  million,  respectively,  or  $209.6  million  in  aggregate. Exclusive of these  acquisitions  completed in 2005, our loans,  net of unearned discount,  increased  $687.5 million as a result of internal  growth in 2005. In addition,  we  reduced  our loans and  leases by $14.3  million in the first and second quarters of 2005 from the sale of certain nonperforming loans,  resulting from  management's  business  decision  in late 2004 to reduce  the level of our nonperforming assets through the sale of certain nonperforming loans. Loans, net of unearned discount,  increased $809.9 million to $6.14 billion at December 31, 2004 from $5.33 billion at December 31, 2003. Our 2004 acquisitions of CIB Bank, CCB and SBLS provided loans, net of unearned discount, of $683.3 million,  $73.6 million and $24.0  million,  respectively  or $780.9  million in  aggregate.  In addition, we reduced our loans and leases by $83.2 million in 2004 from the sale of a  portion  of our  commercial  leasing  portfolio  and the  sale of  certain performing and  nonperforming  loans.  Exclusive of these  acquisitions and loan sales  completed in 2004,  loans,  net of unearned  discount,  increased  $112.2 million from  internal  growth in 2004.  The overall  increase in loans,  net of unearned discount, in 2005 primarily resulted from:           >>    an  increase  of  $408.2  million  in our  real  estate  mortgage                portfolio,  primarily  attributable to internal growth within our                loan portfolio and our acquisitions  completed during 2005, which                provided real estate mortgage loans of $166.7 million, as well as                a home equity  product line  campaign that we held in mid-2004 in                line  with  our  goal to  increase  our home  equity  lines.  The                increase is also  attributable to management's  business strategy                decision  in  mid-2003  to  retain  a  portion  of our  new  loan                production in our real estate  mortgage  portfolio as a result of                continued weak loan demand in other sectors of our loan portfolio                and management's  business  strategy in the third quarter of 2005                to retain  additional  mortgage  loan product  production  in our                residential  real estate mortgage  portfolio,  including  15-year                fixed rate, conforming conventional adjustable rate mortgages and                other similar products;             >>    an increase of $245.8 million in our real estate construction and                development  portfolio  resulting from internal growth due to new                loan  originations  and  seasonal  fluctuations  on existing  and                available credit lines,  and a $5.3 million  increase  associated                with our acquisitions completed in 2005;           >>    an  increase of $182.1  million in loans held for sale  resulting                from an overall  increase  in loan  origination  volumes  and the                timing of loan sales in the secondary mortgage market,  partially                offset by the sale of certain acquired loans. In addition,  in an                effort to reduce the level of our  nonperforming  assets  through                the  sale  of  certain   nonperforming   loans,   we  transferred                approximately  $59.7 million of  nonperforming  loans to our held                for sale portfolio at December 31, 2005, further  contributing to                the overall increase in 2005; and           >>    an increase of $44.6  million in our  commercial,  financial  and                agricultural portfolio, primarily attributable to a $36.7 million                increase associated with our acquisitions  completed during 2005,                partially  offset by general  runoff of the balances  within this                portfolio  as  well  as  an   anticipated   amount  of  attrition                associated with our acquisitions completed during 2003 and 2004.           In our evaluation of  acquisitions,  it is anticipated that as we apply our standards for credit structuring, underwriting,  documentation and approval, a portion  of the  existing  borrowers  will  elect to  refinance  with  another financial  institution,  because: (a) there may be an aggressive effort by other financial  institutions  to attract  them;  (b) they do not  accept the  changes involved,  or (c) they are unable to meet our credit requirements.  In addition, another  portion of the  portfolio  may  either  enter our  remedial  collection process to reduce  undue credit  exposure or improve  problem  loans,  or may be charged-off.  The  amount  of  this  attrition  will  vary  substantially  among acquisitions depending on the strength and discipline within the credit function of the acquired institution; the magnitude of problems contained in the acquired portfolio; the aggressiveness of competing institutions to attract business; and the  significance  of the acquired  institution to the overall  banking  market. Typically,  in  acquisitions  of  institutions  that have strong credit cultures prior to their  acquisitions and operate in relatively  large markets,  there is relatively little attrition that occurs after the acquisition. However, in those acquisitions  in which the credit  discipline  has been weak,  and  particularly those in small  metropolitan  or rural areas,  we can  experience  substantially greater attrition. Generally, this process occurs within approximately six to 12 months after completion of the acquisition.           During the five years ended December 31, 2005,  loans,  net of unearned discount,  increased  significantly  from $4.75  billion at December 31, 2000 to $7.02  billion  at  December  31,  2005.   Throughout   this  period,   we  have substantially  enhanced our  capabilities  for achieving  and managing  internal growth.  A key element of this process has been the  expansion of our  corporate business  development staff,  which is responsible for the internal  development and management of both loan and deposit relationships with commercial customers. While this process was occurring, in an attempt to achieve more diversification, a higher level of interest  yield and a reduction  in interest  rate risk within our loan  portfolio,  we also focused on  repositioning  our  portfolio.  As the corporate  business  development  effort  continued to  originate a  substantial volume of new loans,  substantially all of our conforming  residential  mortgage loan  production was  historically  sold in the secondary  mortgage market until management's  decision in 2003 to retain a portion of the new loan production in our real estate mortgage portfolio to offset continued weak loan demand in other sectors of our loan portfolio and management's  decision in the third quarter of 2005 to retain  additional  mortgage loan product  production in our residential real  estate  mortgage  portfolio,  including  15-year  fixed  rate,  conforming conventional adjustable rate mortgages and other similar products.  Furthermore, we  substantially  reduced our lease financing  portfolio as a result of (a) the discontinuation  of our New Mexico based leasing operation in 2002, the transfer of all responsibilities for the existing portfolio to a new leasing staff in St. Louis,  Missouri, a change in our overall business strategy resulting in reduced commercial leasing activities and repayment of leases by borrowers,  and (b) the sale of a significant  portion of our remaining  commercial  leasing  portfolio, which  reduced the portfolio by  approximately  $33.1 million to $9.6 million at June 30, 2004.  This portfolio has further  declined to $3.0 million at December 31,  2005.  We  have  also   substantially   reduced  our  consumer  lending  by discontinuing  the  origination  of indirect  auto loans and selling our student loan and credit card loan portfolios. This allowed us to fund part of the growth in  corporate  lending  through  reductions  in  indirect  automobile  and other consumer-related loans.           In  addition,  our  acquisitions  have  contributed  to  a  substantial increase  in the  portfolios  of new loans.  In certain  cases,  these  acquired portfolios  contained  significant  loan problems,  which we had anticipated and attempted  to  consider in our  acquisition  pricing.  As we resolved  the asset quality issues, the portfolios of the acquired entities tended to decline due to the  elimination  of problem loans and because many of the resources  that would otherwise be directed toward generating new loans were concentrated on improving or eliminating  existing  relationships.  We continue to experience  this trend, primarily as a result of our acquisitions of CCB and CIB Bank, completed in July 2004 and  November  2004,  respectively,  and expect the  resolution  of certain problem credits acquired from CIB Bank to continue in the near term.              The following  table  summarizes  the components of changes in our loan portfolio, net of unearned discount, for the five years ended December 31, 2005:                                                                       Increase (Decrease) For the Year Ended December 31,                                                                 --------------------------------------------------------                                                                    2005         2004       2003       2002        2001                                                                    ----         ----       ----       ----        ----                                                                             (dollars expressed in thousands)       Internal loan volume increase (decrease):                 Commercial lending................................    $ 204,494      91,760     (22,211)  (119,295)   174,568           Residential real estate lending (1) ..............      481,642      32,348    (103,573)    36,074     48,616           Consumer lending, net of unearned discount........        1,383     (11,900)    (22,429)   (44,060)   (75,280)       Loans and leases sold.................................      (14,337)    (83,216)         --         --         --       Loans provided by acquisitions........................      209,621     780,901      43,700    151,000    508,700                                                                 ---------     -------    --------   --------    -------           Total increase (decrease).........................    $ 882,803     809,893    (104,513)    23,719    656,604                                                                 =========     =======    ========   ========    =======       ---------------       (1) Includes loans held for sale.            Our lending strategy  emphasizes quality,  growth and  diversification. Throughout our organization,  we employ a common credit underwriting policy. Our commercial  lenders  focus  principally  on  small to  middle-market  companies. Consumer lenders focus principally on residential  loans,  including home equity loans and other  consumer  financing  opportunities  arising  out of our  branch banking network.           Commercial,  financial  and  agricultural  loans include loans that are made primarily  based on the borrowers'  general credit  strength and ability to generate cash flows for repayment from income sources even though such loans may also be secured by real estate or other  assets.  Real estate  construction  and development loans,  primarily relating to residential  properties and commercial properties,  represent financing secured by real estate under construction. Real estate  mortgage  loans  consist  primarily of loans  secured by  single-family, owner-occupied  properties  and various types of commercial  properties on which the income from the property is the intended  source of repayment.  Consumer and installment  loans are loans to individuals  and consist of a mix of secured and unsecured  loans,  including  preferred credit and loans secured by automobiles. Loans held for sale are primarily fixed and adjustable rate residential mortgage loans  pending  sale  in  the  secondary  mortgage  market  in  the  form  of  a mortgage-backed security, or to various private third-party investors.           The following table summarizes the composition of our loan portfolio by major category and the percent of each category to the total portfolio as of the dates presented:                                                                              December 31,                                  --------------------------------------------------------------------------------------------------                                          2005               2004               2003                  2002               2001                                  ------------------- ------------------ -------------------- ------------------- ------------------                                    Amount       %      Amount      %       Amount      %       Amount       %      Amount      %                                    ------       -      ------      -       ------      -       ------       -      ------      -                                                                 (dollars expressed in thousands)  Commercial, financial                and agricultural............ $1,616,841    24.1% $1,569,321   26.1%  $1,407,626   27.1%  $1,443,016    28.4% $1,532,875   29.5% Real estate construction     and development.............  1,564,255    23.3   1,318,413   22.0    1,063,889   20.5      989,650    19.5     954,913   18.4 Real estate mortgage:     One-to-four-family       residential loans.........  1,214,121    18.1     870,889   14.5      811,650   15.7      694,604    13.7     798,089   15.3     Multi-family residential       loans.....................    143,663     2.2     102,447    1.7      108,163    2.1      112,517     2.2     148,684    2.9     Commercial real estate       loans.....................  2,112,004    31.5   2,088,245   34.8    1,662,451   32.1    1,637,001    32.2   1,499,074   28.8 Lease financing.................      2,981      --       5,911    0.1       67,282    1.3      126,738     2.5     148,971    2.8 Consumer and installment,     net of unearned     discount....................     51,772     0.8      49,677    0.8       61,268    1.2       79,097     1.5     122,057    2.3                                  ----------   -----  ----------  -----   ----------  -----   ----------   -----  ----------  -----         Total loans,            excluding loans            held for sale........  6,705,637   100.0%  6,004,903  100.0%   5,182,329  100.0%   5,082,623   100.0%  5,204,663  100.0%                                               =====              =====               =====                =====              ===== Loans held for sale.............    315,134             133,065             145,746             349,965             204,206                                  ----------          ----------          ----------          ----------          ----------         Total loans............. $7,020,771          $6,137,968          $5,328,075          $5,432,588          $5,408,869                                  ==========          ==========          ==========          ==========          ==========              Loans at December 31, 2005 mature as follows:                                                                                   Over One Year                                                                                Through Five                                                                                    Years             Over Five Years                                                                          ----------------------    -------------------                                                               One Year      Fixed      Floating     Fixed     Floating                                                               or Less       Rate         Rate       Rate        Rate       Total                                                               -------       ----         ----       ----        ----       -----                                                                             (dollars expressed in thousands)         Commercial, financial and agricultural....................  $  937,844     195,269      390,940     40,230      52,558   1,616,841 Real estate construction and development..................     888,281      91,562      530,635     28,043      25,734   1,564,255 Real estate mortgage:     One-to-four family residential loans..................      87,684     136,470       54,905    256,454     678,608   1,214,121     Multi-family residential loans........................      35,512      37,081       39,425     15,270      16,375     143,663     Commercial real estate loans..........................     443,229     607,132      501,292    264,792     295,559   2,112,004 Lease financing...........................................          --       2,981           --         --          --       2,981 Consumer and installment, net of unearned discount........      22,882      24,001        2,109      2,460         320      51,772 Loans held for sale.......................................     315,134          --           --         --          --     315,134                                                             ----------   ---------    ---------    -------   ---------   ---------       Total loans.........................................  $2,730,566   1,094,496    1,519,306    607,249   1,069,154   7,020,771                                                             ==========   =========    =========    =======   =========   =========             Nonperforming  assets include nonaccrual loans,  restructured loans and other real estate.  The following table presents the categories of nonperforming assets and certain ratios as of the dates presented:                                                                                     December 31,                                                       -----------------------------------------------------------------                                                           2005          2004         2003          2002         2001                                                           ----          ----         ----          ----         ----                                                                            (dollars expressed in thousands)     Commercial, financial and agricultural:            Nonaccrual....................................   $    4,937       10,147       26,876        15,787       17,141      Restructured terms............................           --            4           --            --           --    Real estate construction and development:      Nonaccrual....................................       11,137       13,435        6,402        23,378        3,270    Real estate mortgage:      One-to-four family residential loans:        Nonaccrual..................................        9,576        9,881       21,611        14,833       20,780        Restructured terms..........................           10           11           13            15           20      Multi-family residential loans:        Nonaccrual..................................          740          434          804           772          476      Commercial real estate loans:        Nonaccrual..................................       70,625       50,671       13,994         8,890       20,642        Restructured terms..........................           --           --           --         1,907        1,993    Lease financing:      Nonaccrual....................................           11          907        5,328         8,723        2,185    Consumer and installment:      Nonaccrual....................................          160          310          336           860          794      Restructured terms............................           --           --           --            --            7                                                       ----------    ---------    ---------     ---------    ---------               Total nonperforming loans............       97,196       85,800       75,364        75,165       67,308    Other real estate...............................        2,025        4,030       11,130         7,609        4,316                                                       ----------    ---------    ---------     ---------    ---------               Total nonperforming assets...........   $   99,221       89,830       86,494        82,774       71,624                                                       ==========    =========    =========     =========    =========     Loans, net of unearned discount.................   $7,020,771    6,137,968    5,328,075     5,432,588    5,408,869                                                       ==========    =========    =========     =========    =========     Loans past due 90 days or more      and still accruing............................   $    5,576       28,689       2,776          4,635       15,156                                                       ==========    =========    =========     =========    =========     Ratio of:      Allowance for loan losses to loans............         1.93%        2.46%        2.19%         1.83%        1.80%      Nonperforming loans to loans..................         1.38         1.40         1.41          1.38         1.24      Allowance for loan losses to        nonperforming loans.........................       139.23       175.65       154.52        132.29       144.36      Nonperforming assets to loans and        other real estate...........................         1.41         1.46         1.62          1.52         1.32                                                       ==========    =========    =========     =========    =========             Nonperforming assets,  consisting of nonperforming loans and other real estate owned,  were $99.2  million,  $89.8 million and $86.5 million at December 31, 2005, 2004 and 2003, respectively. Other real estate owned was $2.0 million, $4.0  million  and  $11.1   million  at  December  31,  2005,   2004  and  2003, respectively.  Nonperforming loans, consisting of loans on nonaccrual status and certain  restructured  loans,  were  $97.2  million at  December  31,  2005,  in comparison  to $85.8  million and $75.4  million at December  31, 2004 and 2003, respectively.  A significant  portion of our nonperforming  loans includes loans associated  with  our  acquisition  of CIB Bank in  November  2004,  which  have increased to $55.0 million,  or 56.6% of  nonperforming  loans,  at December 31, 2005, from $50.5 million, or 58.8% of nonperforming loans, at December 31, 2004. As further discussed under "--Lending Activities," the increase in nonperforming loans in 2005 is  primarily  attributable  to the  deterioration  of a few large credit  relationships  in our Midwest  region during the fourth quarter of 2005, partially   offset  by   significant   improvement   in  the  overall  level  of nonperforming  loans  during  the first nine  months of 2005.  The  increase  in nonperforming  loans in the fourth quarter of 2005 is primarily  attributable to further  deterioration of a small number of credit  relationships in our Midwest region, including two large relationships of $14.9 million and $16.6 million, or $31.5 million in aggregate.  On December 31, 2005, we recognized $7.6 million of loan  charge-offs  to reduce the loans to their  estimated  fair  value,  net of costs,  that is expected to be realized at the time of the sale, and transferred approximately  $59.7  million  of  nonperforming  loans  to our  held  for  sale portfolio,  which included several of the relationships that deteriorated during the fourth quarter of 2005 and one credit  relationship of $12.4 million,  which was included in  nonperforming  loans at December 31, 2004 with a value of $14.5 million.  Included in these loan  charge-offs and loans  transferred to our held for sale portfolio were $6.0 million of loan charge-offs and approximately $49.6 million of nonperforming  loans that were associated with our CIB Bank purchase. In January 2006, we received a payoff on one of the  nonperforming  loans in our held for sale  portfolio,  reducing the held for sale portfolio by $12.4 million and resulting in the  recognition of a $5.0 million loan recovery.  Furthermore, in March 2006, we completed  the sale of a majority of the remaining  nonaccrual loans in our held for sale  portfolio,  reducing the held for sale  portfolio by $32.5 million,  as further  discussed in Note 25 to our  Consolidated  Financial Statements.  We continue to actively  market the  remaining  loans held for sale through an  independent  third party.  The  improvement of  nonperforming  loans during the first nine months of 2005  primarily  resulted  from:  our  continued emphasis on improving asset quality; the sale of certain acquired  nonperforming loans;  strengthening  of  certain  loans;  and  loan  payoffs  and/or  external refinancing of various  credits,  as further  discussed  below. A portion of the loan payoffs and sales during the first  quarter of 2005  pertaining  to certain acquired  nonperforming  loans that were classified as loans held for sale as of December 31, 2004  contributed  to a  reallocation  of the purchase price on our acquisition  of CIB Bank,  as further  discussed  in Note 2 to our  Consolidated Financial Statements.  We also recorded a $1.6 million write-down on an acquired parcel of other  real  estate  owned to its  estimated  fair  value  based  upon additional data received. This write-down was recorded as an acquisition-related adjustment  in the first  quarter of 2005 and is further  discussed in Note 2 to our Consolidated  Financial  Statements.  The increase in nonperforming loans in 2004 is primarily  associated with our 2004  acquisitions,  partially  offset by substantial  improvement in our existing portfolio of nonperforming  assets as a result of significant loan payoffs, the liquidation of foreclosed property,  the sale of certain  nonperforming loans and the sale of a portion of our commercial leasing  portfolio.  The  increase  in  nonperforming  loans in 2003 and 2002 is primarily   attributable  to  the  current  economic  conditions  as  previously discussed,  additional  problems  identified in two acquired loan portfolios and continuing  deterioration in our commercial leasing portfolio,  particularly the segment of the portfolio related to the airline industry.           The 10.5% net increase in nonperforming assets during 2005 reflects the following significant changes:           >>    Overall  improvement in the level of nonperforming  assets during                the first nine months of 2005,  exclusive of the deterioration of                certain credit  relationships  as discussed below, as a result of                our continued focus on improving asset quality through an ongoing                process of problem loan  work-out;  the sale of certain  acquired                nonperforming loans, as previously  discussed;  the strengthening                of certain loans; and loan payoffs and/or external refinancing of                various  credits,  including  $97.3 million of loan payoffs on 14                credit  relationships  during  the first and second  quarters  of                2005;            >>    The deterioration of several credit  relationships in the Midwest                region  during the fourth  quarter of 2005.  There  credits  were                primarily  associated  with loans acquired in the purchase of CIB                Bank and included two large credit relationships of $14.9 million                and $16.6 million, respectively,  which were placed on nonaccrual                status in the fourth quarter of 2005;           >>    On December 31,  2005,  we  transferred  11  nonperforming  loans                totaling  approximately  $59.7  million  to  our  held  for  sale                portfolio.  These  loans  were  primarily  associated  with loans                acquired in the purchase of CIB Bank and included  several of the                loans that had deteriorated during the fourth quarter of 2005, as                discussed  above,  and one credit  relationship of $12.4 million,                which was  included in  nonperforming  loans at December 31, 2004                with a value of $14.5 million. We recognized $7.6 million of loan                charge-offs in  conjunction  with this transfer to loans held for                sale to reduce the loans to their  estimated  fair value,  net of                costs,  that is  expected to be realized at the time of the sale.                Included in these loan  charge-offs and loans  transferred to our                held for sale portfolio were $6.0 million of loan charge-offs and                approximately $49.6 million of nonperforming loans transferred to                our held for sale  portfolio  that were  associated  with our CIB                Bank purchase;           >>    The sale of  approximately  $14.3  million  of  certain  acquired                nonperforming loans in early 2005,  specifically $2.8 million and                $11.5 million during the first and second quarters of 2005; and           >>    A $4.0 million decrease in nonperforming  assets  associated with                our acquisition of SBLS in August 2004,  primarily resulting from                $3.8 million of loan charge-offs  recorded in 2005, which reduced                SBLS LLC's  nonperforming  assets to $2.3 million at December 31,                2005.  SBLS  LLC  had  a  significant   concentration  of  assets                associated  with  the  shrimping  vessels  industry,   which  are                reflected  in both  nonperforming  loans  and  other  repossessed                assets.  Although we adjusted our asset purchase price to reflect                this concentration,  asset quality issues will likely continue in                the near future as a result of this  industry  concentration  and                its ongoing depressed status,  which has deteriorated  further in                2005 due to  higher  interest  rates,  increased  fuel  costs and                damage to several vessels by Hurricane Katrina. The SBA agreed to                repurchase SBLS LLC's entire  shrimping  vessels  portfolio,  and                these loans were placed in liquidation  status in 2005.  However,                the ultimate  liquidation of the shrimping vessels is expected to                be time  consuming  due to the poor  condition  of certain of the                vessels following Hurricane Katrina and the potential  collection                of funds through  insurance  proceeds,  which will likely require                additional   time  and  effort  to  comply  with  the  individual                requirements of the respective insurance companies.           Loans past due 90 days or more and still  accruing  interest  decreased $23.1  million to $5.6  million at  December  31,  2005,  from $28.7  million at December 31, 2004, and were $2.8 million at December 31, 2003. The overall level of such  delinquencies  at December  31,  2005 is  primarily  reflective  of the continued  growth  in our  loan  portfolio.  The  substantial  increase  in 2004 resulted  from our  acquisitions  of CIB Bank and  CCB,  which  comprised  $27.2 million of our loans  past due 90 days or more and still  accruing  interest  at December  31,  2004.  A  significant  portion of these loans were past due as to contractual  maturity and pending  renewal at December 31,  2004;  however,  the majority  of  the  loan  payments  were  current  and  in  accordance  with  the contractual  terms of the underlying credit  agreements.  Our allowance for loan losses as a percentage of loans, net of unearned discount,  was 1.93%, 2.46% and 2.19% at December 31, 2005, 2004 and 2003, respectively.  Our allowance for loan losses as a percentage of  nonperforming  loans decreased to 139.23% at December 31, 2005, from 175.65% and 154.52% at December 31, 2004 and 2003,  respectively. The allowance for loan losses was $135.3 million at December 31, 2005,  compared to  $150.7   million  and  $116.5   million  at  December  31,  2004  and  2003, respectively.  As reflected in the table below, a $1.0 million  specific reserve was  established in December 2003 for the estimated loss  associated with a $5.3 million unfunded letter of credit. The letter of credit was subsequently  funded as a loan in January  2004,  and the related $1.0 million  specific  reserve was transferred to the allowance for loan losses. In addition,  on June 30, 2004, we transferred  approximately  $1.5 million from the allowance for loan losses to a contingent liability related to recourse obligations associated with the sale of certain leases in our commercial leasing portfolio, as further described in Note 24 to our Consolidated  Financial Statements.  As further described in the table below and under "--Business - Lending Activities," the allowance for loan losses also  reflects  an  increase  of $2.0  million in 2005 and an  increase of $33.8 million in 2004 of  balances  acquired  in  conjunction  with our  acquisitions, including  a $15.7  million  increase  to reflect  the  application  of our loss factors to CIB Bank's loan portfolio risk ratings, reflecting our strategies for more rapid resolution of certain acquired  classified and nonperforming  assets. This  adjustment was partially  offset by our  reclassification,  at the time of acquisition,  of CIB Bank's specific reserves of $21.7 million as a reduction of the basis of the individual loan  relationships  (which had no impact on our net loan  balances),  and the transfer of $18.3  million of  nonperforming  loans to loans held for sale,  resulting in a corresponding charge of $5.4 million to the allowance  for loan losses to reduce the loans held for sale to their  estimated fair value, net of broker costs, that was expected to be realized at the time of sale.            Loan charge-offs decreased to $33.1 million for the year ended December 31, 2005, compared to $50.6 million and $55.8 million for the comparable periods in 2004 and 2003, respectively.  Loan recoveries were $19.8 million for the year ended  December 31, 2005,  compared to $25.9  million and $23.0  million for the comparable  periods in 2004 and 2003,  respectively.  Loan  charge-offs,  net of recoveries,  decreased  to $13.4  million for the year ended  December 31, 2005, compared to $24.8 million and $32.7 million for the  comparable  periods in 2004 and 2003,  respectively.  Net loan charge-offs for 2005 included $7.6 million of charge-offs  associated with the $59.7 million of loans  transferred to our held for sale  portfolio at December  31, 2005,  as  previously  discussed.  Net loan charge-offs for 2004 reflect $2.5 million in net charge-offs  related to certain nonperforming and problem loans that were sold in the fourth quarter of 2004. In addition,  net loan recoveries  associated with our commercial leasing portfolio were  $342,000 in 2004,  compared to net loan  charge-offs  of $14.4  million in 2003. We continue to closely  monitor our loan portfolio and address the ongoing challenges  posed by the  economic  environment,  including  reduced loan demand within certain  sectors of our loan  portfolio.  We consider this in our overall assessment  of the  adequacy  of the  allowance  for loan  losses.  The level of nonperforming  assets from our 2004  acquisitions  significantly  contributed to increased  levels of problem loans and past due loans,  and we  anticipated  the level of nonperforming and delinquent loans to continue during 2005 as we worked to resolve the underlying issues associated with the nonperforming assets of CCB and CIB Bank,  including our efforts to actively market a significant portion of the problem loans, as discussed above. Although substantial improvement was made in this regard  throughout  2005,  we continue our efforts to reduce the overall level of our nonperforming assets.           As of December 31, 2005,  2004,  2003,  2002 and 2001,  $124.3 million, $161.8 million, $109.4 million, $98.2 million and $123.2 million,  respectively, of loans not included in the table above were identified by management as having potential credit problems, or problem loans. The decline in the level of problem loans for the year ended December 31, 2005 primarily reflects improvement in the management  of these  problem  loans and  success  in  resolving  certain of the problem loans associated with our 2004 acquisitions. The significant increase in the level of problem  loans for the year ended  December  31, 2004 is  primarily attributable  to our  acquisitions  of CCB and CIB Bank, in addition to internal portfolio growth and economic  conditions  within certain sectors of the markets in which we operate.  The  significant level of problem loans for the year ended December  31,  2003  was  primarily  due  to  continuing  deterioration  of  our commercial leasing portfolio, portfolio growth (both internal and external), the gradual slow down and uncertainties  that occurred in the economy in the markets in which  we  operate,  as well as  residual  problem  loans  stemming  from our acquisition  of Union  Financial  Group,  Ltd. in December  2001.  As previously discussed  under  "--Lending   Activities,"  certain  acquired  loan  portfolios exhibited  varying degrees of distress prior to their  acquisition.  While these problems had been  identified and  considered in our  acquisition  pricing,  the acquisitions  led to an increase  in  nonperforming  assets and  problem  loans. Management  continues its efforts to reduce  nonperforming and problem loans and re-define overall strategy and business plans with respect to our loan portfolio as deemed necessary.           Our credit  management  policies and procedures  focus on  identifying, measuring  and  controlling   credit  exposure.   These   procedures   employ  a lender-initiated  system  of  rating  credits,  which  is  ratified  in the loan approval  process and subsequently  tested in internal credit reviews,  external audits and regulatory bank examinations. The system requires rating all loans at the time they are originated,  except for homogeneous  categories of loans, such as residential real estate mortgage loans and consumer loans.  These homogeneous loans are assigned an initial rating based on our  experience  with each type of loan. We adjust these ratings  based on payment  experience  subsequent to their origination.           We include  adversely  rated credits,  including  loans requiring close monitoring  which  would  not  normally  be  considered  classified  credits  by regulators, on our monthly loan watch list. Loans may be added to our watch list for reasons that are temporary and  correctable,  such as the absence of current financial  statements  of the  borrower or a deficiency  in loan  documentation. Other loans are added whenever any adverse  circumstance is detected which might affect  the  borrower's  ability  to  comply  with the  terms of the  loan.  The delinquency  of a  scheduled  loan  payment,  deterioration  in  the  borrower's financial condition identified in a review of periodic financial  statements,  a decrease in the value of the  collateral  securing the loan,  or a change in the economic  environment  within which the  borrower  operates  could  initiate the addition of a loan to our watch list.  Loans on our watch list require  periodic detailed loan status  reports  prepared by the  responsible  officer,  which are discussed in formal meetings with credit review and credit  administration staff members.  Upgrades and  downgrades  of loan risk ratings may be initiated by the responsible  loan officer.  However,  upgrades of risk ratings  associated  with significant credit relationships and/or problem credit relationships may only be made with the  concurrence of  appropriate  regional or senior  regional  credit officers.            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 profiles 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 levels of risk in the  portfolio.  Factors are applied to the loan  portfolio for each category of loan risk to determine  acceptable  levels of the 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,  additional provisions 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 provisions  necessary to maintain the allowance at appropriate  levels.  In addition,  management  exercises a certain degree of judgment in its analysis of the overall  adequacy of the allowance for losses.  In its  analysis,  management  considers  the change in the  portfolio, including growth,  composition,  the ratio of net loans to total assets, and the economic  conditions  of  the  regions  in  which  we  operate.  Based  on  this quantitative and qualitative analysis, adjustments are made to the allowance for loan losses.  Such adjustments are reflected in our  consolidated  statements of income.           The  allocation  of the allowance for loan losses by loan category is a result of the  application  of our risk rating system  augmented by  qualitative analysis.  The same  procedures  we employ to determine  the overall risk in our loan portfolio and our  requirements for the allowance for loan losses determine the  distribution  of  the  allowance  by  loan  category.   Consequently,   the distribution  of the  allowance  will  change  from  period to period due to (a) changes in the  aggregate  loan  balances by loan  category;  (b) changes in the identified  risk in each  loan  in the  portfolio  over  time,  excluding  those homogeneous  categories  of loans such as  consumer  and  installment  loans and residential  real estate mortgage loans for which risk ratings are changed based on payment performance; and (c) changes in loan concentrations by borrower.           Since the methods of calculating  the allowance  requirements  have not significantly changed over time, the reallocations among different categories of loans that appear between  periods are the result of the  redistribution  of the individual loans that comprise the aggregate portfolio due to the factors listed above.  However,  the perception of risk with respect to particular loans within the  portfolio  will  change  over time as a result of the  characteristics  and performance of those loans,  as well as the overall  economic  trends and market trends,  including  our  actual  and  expected  trends in  nonperforming  loans. Consequently, while there are no specific allocations of the allowance resulting from economic or market conditions or actual or expected trends in nonperforming loans, these factors are considered in the initial assignment of risk ratings to loans and in subsequent changes to those risk ratings.            The following  table is a summary of our loan loss  experience  for the five years ended December 31, 2005:                                                                    As of or For the Years Ended December 31,                                                       -------------------------------------------------------------                                                           2005        2004        2003         2002         2001                                                           ----        ----        ----         ----         ----                                                                        (dollars expressed in thousands)        Allowance for loan losses, beginning of year......... $  150,707     116,451      99,439       97,164       81,592 Acquired allowances for loan losses..................      1,989      33,752         757        1,366       14,046 Other adjustments (1)(2).............................         --        (479)         --           --           --                                                       ----------   ---------   ---------    ---------    ---------                                                          152,696     149,724     100,196       98,530       95,638                                                       ----------   ---------   ---------    ---------    --------- Loans charged-off:     Commercial, financial and agricultural...........    (10,500)    (26,550)    (23,476)     (45,697)     (21,085)     Real estate construction and development.........     (7,838)     (3,481)     (5,825)      (7,778)        (108)     Real estate mortgage:        One-to-four family residential loans..........     (3,399)     (4,891)     (4,167)      (2,697)        (802)        Multi-family residential loans................         --        (139)        (87)        (109)          (4)        Commercial real estate loans..................     (9,699)     (9,995)     (1,708)      (2,747)      (1,012)     Lease financing..................................       (491)     (4,536)    (19,160)      (8,426)      (6,749)     Consumer and installment.........................     (1,196)     (1,051)     (1,350)      (3,070)      (1,693)                                                       ----------   ---------   ---------    ---------    ---------           Total......................................    (33,123)    (50,643)    (55,773)     (70,524)     (31,453)                                                       ----------   ---------   ---------    ---------    --------- Recoveries of loans previously charged-off:     Commercial, financial and agricultural...........     10,802      14,983      10,147        8,331        4,015     Real estate construction and development.........      1,963         748       1,659          631        1,171     Real estate mortgage:        One-to-four family residential loans..........      1,953       1,597         781          628          755        Multi-family residential loans................         --          27          99          792           15        Commercial real estate loans..................      2,901       2,659       4,174        3,491        1,332     Lease financing..................................      1,501       4,878       4,805          494          435     Consumer and installment.........................        637         984       1,363        1,566        1,746                                                       ----------   ---------   ---------    ---------    ---------           Total......................................     19,757      25,876      23,028       15,933        9,469                                                       ----------   ---------   ---------    ---------    ---------           Net loans charged-off......................    (13,366)    (24,767)    (32,745)     (54,591)     (21,984)                                                       ----------   ---------   ---------    ---------    --------- Provision for loan losses............................     (4,000)     25,750      49,000       55,500       23,510                                                       ----------   ---------   ---------    ---------    --------- Allowance for loan losses, end of year............... $  135,330     150,707     116,451       99,439       97,164                                                       ==========   =========   =========    =========    =========  Loans outstanding, net of unearned discount:     Average.......................................... $6,436,970   5,509,054   5,385,363    5,424,508    4,884,299     End of year......................................  7,020,771   6,137,968   5,328,075    5,432,588    5,408,869     End of year, excluding loans held for sale.......  6,705,637   6,004,903   5,182,329    5,082,623    5,204,663                                                       ==========   =========   =========    =========    =========  Ratio of allowance for loan losses     to loans outstanding:     Average..........................................       2.10%       2.74%       2.16%        1.83%        1.99%     End of year......................................       1.93        2.46        2.19         1.83         1.80     End of year, excluding loans held for sale.......       2.02        2.51        2.25         1.96         1.87 Ratio of net charge-offs to average     loans outstanding................................       0.21        0.45        0.61         1.01         0.45 Ratio of current year recoveries to     preceding year's charge-offs.....................      39.01       46.40       32.65        50.66        55.54                                                       ==========   =========   =========    =========    ========= - --------------- (1)  In December 2003, we established a $1.0 million specific reserve for estimated losses on a $5.3 million letter      of credit that was recorded in accrued and other  liabilities in  our consolidated balance sheets. In  January      2004,  the  letter  of  credit  was  fully funded as a loan and the  related $1.0 million specific reserve was      reclassified from accrued and other liabilities to the allowance for loan losses. (2)  In June 2004, we reclassified $1.5 million from the allowance for loan losses to accrued and other liabilities      to establish a specific reserve  associated with  our  commercial  leasing portfolio sale and related recourse      obligations for certain leases sold.               The following table is a summary of the allocation of the allowance for loan losses for the five years ended December 31, 2005:                                                    2005              2004              2003              2002               2001                                           ----------------  ----------------  ----------------   ---------------    ---------------                                                    Percent           Percent           Percent           Percent            Percent                                                      of                of                of                of                 of                                                   Category          Category          Category          Category           Category                                                      of                of                of                of                 of                                                     Loans             Loans             Loans             Loans              Loans                                                      to                to                to                to                 to                                                     Total             Total             Total             Total              Total                                            Amount   Loans    Amount   Loans    Amount   Loans    Amount   Loans     Amount   Loans                                            ------   -----    ------   -----    ------   -----    ------   -----     ------   -----                                                                  (dollars expressed in thousands)             Commercial, financial    and agricultural..................     $ 39,245  23.03%  $ 46,195   25.57% $ 37,142   26.42%  $34,915   26.56%   $40,161   28.34% Real estate construction    and development...................       32,638  22.28     38,525   21.48    26,782   19.97    22,667   18.22     21,598   17.65 Real estate mortgage:    One-to-four family       residential loans..............       10,526  17.29      8,466   14.19     9,684   15.23     7,913   12.79      5,349   14.76    Multi-family residential loans....           67   2.05         20    1.67       186    2.03        32    2.07         81    2.75    Commercial real estate loans......       51,199  30.08     55,922   34.01    36,632   31.20    28,477   30.13     25,167   27.71 Lease financing......................          315   0.04        628    0.10     4,830    1.26     3,649    2.33      3,062    2.75 Consumer and installment.............          757   0.74        617    0.81       668    1.15       703    1.46        937    2.26 Loans held for sale..................          583   4.49        334    2.17       527    2.74     1,083    6.44        809    3.78                                           -------- ------   --------  ------  --------  ------   -------  ------    -------  ------      Total...........................     $135,330 100.00%  $150,707  100.00% $116,451  100.00%  $99,439  100.00%   $97,164  100.00%                                           ======== ======   ========  ======  ========  ======   =======  ======    =======  ======   Deposits           Deposits are the primary  source of funds for First Bank.  Our deposits consist  principally  of core deposits  from our local market  areas,  including individual and corporate customers.           The following table sets forth the  distribution of our average deposit accounts for the years indicated and the weighted average interest rates on each category of deposits:                                                                           Year Ended December 31,                                      ------------------------------------------------------------------------------------------                                                  2005                          2004                           2003                                      ---------------------------  ------------------------------   ----------------------------                                                   Percent                       Percent                        Percent                                                     of                            of                            of                                         Amount   Deposits   Rate    Amount     Deposits    Rate      Amount   Deposits    Rate                                         ------   --------   ----    ------     --------    ----      ------   --------    ----                                                                 (dollars expressed in thousands)            Noninterest-bearing demand   deposits.........................  $1,257,277    17.45%     --% $1,100,072     17.83%      --%   $1,007,400    16.64%     --%  Interest-bearing demand deposits...     905,613    12.57    0.49     856,765     13.89     0.41       852,104    14.08    0.64 Savings deposits...................   2,135,156    29.64    1.39   2,175,425     35.27     0.93     2,147,573    35.47    1.09 Time deposits .....................   2,906,601    40.34    3.21   2,036,323     33.01     2.43     2,046,741    33.81    2.65                                      ----------   ------    ====  ----------    ------     ====    ----------   ------    ====       Total average deposits.......  $7,204,647   100.00%         $6,168,585    100.00%            $6,053,818   100.00%                                      ==========   ======          ==========    ======             ==========   ======   Capital and Dividends           Historically,  we have accumulated  capital to support our acquisitions by retaining  most of our earnings.  We pay  relatively  small  dividends on our Class A convertible,  adjustable rate preferred stock and our Class B adjustable rate preferred stock,  totaling  $786,000 for the years ended December 31, 2005, 2004 and 2003.            Management believes as of December 31, 2005 and 2004, First Bank and we were "well  capitalized," as defined in regulations adopted pursuant to the FDIC Improvement Act of 1991. First Bank's and our actual and required capital ratios are further described in Note 21 to our Consolidated Financial Statements.           As of December 31, 2005, we had six statutory and business  trusts that were  created for the sole purpose of issuing  trust  preferred  securities.  As further described in Note 12 to our Consolidated Financial Statements,  the sole assets of the statutory  and business  trusts are our  subordinated  debentures. Initially, the trusts served as financing subsidiaries, however, as discussed in Note 1 to our  Consolidated  Financial  Statements,  on December  31,  2003,  we implemented  Financial Accounting  Standards Board, or FASB,  Interpretation No. 46,  Consolidation of Variable Interest  Entities,  an interpretation of ARB No. 51,  which  resulted in the  deconsolidation  of these  financing  subsidiaries. Consequently,  the trusts now serve as affiliated statutory and business trusts. The  implementation  of  this  Interpretation  had  no  material  effect  on our consolidated financial position or results of operations.           A summary of the outstanding  trust preferred  securities issued by our affiliated   statutory  and  business  trusts,  and  our  related   subordinated debentures  issued  to the  respective  trusts  in  conjunction  with the  trust preferred securities offerings as of December 31, 2005, is as follows:                                                                                              Preferred     Subordinated             Name of Trust                 Date Formed            Type of Offering         Securities     Debentures             -------------                 -----------            ----------------         ----------     ----------           First Preferred Capital Trust III    November 2001         Publicly Underwritten      55,200,000     56,907,250     First Bank Capital Trust              April 2002             Private Placement        25,000,000     25,774,000     First Bank Statutory Trust            March 2003             Private Placement        25,000,000     25,774,000     First Preferred Capital Trust IV     January 2003          Publicly Underwritten      46,000,000     47,422,700     First Bank Statutory Trust II       September 2004           Private Placement        20,000,000     20,619,000     First Bank Statutory Trust III       November 2004           Private Placement        40,000,000     41,238,000            For regulatory  reporting purposes,  the trust preferred securities are eligible for inclusion,  subject to certain limitations,  in our Tier 1 capital. As of  December  31,  2005,  there were no  limitations  on the trust  preferred securities eligible for inclusion in our Tier 1 capital.  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 Federal Home Loan Banks and other borrowings, including  our term loan and our  revolving  credit line.  The  aggregate  funds acquired from these sources were $1.72 billion and $1.42 billion at December 31, 2005 and 2004, 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 December 31, 2005:                                                                   Certificates of Deposit      Other                                                                  of $100,000 or More     Borrowings        Total                                                                  -------------------     ----------        -----                                                                         (dollars expressed in thousands)               Three months or less....................................    $  354,323            204,874          559,197          Over three months through six months....................       165,291              9,000          174,291          Over six months through twelve months...................       314,491             14,000          328,491          Over twelve months......................................       242,803            411,300          654,103                                                                      ----------            -------        ---------               Total..............................................    $1,076,908            639,174        1,716,082                                                                      ==========            =======        =========             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 December 31, 2005 and 2004, First Bank's borrowing  capacity under the agreement was approximately $743.6 million and $778.7 million,  respectively. In addition, First Bank's borrowing  capacity through its relationship  with the Federal Home Loan Bank was  approximately  $679.3  million and $505.2 million at December 31, 2005 and 2004,  respectively.  Exclusive of the Federal Home Loan Bank  advances outstanding  of $39.3  million and $35.6  million at December 31, 2005 and 2004, respectively,  which  represent  advances  assumed in  conjunction  with various acquisitions,  First  Bank  had  no  amounts  outstanding  under  its  borrowing arrangement with the Federal Home Loan Bank at December 31, 2005 and 2004.           In addition  to our owned  banking  facilities,  we have  entered  into long-term leasing  arrangements to support our ongoing activities.  The required payments under such commitments and other  obligations at December 31, 2005 were as follows:                                                        Less Than          1-3          3-5        Over                                                       1 Year          Years        Years      5 Years       Total                                                     ----------       ------        -----      -------       -----                                                                      (dollars expressed in thousands)                 Operating leases........................   $   11,356       17,867       12,993       18,231        60,447          Certificates of deposit (1).............    2,270,737      720,393      137,066       25,978     3,154,174          Other borrowings........................      207,874      314,500       15,800        1,000       539,174          Notes payable...........................       20,000       80,000           --           --       100,000          Subordinated debentures.................           --           --           --      215,461       215,461          Other contractual obligations...........        1,288          263           18           19         1,588                                                     ----------    ---------      -------      -------     ---------               Total..............................   $2,511,255    1,133,023      165,877      260,689     4,070,844                                                     ==========    =========      =======      =======     =========          -------------------------          (1) Amounts exclude the related interest expense accrued on these obligations as of December 31, 2005.            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 the interest  on the  subordinated  debentures  that  we  issued  to our  affiliated statutory and business financing trusts.  Critical Accounting Policies           Our  financial  condition  and results of  operations  presented in our Consolidated  Financial  Statements,  accompanying  notes  to  our  Consolidated Financial  Statements,  selected consolidated and other financial data appearing elsewhere in this report, and management's  discussion and analysis of financial condition and results of operations  are, to a large degree,  dependent upon our accounting  policies.  The selection and application of our accounting  policies involve judgments, estimates and uncertainties that are susceptible to change.           We have  identified the following  accounting  policies that we believe are the most  critical  to the  understanding  of our  financial  condition  and results of operations.  These critical accounting policies require  management's most  difficult,  subjective  and  complex  judgments  about  matters  that  are inherently uncertain. In the event that different assumptions or conditions were to prevail,  and depending upon the severity of such changes, the possibility of a materially different financial condition and/or results of operations could be a reasonable  likelihood.  The impact and any  associated  risks  related to our critical accounting policies on our business operations is discussed  throughout "--Management's  Discussion  and Analysis of Financial  Condition and Results of Operations,"  where such  policies  affect our reported  and expected  financial results. A detailed  discussion on the application of these and other accounting policies  is  summarized  in  Note 1 to our  Consolidated  Financial  Statements appearing elsewhere in this report.           Loans and Allowance for Loan Losses.  We maintain an allowance for loan losses at a level we consider  adequate to provide  for  probable  losses in our loan  portfolio.  The  determination  of our allowance for loan losses  requires management to make  significant  judgments  and estimates  based upon a periodic analysis of our loans held for  portfolio and held for sale  considering,  among other factors,  current economic conditions,  loan portfolio  composition,  past loan loss experience,  independent appraisals, the fair value of underlying loan collateral,  our  customers'  ability  to repay  their  loans and  selected  key financial  ratios.  If actual events prove the estimates and assumptions we used in determining our allowance for loan losses were incorrect, we may need to make additional provisions for loan losses. See further discussion under "--Loans and Allowance for Loan Losses" and Note 4 to our Consolidated  Financial  Statements appearing elsewhere in this report.            Derivative  Financial  Instruments.  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 judgments and  assumptions  that are most critical to the application  of  this  critical   accounting  policy  are  those  affecting  the estimation of fair value and hedge effectiveness.  Fair value is based on quoted market prices where  available.  If quoted market prices are  unavailable,  fair value is based on quoted  market prices of  comparable  derivative  instruments. Factors that affect  hedge  effectiveness  include the initial  selection of the derivative that will be used as a hedge and how well changes in its cash flow or fair value have  correlated  and are expected to  correlate  with changes in the cash  flow or fair  value of the  underlying  hedged  asset or  liability.  Past correlation  is easy to  demonstrate,  but  expected  correlation  depends  upon projections and trends that may not always hold true within  acceptable  limits. Changes in  assumptions  and  conditions  could result in greater than  expected inefficiencies  that,  if large  enough,  could reduce or eliminate the economic benefits   anticipated  when  the  hedges  were  established  and/or  invalidate continuation of hedge accounting. Greater inefficiency and/or discontinuation of hedge  accounting  are likely to result in increased  volatility to our reported earnings.  For cash flow hedges,  this would result as more or all of the change in the fair value of the  affected  derivative  being  reported  in  noninterest income. For fair value hedges, there may be some impact on our reported earnings as the change in the fair value of the affected  derivative may not be offset by changes in the fair  value of the  underlying  hedged  asset or  liability.  See further  discussion under "--Effects of New Accounting  Standards,"  "--Interest Rate  Risk  Management"  and  Note 5 to our  Consolidated  Financial  Statements appearing elsewhere in this report.           Deferred Tax Assets. We recognize  deferred tax assets and deferred tax liabilities for the estimated future tax effects of temporary  differences,  net operating loss  carryforwards and tax credits.  We recognize deferred tax assets subject to management's  judgment based upon available evidence that realization is more likely than not. Our deferred tax assets are reduced, if necessary, by a deferred tax asset valuation allowance.  In the event that we determine we would not be able to realize all or part of our net deferred tax assets in the future, we would need to adjust the recorded  value of our  deferred  tax assets,  which would result in a direct  charge to our provision for income taxes in the period in which such determination is made. See further discussion under  "--Comparison of Results  of  Operations  for 2005 and 2004 -  Provision  for  Income  Taxes," "--Comparison  of Results of Operations for 2004 and 2003 - Provision for Income Taxes," and Note 13 to our Consolidated Financial Statements appearing elsewhere in this report.           Business   Combinations.   We  emphasize   acquiring   other  financial institutions as one means of achieving our growth objectives.  The determination of the fair value of the assets and liabilities  acquired in these  transactions as well as the returns on investment that may be achieved requires management to make  significant  judgments and estimates  based upon detailed  analyses of the existing and future  economic  value of such assets and  liabilities  and/or the related income streams,  including the resulting  intangible  assets.  If actual events prove the  estimates  and  assumptions  we used in  determining  the fair values of the acquired  assets and  liabilities or the projected  income streams were  incorrect,  we may need to make  additional  adjustments  to the  recorded values  of  such  assets  and  liabilities,  which  could  result  in  increased volatility to our reported earnings. In addition, we may need to make additional adjustments  to the recorded  value of our  intangible  assets,  which  directly impacts  our  regulatory   capital   levels.   See  further   discussion   under "--Acquisitions"  and Note 2, Note 8 and Note 21 to our  Consolidated  Financial Statements appearing elsewhere in this report.  Effects of New Accounting Standards           In November 2003, the Emerging  Issues Task Force,  or EITF,  reached a consensus  on certain  disclosure  requirements  under  EITF Issue No 03-1,  The Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to  Certain Investments.  The new disclosure  requirements  apply to investments in debt and marketable equity securities that are accounted for under Statement of Financial Accounting  Standards,  or SFAS, No. 115,  Accounting for Certain Investments in Debt and Equity Securities, and SFAS No. 124, Accounting for Certain Investments Held by  Not-for-Profit  Organizations.  Effective for fiscal years ending after    December 15, 2003,  companies are required to disclose information about debt or marketable  equity  securities  with market  values below  carrying  values.  We previously adopted the disclosure  requirements of EITF Issue No. 03-1. In March 2004, the EITF came to a consensus regarding EITF 03-1.  Securities in scope are those  subject to SFAS No. 115 and SFAS No. 124.  The EITF  adopted a three-step model that requires management to determine if impairment exists, decide whether it is other than temporary, and record  other-than-temporary losses in earnings. In  September  2004,  the FASB  approved  issuing a Staff  Position to delay the requirement to record impairment losses under EITF 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 03-1, the Consensus that provides  guidance for  determining  whether an  investment's impairment is other than  temporary and should be recognized in income.  On June 29, 2005, the FASB directed the EITF to issue EITF Issue 03-1-a,  Implementation Guidance for the  Application  of Paragraph 16 of EITF Issue No. 03-1, as final. On November 3, 2005, the FASB issued FASB Staff Position,  or FSP, FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain  Investments.  The  FSP  addresses  determining  when an  investment  is considered  impaired and whether that  impairment is other than  temporary,  and measuring an impairment  loss. The FSP also  addresses the  accounting  after an entity  recognizes  an  other-than-temporary  impairment,  and requires  certain disclosures  about  unrealized  losses  that the  entity  did not  recognize  as other-than-temporary  impairments.  The FSP is effective for  reporting  periods beginning after December 15, 2005. We have evaluated the requirements of FSP FAS 115-1 and FAS  124-1 and do not  expect  them to have a  material  effect on our financial condition or results of operations.           In  December  2003,  the  FASB  issued  FASB   Interpretation  No.  46, Consolidation of Variable Interest Entities,  an interpretation of ARB No. 51, a revision to FASB  Interpretation  No. 46,  Consolidation  of  Variable  Interest Entities issued in January 2003. This Interpretation is intended to achieve more consistent  application of consolidation  policies to variable interest entities and,  thus to  improve  comparability  between  enterprises  engaged  in similar activities  even if some of those  activities  are  conducted  through  variable interest  entities.  The  provisions  of this  Interpretation  are effective for financial  statements issued for fiscal years ending after December 15, 2003. We have several statutory and business trusts that were formed for the sole purpose of issuing trust preferred  securities.  As further described in Note 1 and Note 12 to our Consolidated  Financial Statements appearing elsewhere in this report, on December 31, 2003, we  implemented  FASB  Interpretation  No. 46, as amended, which resulted in the  deconsolidation of our statutory and business trusts. The implementation of this Interpretation had no material effect on our consolidated financial position or results of operations.  Furthermore, on March 1, 2005, the Federal  Reserve  adopted a final  rule,  Risk-Based  Capital  Standards:  Trust Preferred  Securities  and the  Definition  of  Capital,  which  allows  for the continued limited inclusion of trust preferred  securities in Tier I capital. As further discussed in Note 21 to our Consolidated  Financial Statements,  we have evaluated the impact of the final rule on our financial condition and results of operations,  and determined the  implementation  of the Federal  Reserve's final rules  that will be  effective  in March  2009  would  reduce  our bank  holding company's  Tier I capital  (to  risk-weighted  assets)  and Tier I  capital  (to average  assets) to 8.47% and 7.74%,  respectively,  as of December 31, 2005. In October 2005, the Federal Reserve,  in conjunction with various other regulatory agencies,  announced  plans  to  consider  various  proposed  revisions  to U.S. risk-based capital standards that would enhance risk sensitivity of the existing framework.  The comment  period ended in January 2006.  We are awaiting  further guidance from the Board pending the outcome of the newly proposed revisions, and are continuing to evaluate the proposed  changes and their overall impact on our financial condition and results of operations.           In December 2003,  the Accounting  Standards  Executive  Committee,  or AcSEC, issued Statement of Position,  or SOP, 03-3, Accounting for Certain Loans or Debt  Securities  Acquired in a  Transfer,  effective  for loans  acquired in fiscal years beginning after December 15, 2004. The scope of SOP 03-3 applies to problem loans that have been acquired, either individually in a portfolio, or in an acquisition.  These loans must have evidence of credit  deterioration and the purchaser must not expect to collect  contractual  cash flows.  SOP 03-3 updates Practice  Bulletin No. 6,  Amortization of Discounts on Certain  Acquired Loans, for more recently issued literature,  including FASB's SFAS No. 114,  Accounting by Creditors for  Impairment  of a Loan;  SFAS No. 115,  Accounting  for Certain Investments  in Debt and Equity  Securities;  and SFAS No. 140,  Accounting  for Transfers and Servicing of Financial Assets and  Extinguishments of Liabilities. Additionally,  it addresses SFAS No. 91, Accounting for  Nonrefundable  Fees and    Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases,  which  requires that  discounts be recognized as an adjustment of yield over a loan's life.  SOP 03-3 states that an  institution  may no longer display discounts on purchased  loans within the scope of SOP 03-3 on the balance  sheet and may not carry over the allowance for loan losses. For those loans within the scope of SOP 03-3,  this statement  clarifies that a buyer cannot carry over the seller's  allowance  for loan  losses for the  acquisition  of loans with credit deterioration.  Loans acquired with evidence of  deterioration in credit quality since  origination  will need to be  accounted  for under a new method  using an income  recognition model. This prohibition also applies to purchases of problem loans not  included in a purchase  business  combination,  which  would  include syndicated  loans  purchased  in the  secondary  market  and loans  acquired  in portfolio purchases. We implemented SOP 03-3 in conjunction with our acquisition of FBA, which we completed on April 29, 2005, our acquisition of IBOC,  which we completed on September 30, 2005, and our  acquisition of NSB, which we completed on October 31, 2005.  At  September  30,  2005,  the carrying  value of acquired problem loans that were being  accounted for under SOP 03-3 totaled $1.8 million in  aggregate.  During  the  fourth  quarter of 2005,  these  loans were  either charged-off due to further credit  deterioration or were transferred to our held for sale  portfolio  and are now  being  accounted  for at the  lower of cost or market,  less  applicable  selling  costs.  Consequently,  we did not  have  any acquired  problem loans that are being  accounted for under SOP 03-3 at December 31,  2005.  The  implementation  of  SOP  03-3,  as  it  pertains  to  our  2005 transactions,  did not have a  material  impact on our  financial  condition  or results of  operations.  We will  continue to evaluate the impact of SOP 03-3 on our financial  condition and results of operations as it relates to our recently announced  acquisitions  described in Note 2 and in Note 25 to our  Consolidated Financial Statements and future transactions.           In July  2004,  the  FASB's  Derivatives  Implementation  Group  issued guidance on SFAS No. 133 Implementation  Issue No. G25, Cash Flow Hedges:  Using the First-Payments-Received  Technique in Hedging the Variable Interest Payments on a Group of  Non-Benchmark-Rate-Based  Loans,  or DIG Issue G25. DIG Issue G25 clarifies  the  FASB's  position  on  the  ability  of  entities  to  hedge  the variability in interest  receipts or overall changes in cash flows on a group of prime-rate-based   loans.   The   new   guidance   permits   the   use   of  the first-payments-received   technique  in  a  cash  flow  hedge  of  the  variable prime-rate-based  or other variable  non-benchmark-rate-based  interest payments for a rolling  portfolio  of  prepayable  interest-bearing  loans,  provided the hedging  relationship meets all other conditions in SFAS No. 133, Accounting for Derivative  Instruments and Hedging Activities,  for cash flow hedge accounting. If a  pre-existing  cash flow hedging  relationship  has  identified  the hedged transactions  in a manner  inconsistent  with the guidance in DIG Issue G25, the hedging  relationship  must be  de-designated  at the effective date, as further discussed  below,  and any  derivative  gains or  losses  in  accumulated  other comprehensive income related to the de-designated  hedging  relationships should be accounted for under paragraphs 31 and 32 of SFAS No. 133. We had pre-existing cash flow hedging  relationships that were inconsistent with the guidance in DIG Issue G25. As of September 30, 2004, our accumulated other comprehensive  income included a $4.1 million net gain  attributable to these  pre-existing  cash flow hedging  relationships.  DIG  Issue  G25 is  effective  for the  fiscal  quarter beginning   after  August  9,  2004,   and  shall  be  applied  to  all  hedging relationships  as of the effective  date. On October 1, 2004, we implemented DIG Issue G25 and de-designated all of our specific cash flow hedging  relationships that were  inconsistent  with the guidance in DIG Issue G25.  Consequently,  the $4.1  million  net gain  associated  with the  de-designated  cash flow  hedging relationships  is being  amortized  over the remaining  lives of the  respective hedging relationships, which range from approximately six months to three years. We elected to  prospectively  re-designate  new cash flow hedging  relationships based upon minor  revisions  to the  underlying  hedged items as required by the guidance in DIG Issue G25.  The  implementation  of DIG Issue G25 did not and is not expected to have a material  impact on our  financial  position,  results of operations or our interest rate risk management program.           In May 2005,  the FASB  issued SFAS No. 154 --  Accounting  Changes and Error  Corrections.  SFAS No.  154,  a  replacement  of APB  Opinion  No.  20 -- Accounting  Changes  and FASB  SFAS No. 3 --  Reporting  Accounting  Changes  in Interim Financial Statements,  requires retrospective  application for voluntary changes in accounting  principles  unless it is impracticable to do so. SFAS No. 154 is effective  for  accounting  changes and  corrections  of errors in fiscal years  beginning  after  December 15, 2005.  Early  application is permitted for accounting changes and corrections of errors during fiscal years beginning after June 1, 2005.  We have  evaluated  the  requirements  of SFAS No. 154 and do not expect it to have a material  effect on our  financial  condition  or results of operations.              In July 2005, the FASB issued an exposure  draft titled  Accounting for Uncertain Tax  Positions,  an  Interpretation  of SFAS No. 109 -- Accounting for Income Taxes.  This exposure draft  addresses  accounting for tax  uncertainties that  arise  when a  position  that an  entity  takes on its tax  return  may be different  from the position that the taxing  authority  may take,  and provides guidance  about the accounting  for tax benefits  associated  with uncertain tax positions, classification of a liability recognized for those tax positions, and interim reporting considerations. The proposed interpretation is not expected to be issued until the second  quarter of 2006.  We are  currently  evaluating  the requirements  of the exposure  draft to determine  their impact on our financial condition and results of operations.
The  quantitative  and  qualitative  disclosures  about market risk are included  under "Item 7 -  Management's  Discussion  and  Analysis of  Financial Condition and Results of Operations - Interest Rate Risk  Management"  appearing on pages 38 through 40 of this report.  Effects of Inflation           Inflation  affects  financial  institutions  less than  other  types of companies.   Financial   institutions  make  relatively  few  significant  asset acquisitions that are directly affected by changing prices.  Instead, the assets and liabilities are primarily monetary in nature.  Consequently,  interest rates are more  significant  to the  performance  of financial  institutions  than the effect of general  inflation  levels.  While a  relationship  exists between the inflation  rate and interest  rates,  we believe  this is  generally  manageable through our asset-liability management program.
The  financial  statements  and  supplementary  data appear on pages 64 through 108 of this report.  Item  9. Changes  in  and  Disagreements  with  Accountants  on  Accounting  and          Financial Disclosure           None.
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 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 fourth quarter  of 2005 that have  materially  affected,  or are  reasonably  likely to materially affect, the Company's control over financial reporting.
None.                                           PART III
Board of Directors and Committees of the Board           We are a  "controlled  company"  as defined in Rule  4350(c)(5)  of the NASDAQ  Marketplace  Rules  because more than 50% of our voting power is held by James F.  Dierberg,  our Chairman of the Board,  as more fully  discussed  under "Item 12 - Security  Ownership of Certain  Beneficial  Owners and Management and Related  Stockholder  Matters."  Therefore,   we  are  not  subject  to  certain requirements of Rule 4350.           Our Board of Directors  currently consists of seven members,  following the  resignation  of Mr. Hal J. Upbin on January 27, 2006, as further  discussed below. The Board determined that Messrs. Gundaker, Steward, Upbin and Yaeger are independent. Each of our directors identified in the following table was elected or  appointed  to serve a one-year  term and until his  successor  has been duly qualified for office.                                            Director               Principal Occupation(s) During Last Five Years            Name                 Age      Since                    and Directorships of Public Companies            ----                 ---      -----                    -------------------------------------       James F. Dierberg (1)            68      1979      Chairman of the Board of Directors of First Banks, Inc. since 1988;                                                    Chief  Executive  Officer of First Banks,  Inc.  from 1988 to April                                                    2003;  President  of First  Banks,  Inc. from 1979 to 1992 and from                                                    1994 to October 1999; Chairman of the Board of Directors, President                                                    and Chief Executive  Officer of First Banks America,  Inc.from 1994                                                    until its merger with First Banks, Inc. in December 2002.  Allen H. Blake                   63      1988      President of First Banks,  Inc. since October 1999; Chief Executive                                                    Officer of First  Banks,  Inc.  since April 2003;  Chief  Financial                                                    Officer of First Banks,  Inc. from 1984 to September  1999 and from                                                    May 2001 to August  31,  2005;  Chief  Operating  Officer  of First                                                    Banks,  Inc. from 1998 to July 2002;  Director of First Banks, Inc.                                                    since 1988;  Director,  Executive Vice  President,  Chief Operating                                                    Officer and Secretary of First Banks America,  Inc. from 1998 until                                                    its  merger  with  First  Banks,   Inc.  in  December  2002;  Chief                                                    Financial  Officer  of  First  Banks  America,  Inc.  from  1994 to                                                    September 1999 and from May 2001 until December 2002.  Terrance M. McCarthy             51      2003      Senior  Executive  Vice  President and Chief  Operating  Officer of                                                    First Banks, Inc. since August 2002;  Director of First Banks, Inc.                                                    since April 2003;  Director of First Banks America,  Inc. from July                                                    2001 until its merger with First  Banks,  Inc.  in  December  2002;                                                    Executive Vice President of First Banks America,  Inc. from 1999 to                                                    December  2002;  Chairman of the Board of  Directors  of First Bank                                                    since January 2003;  President and Chief Executive Officer of First                                                    Bank  since  August  2002;  Chairman  of the  Board  of  Directors,                                                    President and Chief Executive  Officer of First Bank and Trust from                                                    April  2000  until its  merger  with and into  First  Bank in March                                                    2003;  Director of First Bank Business Capital,  Inc.  (formerly FB                                                    Commercial  Finance,  Inc.)  since  March  2003;  Chairman  of  the                                                    Members,  President and Chief  Executive  Officer of Small Business                                                    Loan Source LLC since September 2004.  Steven F. Schepman (1)           33      2004      Director  of  First  Banks,  Inc.  since  July  2004;  Senior  Vice                                                    President and Chief  Financial  Officer of First Banks,  Inc. since                                                    August 31, 2005;  Director of First Bank from April 2001 to October                                                    2004;  Senior Vice President - Private Banking,  Wealth  Management                                                    and Trust  Services of First Bank from  November 2000 to August 31,                                                    2005;  From May 1999 to November 2000, Mr. Schepman was employed in                                                    various other senior management capacities with First Banks, Inc.  Gordon A. Gundaker (2)           72      2001      President and Chief Executive  Officer of Coldwell Banker Gundaker,                                                    a  full-service  real  estate  brokerage  company,  in  St.  Louis,                                                    Missouri.       David L. Steward (2)             54      2000      Chairman  of the  Board  of  Directors  of  World  Wide  Technology                                                    Holding Co., Inc., an electronic  procurement and logistics company                                                    in the information  technology  industry,  in St. Louis,  Missouri;                                                    Director   of   Centene   Corporation,   Civic   Progress   of  St.                                                    Louis,  the St. Louis  Regional  Commerce  and Growth  Association,                                                    the Regional Business Council,  Webster  University,  Barnes Jewish                                                    Hospital,  St. Louis Science Center,  the United Way of Greater St.                                                    Louis,  Greater St.  Louis Area Council - Boy Scouts of America and                                                    Harris-Stowe  State College African  American  Business  Leadership                                                    Council.  Hal J. Upbin (2)(4)              67     2001(4)    Director  of  Kellwood  Company,  a  manufacturer  and  marketer of                                                    apparel and related soft goods,  in St.  Louis,  Missouri from 1995                                                    to  January  31,  2006;  Chairman  of the  Board  of  Directors  of                                                    Kellwood  Company  from 1999 to January 31, 2006;  Chief  Executive                                                    Officer of Kellwood  Company  from  December  1997 to June 2, 2005;                                                    President of Kellwood Company from 1994 to December 2003;  Director                                                    of Brown Shoe Company.  Douglas H. Yaeger (2)(3)         57      2000      Chairman of the Board of Directors,  President and Chief  Executive                                                    Officer  of The  Laclede  Group,  Inc.,  an exempt  public  utility                                                    holding company in St. Louis,  Missouri since 2001; Chairman of the                                                    Board of  Directors,  President  and  Chief  Executive  Officer  of                                                    Laclede Gas Company  since 1999;  President  of Laclede Gas Company                                                    since 1997;  Director  and Chief  Operating  Officer of Laclede Gas                                                    Company from 1997 to 1999;  Executive  Vice  President - Operations                                                    and  Marketing of Laclede Gas Company  from 1995 to 1997;  Director                                                    and  immediate  past  Chairman of the Board of Directors of the St.                                                    Louis  Regional  Commerce  and  Growth  Association;  Director  and                                                    immediate  past  Chairman of Southern Gas  Association;  Trustee of                                                    the St. Louis Science Center;  Director of Barnes-Jewish  Hospital,                                                    Greater  St.  Louis  Area  Council  - Boy  Scouts of  America,  The                                                    Municipal  Theatre  Association  of St.  Louis,  the  United Way of                                                    Greater  St.  Louis  and  Webster  University;  President  of Civic                                                    Progress. - ----------------------------------- (1) Mr. Steven F. Schepman is the son-in-law of Mr. James F. Dierberg. (2) Member of the Audit Committee. (3) Mr. Douglas H. Yaeger  serves  as Chairman of the Audit Committee and the audit committee financial expert. (4) Mr. Hal J. Upbin resigned his positions as a Director of the Board and  as an  independent  member  of  the     Audit Committee at the regular meeting of the First Banks Board of Directors held on January 27, 2006.   Committees and Meetings of the Board of Directors           Three  members of our Board of Directors  currently  serve on the Audit Committee,  all of whom the Board of  Directors  determined  to be  independent; there are no other  committees  of the Board of Directors.  The Audit  Committee assists  the  Board  of   Directors   in   fulfilling   the  Board's   oversight responsibilities  with respect to the quality and integrity of the  consolidated financial  statements,  financial  reporting  process  and  systems of  internal controls.  The Audit Committee also assists the Board of Directors in monitoring the independence and performance of the independent auditors, the internal audit department and the operation of ethics  programs.  The Audit Committee  operates under a written charter adopted by the Board of Directors.           The members of the Audit Committee as of March 27, 2006 were Mr. Gordon A. Gundaker,  Mr. David L. Steward and Mr. Douglas H. Yaeger,  who serves as the Chairman of the Audit Committee and the audit  committee  financial  expert.  As previously  discussed,  Mr. Hal J. Upbin resigned his positions as a Director of the Board and as an  independent  member of the Audit  Committee  at the regular meeting of our Board of Directors held on January 27, 2006.  Audit Committee Report           The Audit  Committee is  responsible  for  oversight  of our  financial reporting  process on behalf of the Board of Directors.  Management  has primary responsibility for our financial statements and financial  reporting,  including internal controls, subject to the oversight of the Audit Committee and the Board of Directors.  In fulfilling its responsibilities,  the Audit Committee reviewed the audited consolidated  financial statements with management and discussed the acceptability  of  the  accounting   principles  used,  the   reasonableness  of significant judgments made and the clarity of the disclosures.            The Audit  Committee  reviewed with the Independent  Registered  Public Accounting  Firm who is responsible for planning and carrying out a proper audit and  expressing  an  opinion  on  the  conformity  of our  audited  consolidated financial statements with U.S. generally accepted accounting  principles,  their judgments as to the acceptability of the accounting  principles we use, and such other  matters as are  required  to be  discussed  with the Audit  Committee  by Statement on Auditing Standards No. 61, Communications with Audit Committees, as amended.  In  addition,  the  Audit  Committee  discussed  with the  Independent Registered  Public  Accounting  Firm its  independence  from  management and the Company,  including the matters  required by Standard No. 1 of the  Independence Standards  Board,  and the  Audit  Committee  considered  the  compatibility  of non-audit services provided by the Independent Registered Public Accounting Firm with the firm's independence. KPMG LLP has provided the Audit Committee with the written  disclosures  and letter  required by Standard No. 1 of the  Independent Standards Board.           The Audit  Committee  discussed with our Internal Audit  Department and Independent  Registered  Public  Accounting Firm the overall scope and plans for their  respective  audits.  The  Audit  Committee  met with the  Internal  Audit Department and Independent  Registered  Public  Accounting Firm with and without management  present  to  discuss  the  results  of  their  examinations,   their evaluations  of our internal  controls and the overall  quality of our financial reporting.           In reliance on the reviews and discussions referred to above, the Audit Committee  recommended to the Board of Directors  that the audited  consolidated financial statements be included in the Annual Report on Form 10-K as of and for the year ended December 31, 2005 for filing with the SEC.                             Audit Committee                            ---------------                             Douglas H. Yaeger, Chairman of the Audit Committee                            Gordon A. Gundaker                            David L. Steward  Code of Ethics for Principal Executive Officer and Financial Professionals           The Board of  Directors  has  approved a Code of Ethics  for  Principal Executive  Officer  and  Financial   Professionals  that  covers  the  Principal Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the Chief Credit Officer,  the Chief Investment  Officer,  the Senior Vice President and Controller,  the Senior Vice President - Director of Taxes,  the Senior Vice President - Director of Management Accounting,  and all professionals serving in a Corporate Finance, Accounting, Treasury, Tax or Investor Relations role. These individuals  are also subject to the policies  and  procedures  adopted by First Banks that  govern the conduct of all of its  employees.  The Code of Ethics for Principal  Executive  Officer  and  Financial  Professionals  is  included as an exhibit to this Annual Report on Form 10-K.  Code of Conduct for Employees, Officers and Directors           The Board of Directors has approved a Code of Conduct applicable to all employees,  officers and  directors of First Banks that  addresses  conflicts of interest,  honesty and fair dealing,  accounting and auditing matters, political activities and application  and enforcement of the Code of Conduct.  The Code of Conduct is available on First Banks' website,  www.firstbanks.com,  under "About us."                                           ------------------        Executive Officers           Our  executive  officers,  each of whom was  elected  to the  office(s) indicated by the Board of Directors, as of March 27, 2006, were as follows:                                                  Current First Banks                     Principal Occupation(s)           Name                 Age              Office(s) Held                       During Last Five Years           ----                 ---              --------------                       ----------------------      James F. Dierberg              68    Chairman of the Board of Directors.     See "Item 10 - Directors  and  Executive                                                                              Officers  of the  Registrant - Board  of                                                                              Directors."  Allen H. Blake                 63    President,  Chief Executive  Officer    See "Item 10 - Directors  and  Executive                                      and Director.                           Officers  of the  Registrant  - Board of                                                                              Directors."  Terrance M. McCarthy           51    Senior   Executive  Vice  President,    See "Item 10 - Directors  and  Executive                                      Chief    Operating    Officer    and    Officers  of the  Registrant  - Board of                                      Director;  Chairman  of the Board of    Directors."                                      Directors,   President   and   Chief                                      Executive Officer of First Bank.  Steven F. Schepman             33    Senior   Vice    President,    Chief    See "Item 10 - Directors  and  Executive                                      Financial Officer and Director.         Officers  of the  Registrant  - Board of                                                                              Directors."  Russell L. Goldammer           49    Executive  Vice  President and Chief    Executive   Vice   President  and  Chief                                      Information Officer.                    Information   Officer   since   November                                                                              2004;  Chief   Information   Officer  of                                                                              Outsourcing Solutions,  Inc., St. Louis,                                                                              Missouri,  from  April  2001 to  October                                                                              2004;  Senior  Vice  President  of  U.S.                                                                              Bank  in  Milwaukee,   Wisconsin,   from                                                                              October 1999 to April 2001.  Daniel W. Jasper               60    Executive  Vice  President and Chief    Executive   Vice   President  and  Chief                                      Credit    Officer;    Director   and    Credit  Officer  of  First  Banks,  Inc.                                      Executive  Vice  President  of First    since   October   2003;    Senior   Vice                                      Bank.                                   President   and  Acting   Chief   Credit                                                                              Officer of First  Banks,  Inc.  from May                                                                              2003  to  October   2003;   Senior  Vice                                                                              President  -  Credit  Administration  of                                                                              First Banks, Inc. from 1995 to May 2003.  F. Christopher McLaughlin      52    Executive    Vice     President  and    Executive Vice President and Director of                                      Director  of  Sales,  Marketing  and    Sales, Marketing and Products  of  First                                      Products;  Director  of First  Bank.    Banks,Inc.   since    September    2003;                                                                              Director  of  First Bank  since  October                                                                              2004; Executive Vice  President-Personal                                                                              Division,  HSBC Bank USA in Buffalo, New                                                                              York from 1998 to June 2002; Independent                                                                              Consultant  from  July  2002  to  August                                                                              2003.  Mary P. Sherrill               51    Executive    Vice    President   and    Executive  Vice  President  and Director                                      Director of Operations;  Director of    of  Operations  of  First  Banks,   Inc.                                      First Bank.                             since  April  2003;  Director  of  First                                                                              Bank  since  April  2003: Director, Vice                                                                              Chairman  and  Chief of Bank Operations,                                                                              Southwest Bank  in  St. Louis,  Missouri                                                                              from April 1999 to March 2003.
The   following   table  sets  forth  certain   information   regarding compensation earned by the named executive officers for the years ended December 31, 2005, 2004 and 2003:                                                     SUMMARY COMPENSATION TABLE                                                 --------------------------                                                                                                          All Other          Name and Principal Position(s)                           Year       Salary        Bonus    Compensation (1)          ------------------------------                           ----       ------        -----    ----------------       James F. Dierberg                                                 2005     $ 610,000          --         5,300 Chairman of the Board of Directors                                2004       610,000          --         6,200                                                                   2003       610,000          --         6,000  Allen H. Blake                                                    2005       448,800     154,800         5,300 President and Chief Executive Officer                             2004       426,000          --         4,200                                                                   2003       397,300          --         6,000  Terrance M. McCarthy                                              2005       395,000     170,000         5,300 Senior Executive Vice President and Chief Operating Officer       2004       367,500          --         4,200                                                                   2003       323,500          --         6,000  Daniel W. Jasper                                                  2005       231,300     100,000         5,600 Executive Vice President and Chief Credit Officer                 2004       209,500          --         4,500                                                                   2003       152,000      15,000         4,700  F. Christopher McLaughlin (2)                                     2005       199,300      70,000         5,300 Executive Vice President and Director of Sales, Marketing         2004       180,300      32,500        51,900 (3) and Products                                                      2003        55,100          --        29,000 (3) - ----------------------- (1) All other compensation  reported includes matching contributions to our 401(k) Plan for the year     indicated. (2) Mr. McLaughlin became an Executive Officer of the Company in September 2003. (3) All other compensation reportedfor Mr. McLaughlin in 2004 and 2003 includes $46,700 and $29,000,     respectively, associated  with a corporate relocation package. Additionally, for 2004, all other     compensation includes matching contributions to our 401(K) Plan of $5,000 and a single ownership     interest in the amount of $200 granted in Star Lane Trust, our former unit investment trust.   Compensation  of Directors.  Only those  directors who are neither our employees nor employees of any of our subsidiaries receive remuneration for their services as directors.  Such  non-employee  directors  (Messrs.  Gordon  Gundaker,  David Steward,  Hal Upbin and Douglas Yaeger)  received a fee of $3,000 for each Board meeting  attended and $1,000 for each Audit Committee  meeting attended in 2005. Messr. Yaeger also received a fee of $4,000 per calendar quarter for his service as Chairman of the Audit Committee, and Messrs. Gundaker, Steward and Upbin also received a fee of $3,000 per  calendar  quarter for their  service as members of the Audit Committee.  The Audit Committee is currently the only committee of our Board of  Directors.  Messrs.  Gundaker,  Steward,  Upbin  and  Yaeger  received $31,000, $31,000, $31,000 and $35,000,  respectively, in director's compensation in 2005.  Our  non-employee  directors are also eligible to  participate  in our nonqualified  deferred  compensation plan. As further discussed under "Item 10 - Directors  and  Executive  Officers of the  Registrant - Board of Directors  and Committees of the Board," Mr. Hal J. Upbin  resigned his positions as a Director of the Board and as an independent  member of the Audit Committee at the regular meeting of our Board of Directors held on January 27, 2006.           Our  executive   officers  that  are  also  directors  do  not  receive remuneration  other  than  salaries  and  bonuses  for  serving  on our Board of Directors.  Compensation Committee Interlocks and Insider Participation.  Messrs.  Dierberg, Blake,  McCarthy  and Schepman  serve as  executive  officers and members of our Board of Directors.  First Banks does not have a compensation committee, but its Board of Directors  performs the  functions of such a committee.  Except for the foregoing,  none of our executive officers served during 2005 as a member of the compensation  committee, or any other committee performing similar functions, or as a director of another entity,  any of whose  executive  officers or directors served on our Board of Directors.           See further information regarding transactions with related parties in Note 19 to our Consolidated Financial Statements appearing on pages 101 and 102 of this report.
The  following  table  sets  forth,  as  of  March  27,  2006,  certain information  with  respect to the  beneficial  ownership  of all  classes of our voting  capital stock by each person known to us to be the  beneficial  owner of more than five percent of the  outstanding  shares of the respective  classes of our stock:                                                                                                        Percent of                                                                         Number of                     Total                           Title of Class                                 Shares          Percent     Voting                          and Name of Owner                                Owned         of Class      Power                          -----------------                                -----         --------      -----  Common Stock ($250.00 par value) - --------------------------------           James F. Dierberg II Family Trust (1)........................     7,714.677 (2)     32.605%        *      Ellen C. Dierberg Family Trust (1)...........................     7,714.676 (2)     32.605         *      Michael J. Dierberg Family Trust (1).........................     4,255.319 (2)     17.985         *      Michael J. Dierberg Irrevocable Trust (1)....................     3,459.358 (2)     14.621         *      First Trust (Mary W. Dierberg and First Bank, Trustees) (1)..       516.830 (3)      2.184         *  Class A Convertible Adjustable Rate Preferred Stock - --------------------------------------------------- ($20.00 par value) - ------------------       James F. Dierberg, Trustee of the James F. Dierberg          Living Trust (1).........................................       641,082 (4)(5)     100%      77.7%  Class B Non-Convertible Adjustable Rate Preferred Stock - ------------------------------------------------------- ($1.50 par value) - -----------------       James F. Dierberg, Trustee of the James F. Dierberg          Living Trust (1).........................................       160,505 (5)        100%      19.4%  All executive officers and directors      other than Mr. James F. Dierberg      and members of his immediate family..........................             0              0%       0.0% - ---------------  *   Represents less than 1.0%. (1)  Each of the above-named trustees and beneficial owners are United States citizens, and the business      address for  each  such  individual  is  135 North Meramec,  Clayton,  Missouri 63105. Mr. James F.      Dierberg, our Chairman of  the  Board, and Mrs. Mary W. Dierberg, are husband and wife, and Messrs.      James F. Dierberg II,   Michael J. Dierberg   and  Mrs. Ellen D. Schepman,   formerly  Ms. Ellen C.      Dierberg, are their adult children. (2)  Due to the relationship between Mr. James F. Dierberg, his wife and their children, Mr. Dierberg is      deemed to share voting and investment power over these shares. (3)  Due to  the  relationship between Mr. James F. Dierberg,  his wife and First Bank,  Mr. Dierberg is      deemed to share voting and investment power over these shares. (4)  Convertible into common stock, based  on  the  appraised  value of the common  stock at the date of      conversion. Assuming an appraised value of the  common stock equal to the book value, the number of      shares of common stock into which the Class A Preferred Stock is convertible at  December  31, 2005      is 456, which shares are not included in the above table. (5)  Sole voting and investment power.
Outside  of normal  customer  relationships,  no  directors,  executive officers  or  shareholders  holding  over 5% of our  voting  securities,  and no corporations  or firms with  which such  persons  or  entities  are  associated, currently  maintain  or have  maintained  since the  beginning  of the last full fiscal  year,  any  significant  business  or  personal  relationship  with  our subsidiaries  or us, other than that which arises by virtue of such  position or ownership  interest in our subsidiaries or us, except as set forth in "Item 11 - Executive  Compensation  -  Compensation  of  Directors," or as described in the following paragraphs.           First  Bank  has had in the  past,  and may  have in the  future,  loan transactions  and related  banking  services in the ordinary  course of business with our directors or their  affiliates.  These loan transactions have been made 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.  First Bank does not extend  credit to our  officers or to officers of First  Bank,  except  extensions  of credit  secured by  mortgages  on  personal residences, loans to purchase automobiles and personal credit card accounts.           Certain  of  our   shareholders,   directors  and  officers  and  their respective  affiliates have deposit  accounts and related banking  services with First  Bank.  It is First  Bank's  policy not to permit any of its  officers  or directors or their  affiliates to overdraw their  respective  deposit  accounts. Deposit  account  overdraft  protection may be approved for persons under a plan whereby a credit  limit has been  established  in  accordance  with First Bank's standard credit criteria.           Transactions   with  related  parties,   including   transactions  with affiliated  persons and entities,  are described in Note 19 to our  Consolidated Financial Statements on pages 101 and 102 of this report.
Fees of Independent Registered Public Accounting Firm           During  2005 and 2004,  KPMG LLP served as our  Independent  Registered Public  Accounting Firm and provided  additional  services to our affiliates and us. The following table sets forth fees for professional audit services rendered by KPMG LLP for the audit of our  consolidated  financial  statements  and other audit services in 2005 and 2004:                                                                                          2005         2004                                                                                        ----         ----                Audit fees, excluding audit related fees (1).........................    $ 820,500      781,550            Audit related fees...................................................           --           --            Tax fees (2).........................................................      111,676       87,221            All other fees.......................................................           --           --                                                                                     ---------     --------                   Total.........................................................    $ 932,176      868,771                                                                                     =========     ========            --------------            (1)  For 2005, audit fees include the audits of the consolidated  financial statements of First                 Banks  and  SBLS  LLC,  and  Hillside and  subsidiaries, as  well as services provided for                 reporting requirements under FDICIA and mortgage banking activities, which are included in                 the audit fees of First Banks, as these services are closely related to the audit of First                 Banks' consolidated  financial statements. Audit  fees also  include other accounting  and                 reporting  consultations.  For  2004,  audit fees include the  audits of  the consolidated                 financial statements of First Banks and Star Lane Trust, SBLS LLC and Hillside, as well as                 services provided for reporting requirements under FDICIA and mortgage banking activities.                 Audit  fees  also  include  additional  fees  related  to   work  performed  under  FDICIA                 requirements  as  of  December 31, 2003 but  billed  in 2004,  and  other  accounting  and                 reporting consultations.            (2)  For 2005, tax services include preparation of amended income tax returns,  tax  compliance                 and  general  tax  planning  and advice. For 2004, tax services include tax compliance and                 general tax planning and advice.    Policy  Regarding  the Approval of  Independent  Auditor  Provision of Audit and Non-Audit Services           Consistent  with the  Securities and Exchange  Commission  requirements regarding auditor independence, the Audit Committee recognizes the importance of maintaining  the  independence,  in  fact  and  appearance,  of our  independent auditors.  As such, the Audit Committee has adopted a policy for pre-approval of all  audit  and  permissible  non-audit  services  provided  by the  independent auditor.  Under the policy, the Audit Committee,  or its designated member, must pre-approve  services  prior  to  commencement  of the  specified  service.  The requests for pre-approval are submitted to the Audit Committee or its designated member by the  Director of Audit with a statement  as to whether in his/her view the request is consistent with the Securities and Exchange Commission's rules on auditor independence.  The Audit Committee reviews the pre-approval requests and the fees paid for such services at their regularly  scheduled quarterly meetings or at special meetings.                                          PART IV
(a)  1.  Financial Statements and Supplementary Data - The  financial                     statements  and  supplementary  data  filed  as part of this                     this Report are included in Item 8.                  2.  Financial Statement Schedules - These  schedules are omitted                     for the reason they are not required or are not applicable.                  3.  Exhibits - The  exhibits are listed in the index of exhibits                     required by Item 601 of Regulation S-K at Item (b) below and                     are incorporated herein by reference.             (b)  The index of required exhibits is included beginning on page 112                 of this Report.             (c)  Not Applicable.                                       FIRST BANKS, INC.               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ________________________________________________________________________________      The Board of Directors and Stockholders First Banks, Inc.:  We have audited the  accompanying  consolidated  balance  sheets of First Banks, Inc. and  subsidiaries  (the Company) as of December 31, 2005 and 2004,  and the related consolidated  statements of income,  changes in stockholders' equity and comprehensive  income,  and cash  flows for each of the years in the  three-year period ended December 31, 2005. These consolidated  financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  We conducted our audits in accordance  with the standards of the Public  Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis,  evidence  supporting  the amounts and  disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant  estimates  made by  management,  as well as evaluating  the overall financial  statement  presentation.   We  believe  that  our  audits  provide  a reasonable basis for our opinion.  In our opinion, the consolidated  financial statements referred to above present fairly, in all material  respects,  the financial  position of First Banks, Inc. and  subsidiaries  as of December  31,  2005 and 2004,  and the results of their operations and their cash flows for each of the years in the  three-year  period ended December 31, 2005, in conformity with U.S. generally  accepted  accounting principles.                                                            /s/ KPMG LLP                                                        ------------  St. Louis, Missouri March 17, 2006                                                        FIRST BANKS, INC.                                              CONSOLIDATED BALANCE SHEETS  - -----------------------------------------------------------------------------------------------------------------------                           (dollars expressed in thousands, except share and per share data)                                                                                                    December 31,                                                                                            ----------------------------                                                                                               2005              2004                                                                                               ----              ----                                                       ASSETS                                                      ------  Cash and cash equivalents:         Cash and due from banks............................................................   $  212,667           149,605      Short-term investments.............................................................       73,985           117,505                                                                                            ----------         ---------           Total cash and cash equivalents...............................................      286,652           267,110                                                                                            ----------         ---------  Investment securities:      Trading............................................................................        3,389                --      Available for sale.................................................................    1,311,289         1,788,063      Held to maturity (fair value of $25,791 and $25,586, respectively).................       26,105            25,286                                                                                            ----------         ---------           Total investment securities...................................................    1,340,783         1,813,349                                                                                            ----------         ---------  Loans:      Commercial, financial and agricultural.............................................    1,619,822         1,575,232      Real estate construction and development...........................................    1,564,255         1,318,413      Real estate mortgage...............................................................    3,469,788         3,061,581      Consumer and installment...........................................................       64,724            54,546      Loans held for sale................................................................      315,134           133,065                                                                                            ----------         ---------           Total loans...................................................................    7,033,723         6,142,837      Unearned discount..................................................................      (12,952)           (4,869)      Allowance for loan losses..........................................................     (135,330)         (150,707)                                                                                            ----------         ---------           Net loans.....................................................................    6,885,441         5,987,261                                                                                            ----------         ---------  Bank premises and equipment, net of accumulated depreciation and amortization...........      144,941           144,486 Goodwill................................................................................      167,056           156,849 Bank-owned life insurance...............................................................      111,442           106,788 Deferred income taxes...................................................................      128,938           127,397 Other assets............................................................................      105,080           129,601                                                                                            ----------         ---------           Total assets..................................................................   $9,170,333         8,732,841                                                                                            ==========         =========                                                     LIABILITIES                                                    -----------  Deposits:      Noninterest-bearing demand.........................................................   $1,299,350         1,194,662      Interest-bearing demand............................................................      981,837           875,489      Savings............................................................................    2,106,470         2,249,644      Time deposits of $100 or more......................................................    1,076,908           807,220      Other time deposits................................................................    2,077,266         2,024,955                                                                                            ----------         ---------           Total deposits................................................................    7,541,831         7,151,970 Other borrowings........................................................................      539,174           594,750 Notes payable...........................................................................      100,000            15,000 Subordinated debentures.................................................................      215,461           273,300 Deferred income taxes...................................................................       27,104            34,812 Accrued expenses and other liabilities..................................................       61,762            62,116 Minority interest in subsidiary.........................................................        6,063                --                                                                                            ----------         ---------           Total liabilities.............................................................    8,491,395         8,131,948                                                                                            ----------         ---------  `                                               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.......................................................................      673,956           577,836 Accumulated other comprehensive loss....................................................      (19,906)           (1,831)                                                                                            ----------         ---------           Total stockholders' equity....................................................      678,938           600,893                                                                                            ----------         ---------           Total liabilities and stockholders' equity....................................   $9,170,333         8,732,841                                                                                            ==========         =========  The accompanying notes are an integral part of the consolidated financial statements.                                                     FIRST BANKS, INC.                                         CONSOLIDATED STATEMENTS OF INCOME  - -----------------------------------------------------------------------------------------------------------------------                          (dollars expressed in thousands, except share and per share data)                                                                                        Years Ended December 31,                                                                                 ----------------------------------                                                                                    2005         2004        2003                                                                                    ----         ----        ----        Interest income:              Interest and fees on loans..........................................   $ 424,095      341,479     355,472          Investment securities:            Taxable...........................................................      65,895       50,170      32,442            Nontaxable........................................................       1,739        1,490       1,737          Short-term investments..............................................       2,211        1,643       1,502                                                                                 ---------     --------    --------               Total interest income..........................................     493,940      394,782     391,153                                                                                 ---------     --------    --------       Interest expense:          Deposits:            Interest-bearing demand...........................................       4,398        3,472       5,470            Savings...........................................................      29,592       20,128      23,373            Time deposits of $100 or more.....................................      28,010       13,762      13,075            Other time deposits...............................................      65,157       35,705      41,201          Other borrowings....................................................      18,240        6,102       2,243          Notes payable.......................................................       2,305          506         785          Subordinated debentures.............................................      20,557       15,092      17,879                                                                                 ---------     --------    --------               Total interest expense.........................................     168,259       94,767     104,026                                                                                 ---------     --------    --------               Net interest income............................................     325,681      300,015     287,127       Provision for loan losses..............................................      (4,000)      25,750      49,000                                                                                 ---------     --------    --------               Net interest income after provision for loan losses............     329,681      274,265     238,127                                                                                 ---------     --------    --------       Noninterest income:          Service charges on deposit accounts and customer service fees.......      39,776       38,230      36,113          Gain on loans sold and held for sale................................      20,804       18,497      15,645          Net (loss) gain on sales of available-for-sale            investment securities.............................................      (2,873)         257       8,761          Gain on sales of branches, net of expenses..........................          --        1,000       3,992          Bank-owned life insurance investment income.........................       4,860        5,201       5,469          Investment management income........................................       8,573        6,870       4,762          Other...............................................................      23,603       13,431      12,966                                                                                 ---------     --------    --------               Total noninterest income.......................................      94,743       83,486      87,708                                                                                 ---------     --------    --------       Noninterest expense:          Salaries and employee benefits......................................     139,764      117,492      95,441          Occupancy, net of rental income.....................................      22,081       19,882      20,940          Furniture and equipment.............................................      16,015       17,017      18,286          Postage, printing and supplies......................................       5,743        5,010       5,100          Information technology fees.........................................      35,472       32,019      32,136          Legal, examination and professional fees............................       9,319        7,412       8,131          Amortization of intangibles associated with the            purchase of subsidiaries..........................................       4,850        2,912       2,506          Communications......................................................       2,012        1,866       2,667          Advertising and business development................................       7,043        5,493       4,271          Charitable contributions............................................       5,922          577       5,334          Other...............................................................      28,075       19,825      32,257                                                                                 ---------     --------    --------               Total noninterest expense......................................     276,296      229,505     227,069                                                                                 ---------     --------    --------               Income before provision for income taxes and minority                 interest in loss of subsidiary...............................     148,128      128,246      98,766       Provision for income taxes.............................................      52,509       45,338      35,955                                                                                 ---------     --------    --------               Income before minority interest in loss of subsidiary..........      95,619       82,908      62,811       Minority interest in loss of subsidiary................................      (1,287)          --          --                                                                                 ---------     --------    --------               Net income.....................................................      96,906       82,908      62,811       Preferred stock dividends..............................................         786          786         786                                                                                 ---------     --------    --------               Net income available to common stockholders....................   $  96,120       82,122      62,025                                                                                 =========     ========    ========         Basic earnings per common share........................................   $4,062.36     3,470.80    2,621.39                                                                                 =========     ========    ========        Diluted earnings per common share......................................   $4,007.46     3,421.58    2,588.31                                                                                 =========     ========    ========        Weighted average shares of common stock outstanding....................      23,661       23,661      23,661                                                                                 =========     ========    ========        The accompanying notes are an integral part of the consolidated financial statements.                                                          FIRST BANKS, INC.                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME                                          Three Years 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                                                            -----     -------   -----    -------   --------   ------    ------          Consolidated balances, January 1, 2003...............     $12,822      241     5,915     5,910    433,689    60,464    519,041                                                                                                                        ------- Year ended December 31, 2003:     Comprehensive income:       Net income.....................................          --       --        --        --     62,811        --     62,811       Other comprehensive loss, net of tax:         Unrealized losses on investment securities...          --       --        --        --         --    (4,291)    (4,291)         Reclassification adjustment for gains           included in net income.....................          --       --        --        --         --    (5,695)    (5,695)         Derivative instruments:           Current period transactions................          --       --        --        --         --   (21,265)   (21,265)                                                                                                                        -------     Total comprehensive income.......................                                                                   31,560     Class A preferred stock dividends,       $1.20 per share................................          --       --        --        --       (769)       --       (769)     Class B preferred stock dividends,       $0.11 per share................................          --       --        --        --        (17)       --        (17)                                                           -------      ---     -----     -----    -------   -------    ------- Consolidated balances, December 31, 2003.............      12,822      241     5,915     5,910    495,714    29,213    549,815                                                                                                                        ------- Year ended December 31, 2004:     Comprehensive income:       Net income.....................................          --       --        --        --     82,908        --     82,908       Other comprehensive loss, net of tax:         Unrealized losses on investment securities...          --       --        --        --         --    (5,711)    (5,711)         Reclassification adjustment for gains           included in net income.....................          --       --        --        --         --      (167)      (167)         Derivative instruments:           Current period transactions................          --       --        --        --         --   (25,166)   (25,166)                                                                                                                        -------     Total comprehensive income.......................                                                                   51,864     Class A preferred stock dividends,       $1.20 per share................................         --        --        --        --       (769)       --       (769)     Class B preferred stock dividends,       $0.11 per share................................         --        --        --        --        (17)       --        (17)                                                           -------      ---     -----     -----    -------   -------    ------- Consolidated balances, December 31, 2004.............      12,822      241     5,915     5,910    577,836    (1,831)   600,893                                                                                                                        ------- Year ended December 31, 2005:     Comprehensive income:       Net income.....................................          --       --        --        --     96,906        --     96,906       Other comprehensive loss, net of tax:         Unrealized losses on investment securities...          --       --        --        --         --   (15,659)   (15,659)         Reclassification adjustment for losses           included in net income.....................          --       --        --        --         --     1,867      1,867         Derivative instruments:           Current period transactions................          --       --        --        --         --    (4,283)    (4,283)                                                                                                                        -------     Total comprehensive income.......................                                                                   78,831     Class A preferred stock dividends,       $1.20 per share................................          --       --        --        --       (769)       --       (769)     Class B preferred stock dividends,       $0.11 per share................................          --       --        --        --        (17)       --        (17)                                                           -------      ---     -----     -----    -------   -------    ------- Consolidated balances, December 31, 2005.............     $12,822      241     5,915     5,910    673,956   (19,906)   678,938                                                           =======      ===     =====     =====    =======   =======    =======  The accompanying notes are an integral part of the consolidated financial statements.                                                         FIRST BANKS, INC.                                           CONSOLIDATED STATEMENTS OF CASH FLOWS  - ----------------------------------------------------------------------------------------------------------------------------                                             (dollars expressed in thousands)                                                                                         Years ended December 31,                                                                                 --------------------------------------                                                                                    2005          2004          2003                                                                                    ----          ----          ----  Cash flows from operating activities:          Net income..............................................................   $   96,906        82,908       62,811      Adjustments to reconcile net income to net cash        provided by operating activities:           Depreciation and amortization of bank premises and equipment.......       17,381        18,579       20,068           Amortization, net of accretion.....................................       16,111        17,102       24,996           Originations and purchases of loans held for sale..................   (1,327,890)   (1,036,548)  (2,013,902)           Proceeds from sales of loans held for sale.........................    1,201,695     1,104,254    2,201,977           Provision for loan losses..........................................       (4,000)       25,750       49,000           Provision for deferred income taxes................................       (1,216)         (747)     (16,956)           (Increase) decrease in accrued interest receivable.................       (2,280)         (696)       4,614           Net increase in trading securities.................................       (3,389)           --           --           Gain on loans sold and held for sale...............................      (20,804)      (18,497)     (15,645)           Net loss (gain) on sales of available-for-sale             investment securities............................................        2,873          (257)      (8,761)           Gain on sales of branches, net of expenses.........................           --        (1,000)      (3,992)           Other operating activities, net....................................       26,438        14,874       36,002           Minority interest in loss of subsidiary............................       (1,287)           --           --                                                                                 ----------    ----------   ----------                Net cash provided by operating activities.....................          538       205,722      340,212                                                                                 ----------    ----------   ----------  Cash flows from investing activities:      Cash (paid) received for acquired entities, net of cash and        cash equivalents received (paid)......................................      (11,579)       21,098       14,870      Proceeds from sales of investment securities available for sale.........      147,120        26,340        6,019      Maturities of investment securities available for sale..................      658,803       680,631    1,298,682      Maturities of investment securities held to maturity....................        5,635         4,632        5,573      Purchases of investment securities available for sale...................     (325,642)   (1,029,993)  (1,209,592)      Purchases of investment securities held to maturity.....................       (6,509)      (19,031)        (103)      Proceeds from sale of leases............................................           --        35,544           --      Net increase in loans...................................................     (569,255)     (211,104)    (146,270)      Recoveries of loans previously charged-off..............................       19,757        25,876       23,028      Purchases of bank premises and equipment................................      (17,128)      (10,960)      (4,359)      Sale of minority interest in subsidiary.................................        7,350            --           --      Other investing activities, net.........................................        1,834        15,358        3,357                                                                                 ----------    ----------   ----------                Net cash used in investing activities.........................      (89,614)     (461,609)      (8,795)                                                                                 ----------    ----------   ----------  Cash flows from financing activities:      (Decrease) increase in demand and savings deposits......................      (50,119)       23,355       13,287      Increase (decrease) in time deposits....................................      199,255       (11,521)    (223,555)      Decrease in Federal Home Loan Bank advances.............................       (6,144)      (29,020)      (8,548)      Decrease in federal funds purchased.....................................          (78)           --      (55,000)      (Decrease) increase in securities sold under agreements to repurchase...      (59,232)      286,928       69,835      Advances drawn on notes payable.........................................      100,000        15,000       34,500      Repayments of notes payable.............................................      (15,000)      (17,000)     (24,500)      Proceeds from issuance of subordinated debentures.......................           --        61,857       70,907      Repayments of subordinated debentures...................................      (59,278)           --     (136,341)      Cash paid for sales of branches, net of cash and cash equivalents sold..           --       (19,353)     (60,930)      Payment of preferred stock dividends....................................         (786)         (786)        (786)                                                                                 ----------    ----------   ----------                Net cash provided by (used in) financing activities...........      108,618       309,460     (321,131)                                                                                 ----------    ----------   ----------                Net increase in cash and cash equivalents.....................       19,542        53,573       10,286 Cash and cash equivalents, beginning of year.................................      267,110       213,537      203,251                                                                                 ----------    ----------   ---------- Cash and cash equivalents, end of year.......................................   $  286,652       267,110      213,537                                                                                 ==========    ==========   ==========  Supplemental disclosures of cash flow information:      Cash paid during the period for:        Interest on liabilities...............................................   $  162,144        93,406      107,295        Income taxes..........................................................       56,591        42,701       43,632                                                                                 ==========    ==========   ==========      Noncash investing and financing activities:        Loans transferred to other real estate................................   $    3,737         5,142       13,525                                                                                 ==========    ==========   ==========  The accompanying notes are an integral part of the consolidated financial statements.                                        FIRST BANKS, INC.                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------  (1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES           The  following  is a summary  of the  significant  accounting  policies followed by First Banks, Inc. and subsidiaries (First Banks or the Company):           Basis  of  Presentation.   The  accompanying   consolidated   financial statements of First Banks 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.           Principles of  Consolidation.  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 2 and Note 19 to the Consolidated Financial Statements.  All significant intercompany   accounts  and   transactions   have  been   eliminated.   Certain reclassifications of 2004 and 2003 amounts have been made to conform to the 2005 presentation.           First Banks operates  through its wholly owned  subsidiary bank holding company,  The San  Francisco  Company  (SFC),  headquartered  in San  Francisco, California, and SFC's wholly owned subsidiary bank, First Bank, headquartered in St. Louis, Missouri.  First Bank operates through its branch banking offices and subsidiaries,  First Bank Business Capital, Inc., Missouri Valley Partners, Inc. (MVP) and Small Business Loan Source LLC (SBLS LLC) which,  except for SBLS LLC, are wholly owned subsidiaries.           On December  31, 2003,  First Banks  implemented  Financial  Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities,  an interpretation of ARB No. 51, resulting in the  deconsolidation of First  Banks'  statutory  and business  trusts,  which were created for the sole purpose  of issuing  trust  preferred  securities.  The  implementation  of this Interpretation  had no material effect on the Company's  consolidated  financial position or results of operations.           Cash  and  Cash  Equivalents.  Cash,  due  from  banks  and  short-term investments, which include federal funds sold and interest-bearing deposits, are considered  to be cash and cash  equivalents  for  purposes of the  consolidated statements  of cash  flows.  Federal  funds sold were $65.0  million  and $102.2 million  at  December  31,  2005 and 2004,  respectively,  and  interest-bearing deposits  were $9.0  million and $15.3  million at  December  31, 2005 and 2004, respectively.           First Bank is required to maintain  certain daily  reserve  balances on hand  in  accordance  with  regulatory  requirements.   These  reserve  balances maintained in  accordance  with such  requirements  were $24.3 million and $30.2 million at December 31, 2005 and 2004, respectively.           Investment  Securities.  The classification of investment securities as trading,  available  for sale or held to maturity is  determined  at the date of purchase.           Investment  securities  designated  as  trading,  which  represent  any security  held for near term  sale,  are  stated  at fair  value.  Realized  and unrealized gains and losses are included in noninterest income.           Investment securities designated as available for sale, which represent any  security  that First Banks has no  immediate  plan to sell but which may be sold in the future  under  different  circumstances,  are stated at fair  value. Amortization  of  premiums  and  accretion  of  discounts  is  computed  on  the level-yield   method  taking  into   consideration  the  level  of  current  and anticipated  prepayments.  Realized gains and losses are included in noninterest income, based on the amortized cost of the individual security sold.  Unrealized gains and losses, net of related income tax effects, are recorded in accumulated other comprehensive  income. All previous fair value adjustments included in the separate component of accumulated other  comprehensive  income are reversed upon sale.           Investment securities  designated as held to maturity,  which represent any  security  that First Banks has the  positive  intent and ability to hold to maturity,  are stated at cost, net of  amortization of premiums and accretion of discounts computed on the level-yield method taking into consideration the level of current and anticipated prepayments.            A  decline  in  the   market   value  of  any   available-for-sale   or held-to-maturity  investment security below its carrying value that is deemed to be  other-than-temporary  results in a reduction  in cost basis of the  carrying value  to  fair  value.  The  other-than-temporary   impairment  is  charged  to noninterest  income  and a new  cost  basis  is  established.  When  determining other-than-temporary  impairment,  consideration  is given as to  whether  First Banks has the ability and intent to hold the investment  security until a market price  recovery  and  whether  evidence  indicating  the  carrying  value of the investment security is recoverable outweighs evidence to the contrary.           Loans Held for Portfolio. Loans held for portfolio are carried at cost, adjusted  for  amortization  of premiums and  accretion  of discounts  using the interest  method.  Interest and fees on loans are recognized as income using the interest  method.  Loan  origination  fees are deferred and accreted to interest income over the  estimated  life of the loans using the interest  method.  Loans held for  portfolio  are stated at cost as First Banks has the ability and it is management's intention to hold them to maturity.           The accrual of interest on loans is  discontinued  when it appears that interest or principal may not be paid in a timely manner in the normal course of business or once  principal or interest  payments  become 90 days past due under the contractual  terms of the loan agreement.  Generally,  payments  received on nonaccrual  and impaired  loans are recorded as principal  reductions.  Interest income  is  recognized  after all  delinquent  principal  has been  repaid or an improvement  in the  condition  of the loan has  occurred  which  would  warrant resumption of interest accruals.           A loan is considered impaired when it is probable that First Banks will be unable to collect all amounts due, both principal and interest,  according to the  contractual  terms of the loan  agreement.  Loans on nonaccrual  status are considered to be impaired loans. When measuring impairment,  the expected future cash flows of an impaired loan or lease are  discounted at the loan's  effective interest  rate.  Alternatively,  impairment  is  measured  by  reference  to  an observable  market price, if one exists, or the fair value of the collateral for a  collateral-dependent  loan.  Regardless of the historical  measurement method used, First Banks measures  impairment based on the fair value of the collateral when foreclosure is probable. Additionally, impairment of a restructured loan is measured  by  discounting  the total  expected  future  cash flows at the loan's effective rate of interest as stated in the original loan agreement.           Loans Held for Sale.  Loans held for sale are comprised of  residential mortgage loans held for sale in the secondary mortgage market, frequently in the form of a mortgage-backed  security,  U.S. Small Business  Administration  (SBA) loans  awaiting sale of the guaranteed  portion to the SBA, and commercial  real estate loans which may be identified  for sale to specific  buyers due to credit or loan concentration  objectives.  Loans held for sale are carried at the lower of cost or market  value,  which is  determined  on an  individual  loan  basis. Additionally, the carrying value of the residential mortgage loans held for sale also  includes the cost of hedging the loans held for sale.  The amount by which cost exceeds market value is recorded in a valuation allowance as a reduction of loans held for sale. Changes in the valuation allowance are reflected as part of the gain on loans  sold and  held  for sale in the  consolidated  statements  of income in the periods in which the changes occur. Gains or losses on the sale of loans  held for sale are  determined  on a  specific  identification  method and reflect the  difference  between the value  received  upon sale and the carrying value of the loans held for sale,  including the cost of hedging the residential mortgage loans held for sale.  Loans held for sale transferred to loans held for portfolio or  available-for-sale  investment  securities are transferred at fair value.           Loan Servicing Income. Loan servicing income is included in noninterest income and represents fees earned for servicing real estate mortgage loans owned by investors and originated by First Bank's mortgage banking operation,  as well as SBA loans to small  business  concerns that are originated by SBLS LLC, First Bank's majority-owned subsidiary that originates,  sells and services SBA loans. These  fees  are net of  federal  agency  guarantee  fees,  interest  shortfall, amortization of loan servicing rights and impairment valuation allowances.  Such fees are generally calculated on the outstanding  principal balance of the loans serviced and are recorded as income when earned.           Allowance for Loan Losses.  The allowance for loan losses is maintained at a level considered adequate to provide for probable losses. The provision for loan  losses is based on a periodic  analysis  of the loans held for  portfolio, considering,  among other factors,  current economic conditions,  loan portfolio composition, past loan loss experience, independent appraisals, loan collateral, payment  experience and selected key financial  ratios.  As  adjustments  become necessary,  they are  reflected in the results of  operations  in the periods in which they  become  known.  In  addition,  various  regulatory  agencies,  as an integral part of their examination  process,  periodically  review the allowance for loan losses.  Such  agencies may require First Banks to modify its allowance for loan losses based on their judgment about  information  available to them at the time of their examination.            Derivative  Instruments  and Hedging  Activities.  First Banks utilizes derivative  instruments  and hedging  activities to assist in the  management of interest  rate  sensitivity  and to modify the  repricing,  maturity  and option characteristics  of  certain  assets  and  liabilities.  First  Banks  uses such derivative  instruments solely to reduce its interest rate risk exposure.  First Banks accounts for derivative  instruments and hedging  activities in accordance with Statement of Financial  Accounting  Standards  (SFAS) No. 133 -- Accounting for Derivative  Instruments and Hedging Activities,  as amended,  which requires all derivative instruments to be recorded in the consolidated balance sheets and measured at fair value.           At inception of a derivative  transaction,  First Banks  designates the derivative  instrument as either a hedge of the fair value of a recognized asset or liability or of an  unrecognized  firm  commitment  (fair value  hedges) or a hedge  of a  forecasted  transaction  or the  variability  of cash  flows  to be received or paid related to a recognized  asset or liability (cash flow hedges). For all  hedging  relationships,  First  Banks  formally  documents  the hedging relationship and its  risk-management  objectives and strategy for entering into the hedging relationship  including the hedging instrument,  the hedged item(s), the nature of the risk being hedged, how the hedging instrument's  effectiveness in offsetting  the hedged risk will be assessed and a description  of the method the Company will  utilize to measure  hedge  ineffectiveness.  This process also includes  linking all derivative  instruments  that are designated as fair value hedges or cash flow  hedges  to the  underlying  assets  and  liabilities  or to specific firm commitments or forecasted transactions. First Banks also assesses, both at the hedge's  inception and on an ongoing  basis,  whether the derivative instruments  that are used in  hedging  transactions  are  highly  effective  in offsetting changes in fair values or cash flows of the hedged item(s).           First Banks  discontinues  hedge  accounting  prospectively  when it is determined that the derivative  instrument is no longer  effective in offsetting changes in the fair value or cash flows of the hedged  item(s),  the  derivative instrument  expires  or  is  sold,  terminated,  or  exercised,  the  derivative instrument is de-designated as a hedging  instrument because it is unlikely that a forecasted  transaction  will occur, a hedged firm  commitment no longer meets the definition of a firm commitment,  or management  determines that designation of the derivative instrument as a hedging transaction is no longer appropriate.           A  summary  of  First  Banks'  accounting   policies  for  its  various derivative instruments and hedging activities is as follows:           >>    Interest Rate Swap  Agreements - Cash Flow Hedges.  Interest rate                swap agreements  designated as cash flow hedges are accounted for                at fair value.  The  effective  portion of the change in the cash                flow hedge's gain or loss is initially reported as a component of                other  comprehensive  income and subsequently  reclassified  into                noninterest  income  when  the  underlying   transaction  affects                earnings.  The ineffective portion of the change in the cash flow                hedge's  gain or loss is recorded in  noninterest  income on each                monthly  measurement  date.  The  net  interest  differential  is                recognized  as an  adjustment  to  interest  income  or  interest                expense of the related asset or liability  being  hedged.  In the                event of early termination,  the net proceeds received or paid on                the interest rate swap  agreements are recognized  immediately in                noninterest income.           >>    Interest Rate Swap Agreements - Fair Value Hedges.  Interest rate                swap agreements designated as fair value hedges are accounted for                at fair value.  Changes in the fair value of the swap  agreements                are recognized currently in noninterest income. The change in the                fair value of the  underlying  hedged  item is  recognized  as an                adjustment to the carrying  amount of the underlying  hedged item                and is  also  reflected  currently  in  noninterest  income.  All                changes in fair value are  measured on a monthly  basis.  The net                interest  differential is recognized as an adjustment to interest                income or  interest  expense of the  related  asset or  liability                being   hedged.   In  the   event   of   early   termination   or                ineffectiveness,  the  net  proceeds  received  or  paid  on  the                interest  rate swap  agreements  are  recognized  immediately  in                noninterest income and the future net interest  differential,  if                any, is  recognized  prospectively  in  noninterest  income.  The                cumulative change in the fair value of the underlying hedged item                is deferred  and  amortized  or  accreted  to interest  income or                interest  expense over the  weighted  average life of the related                asset or liability.  If, however,  the underlying  hedged item is                repaid, the cumulative change in the fair value of the underlying                hedged item is recognized immediately in noninterest income.            >>    Interest  Rate Cap and Floor  Agreements.  Interest  rate cap and                floor agreements are accounted for at fair value.  Changes in the                fair  value  of  interest  rate  cap  and  floor  agreements  are                recognized  in  noninterest  income on each  monthly  measurement                date.           >>    Interest Rate Lock  Commitments.  Commitments to originate  loans                for subsequent sale in the secondary  market  (interest rate lock                commitments), which primarily consist of commitments to originate                fixed rate  residential  mortgage  loans,  are  recorded  at fair                value.  Changes in the fair value are  recognized in  noninterest                income on a monthly basis.           >>    Forward Commitments to Sell Mortgage-Backed  Securities.  Forward                commitments  to sell  mortgage-backed  securities are recorded at                fair value.  Changes in the fair value of forward  commitments to                sell  mortgage-backed  securities  are  recognized in noninterest                income on a monthly basis.           Bank  Premises and  Equipment,  Net.  Bank  premises and  equipment are carried at cost less accumulated depreciation and amortization.  Depreciation is computed using the  straight-line  method over the estimated useful lives of the related assets.  Amortization of leasehold  improvements is calculated using the straight-line method over the shorter of the useful life of the related asset or term of the lease.  Bank premises and  improvements are depreciated over five to 40 years and equipment over three to seven years.           Intangibles  Associated  With the Purchase of  Subsidiaries  and Branch Offices.  Intangibles  associated with the purchase of  subsidiaries  and branch offices include goodwill and core deposit intangibles.           First Banks accounts for  intangibles  associated  with the purchase of subsidiaries  and branch offices in accordance with SFAS No. 142 -- Goodwill and Other  Intangible  Assets,  and SFAS No. 144 -- Accounting for the Impairment or Disposal of Long-Lived Assets. Pursuant to SFAS No. 142, goodwill and intangible assets with  indefinite  useful lives are not amortized,  but instead tested for impairment at least annually.  Intangible  assets with definite useful lives are amortized  over  their  respective  estimated  useful  lives to their  estimated residual  values,  and reviewed for impairment in accordance  with SFAS No. 144. First Banks amortizes,  on a straight-line  basis, its core deposit  intangibles and goodwill  associated  with  transactions  structured as purchases of certain assets and assumption of selected  liabilities (P&A Transactions).  Core deposit intangibles are amortized over the estimated periods to be benefited,  which has been estimated at seven years, and goodwill  associated with P&A Transactions is amortized over the estimated  periods to be benefited,  which has been estimated to be 15 years.  Goodwill  associated  with the purchase of  subsidiaries is not amortized, but instead, is tested annually for impairment following First Banks' existing  methods of measuring and  recording  impairment  losses,  as described below.           First Banks reviews intangible assets for impairment whenever events or changes in circumstances  indicate the carrying value of an underlying asset may not be recoverable.  First Banks measures  recoverability  based upon the future cash  flows  expected  to result  from the use of the  underlying  asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest  charges) is less than the carrying value of the underlying asset, First Banks recognizes an impairment loss. The impairment loss recognized represents  the  amount  by which the  carrying  value of the  underlying  asset exceeds the fair value of the  underlying  asset.  If an asset being  tested for recoverability  was acquired in a business  combination  accounted for using the purchase  method,  goodwill that arose in the transaction is included as part of the asset  grouping in  determining  recoverability.  If some but not all of the assets acquired in that  transaction are being tested,  goodwill is allocated to the  assets  being  tested  for  recoverability  on a pro rata  basis  using the relative  fair  values of the  long-lived  assets and  identifiable  intangibles acquired at the  acquisition  dates.  In instances  where goodwill is identified with assets that are subject to an impairment  loss, the carrying  amount of the identified  goodwill is  eliminated  before  reducing  the  carrying  amounts of impaired  long-lived  assets and identifiable  intangibles.  As such adjustments become necessary, they are reflected in the results of operations in the periods in which they become known.           Mortgage Servicing Rights. Mortgage servicing rights are capitalized by allocating the total cost of the mortgage loans to mortgage servicing rights and the loans (without mortgage  servicing rights) based on the relative fair values of the two components. Upon capitalizing the mortgage servicing rights, they are amortized,  in  proportion to the related  estimated  net servicing  income on a    basis that approximates the  disaggregated,  discounted basis, over the expected lives of the related  loans,  which is  approximately  five years.  The weighted average  amortization  period of mortgage servicing rights is approximately five years.           The value of  mortgage  servicing  rights is  adversely  affected  when mortgage  interest rates decline which normally causes mortgage loan prepayments to  increase.  When loans are prepaid or  refinanced,  the  related  unamortized balance of the mortgage servicing rights is charged to amortization expense. The determination  of the fair value of the mortgage  servicing  rights is performed quarterly  based  upon an  independent  third  party  valuation.  Based on these analyses,  a comparison of the fair value of the mortgage  servicing rights with the carrying value of the mortgage servicing rights is made, with impairment, if any,  recognized  at that time.  The  impairment  analyses  are  prepared  using stratifications  of the mortgage  servicing rights based on the predominant risk characteristics of the underlying mortgage loans, including size, interest rate, weighted  average original term,  weighted average  remaining term and estimated prepayment  speeds.  As part of these  analyses,  the fair value of the mortgage servicing  rights for each  stratum is  compared  to the  carrying  value of the mortgage servicing rights for each stratum.  To the extent the carrying value of the mortgage  servicing rights exceeds the fair value of the mortgage  servicing rights for a stratum,  First Banks recognizes  impairment equal to the amount by which the carrying value of the mortgage  servicing rights for a stratum exceeds the fair value.  Impairment is recognized through a valuation  allowance that is recorded as a reduction of mortgage  servicing rights.  The valuation  allowance may be  reversed  based  upon  subsequent  improvement  in the  fair  value of a stratum;  however,  First Banks does not,  recognize  fair value of the mortgage servicing  rights in excess of the carrying value of mortgage  servicing  rights for any  stratum.  Changes  in the  valuation  allowance  are  reflected  in the consolidated statements of income in the periods in which the change occurs.           SBA  Servicing   Rights.   SBA  servicing  rights  are  capitalized  by allocating  the total  cost of the SBA loans to  servicing  rights and the loans (without  servicing  rights)  based  on the  relative  fair  values  of the  two components.  The fair value of  servicing  rights is computed  using the present value  of the  estimated  future  servicing  income  in  excess  of such  income estimated at a normal servicing fee rate. The servicing rights, net of valuation allowance, are amortized in proportion to, and over the period of, the estimated net servicing  revenue of the underlying SBA loans,  which range from nine to 25 years. The weighted average  amortization  period of the SBA servicing rights is approximately 20 years. The determination of the fair value of the SBA servicing rights is performed  monthly based upon an  independent  third party  valuation. Based on these  analyses,  a comparison  of the fair value of the SBA  servicing rights  with  the  carrying  value of the SBA  servicing  rights  is made,  with impairment,   if  any,   recognized   at  that  time.   The   predominant   risk characteristics  of the  underlying  SBA loans used to  stratify  SBA  servicing rights for  purposes  of  measuring  impairment  include  size,  interest  rate, weighted  average original term,  weighted average  remaining term and estimated prepayment  speeds. To the extent the carrying value of the SBA servicing rights exceeds  the fair value of the SBA  servicing  rights,  First  Banks  recognizes impairment  equal to the amount by which the carrying value of the SBA servicing rights  exceeds the fair value.  Impairment  is  recognized  through a valuation allowance  that is recorded as a reduction of SBA servicing  rights.  Changes in the valuation  allowance are reflected in the consolidated  statements of income in the  periods  in which the change  occurs.  First  Banks  does not,  however, recognize fair value of the SBA servicing rights in excess of the carrying value of SBA servicing rights for any stratum.           Other  Real  Estate.  Other  real  estate,  consisting  of real  estate acquired  through  foreclosure or deed in lieu of foreclosure,  is stated at the lower of cost or fair value less  applicable  selling costs.  The excess of cost over fair value of the  property  at the date of  acquisition  is charged to the allowance for loan losses.  Subsequent  reductions in carrying value, to reflect current fair value or costs incurred in maintaining the properties,  are charged to expense as  incurred.  Other real estate was $2.0 million and $4.0 million at December 31, 2005 and 2004, respectively.           Income  Taxes.  Deferred tax assets and  liabilities  are  reflected at currently  enacted  income  tax  rates  applicable  to the  period  in which the deferred tax assets or  liabilities  are expected to be realized or settled.  As changes  in the  tax  laws  or  rates  are  enacted,  deferred  tax  assets  and liabilities  are adjusted  through the provision for income taxes.  First Banks, Inc. and its eligible subsidiaries file a consolidated federal income tax return and unitary or consolidated state income tax returns in all applicable states.           Financial   Instruments  With  Off-Balance   Sheet  Risk.  A  financial instrument is defined as cash,  evidence of an ownership  interest in an entity, or a contract  that  conveys or  imposes on an entity the  contractual  right or obligation to either  receive or deliver cash or another  financial  instrument. First Banks  utilizes  financial  instruments  to reduce the interest  rate risk    arising from its financial assets and liabilities. These instruments involve, in varying degrees, elements of interest rate risk and credit risk in excess of the amount  recognized in the consolidated  balance sheets.  "Interest rate risk" is defined as the  possibility  that interest rates may move  unfavorably  from the perspective  of First  Banks due to maturity  and/or  interest  rate  adjustment timing  differences  between   interest-earning   assets  and   interest-bearing liabilities.  The risk that a counterparty to an agreement entered into by First Banks may default is defined as "credit risk."           First Banks is a party to  commitments  to extend credit and commercial and  standby  letters of credit in the  normal  course of  business  to meet the financing needs of its customers. These commitments involve, in varying degrees, elements of interest rate risk and credit risk in excess of the amount reflected in the consolidated balance sheets.           Earnings Per Common  Share.  Basic  earnings per common share (EPS) are computed by dividing the income available to common stockholders (the numerator) by the  weighted  average  number of shares of  common  stock  outstanding  (the denominator)  during the year. The computation of dilutive EPS is similar except the  denominator  is  increased  to include the number of  additional  shares of common stock that would have been  outstanding if the dilutive  potential shares had been issued.  In addition,  in computing the dilutive  effect of convertible securities,  the  numerator  is adjusted to add back any  convertible  preferred dividends.  (2)      ACQUISITIONS AND INTEGRATION COSTS           Completed Acquisitions           During the three years ended December 31, 2005,  First Banks  completed the following acquisitions:                                                                         Total        Purchase        Entity                                 Date                  Assets         Price          Goodwill        ------                                 ----                  ------         -----          --------                                                                         (dollars expressed in thousands) 2005 - ----   Northway State Bank        Grayslake, Illinois                    October 31, 2005         $   50,400        10,300           3,800    International Bank of California   Los Angeles, California               September 30, 2005           151,600        33,700          12,000    Bank and Trust Company   Roodhouse, Illinois   Branch Office (1)                     September 23, 2005             5,000            --              --    FBA Bancorp, Inc.   Chicago, Illinois                       April 29, 2005              73,300        10,500           2,800                                                                   ----------       -------         -------                                                                   $  280,300        54,500          18,600                                                                   ==========       =======         ======= 2004 - ----   Hillside Investors, Ltd.   Hillside, Illinois                     November 30, 2004        $1,196,700        67,400              --    Small Business Loan Source, Inc.   Houston, Texas                          August 31, 2004             47,100        45,600           5,900    Continental Mortgage   Corporation - Delaware   Aurora, Illinois                         July 30, 2004             140,700         4,200 (2)         100                                                                   ----------       -------         -------                                                                   $1,384,500       117,200           6,000                                                                   ==========       =======         ======= 2003 - ----   Bank of Ste. Genevieve   Ste. Genevieve, Missouri                March 31, 2003          $  115,100        15,400             900                                                                   ==========       =======         ======= - -------------- (1)  The Roodhouse, Illinois branch of Bank and Trust Company was acquired by First Bank through a purchase      of certain assets and assumption of certain  liabilities of  the  branch office. Total  assets consist      primarily of cash received upon assumption of the deposit liabilities. (2)  In conjunction with the acquisition of Continental Mortgage  Corporation - Delaware (CMC), First Banks      redeemed in full all of the outstanding subordinated promissory  notes  of CMC, including  accumulated      accrued and unpaid interest, totaling $4.5 million in aggregate.             Goodwill  associated with the acquisitions  included in the table above is not  deductible  for  tax  purposes,  with  the  exception  of  the  goodwill associated  with the purchase of assets and  assumption of  liabilities of Small Business Loan Source,  Inc.  (SBLS),  which is deductible for tax purposes.  For 2005, 2004 and 2003 acquisitions, goodwill in the amounts of $18.6 million, $6.0 million and $900,000, respectively, was assigned to First Bank.           The consolidated  financial  statements  include the financial position and results of operations  of the  aforementioned  transactions  for the periods subsequent to the  respective  acquisition  dates,  and the assets  acquired and liabilities  assumed were recorded at fair value at the acquisition dates. These fair value adjustments for the acquisitions  completed in 2005 represent current estimates  and are  subject  to further  adjustments  as the  valuation  data is finalized.   These  acquisitions  were  funded  from  available  cash  reserves, borrowings  under  First  Banks'  term  loan and  revolving  credit  agreements, proceeds  from  the  issuance  of   subordinated   debentures,   dividends  from subsidiaries, and/or exchanges of available-for-sale investment securities.           On March 31, 2003,  First Banks  completed its  acquisition  of Bank of Ste. Genevieve (BSG), Ste.  Genevieve,  Missouri,  from Allegiant Bancorp,  Inc. (Allegiant),  in exchange for  approximately  974,150 shares of Allegiant common stock  previously held. The purpose of the transaction was to further expand the Midwest  banking  franchise.  At the  time of the  acquisition,  BSG had  $115.1 million in assets,  $43.7  million in loans,  net of  unearned  discount,  $47.8 million in investment securities and $93.7 million in deposits, and operated two locations  in Ste.  Genevieve,  Missouri.  First  Banks  recorded a gain of $6.3 million on the exchange of the Allegiant common stock.  Preliminary  goodwill of approximately $3.4 million was subsequently  adjusted to approximately  $900,000 as a result of a litigation  settlement between the parties that occurred in the fourth  quarter  of  2005  pertaining  to  the  acquisition.  The  core  deposit intangibles,  which are not deductible for tax purposes, were approximately $3.5 million and are being  amortized  over seven years  utilizing the  straight-line method. BSG was merged with and into First Bank.  Subsequent to the acquisition, First Banks  continued  to own 231,779  shares,  or  approximately  1.52% of the issued and  outstanding  shares of Allegiant  common stock. In October 2003, the remaining  shares of  Allegiant  common stock were  contributed  to a previously established  charitable  foundation.   In  conjunction  with  this  transaction, charitable  contribution  expense  was  recorded  of  $5.1  million,  which  was partially  offset  by a gain on the  contribution  of  these  available-for-sale investment  securities of $2.3 million,  representing the difference between the cost  basis  and  the  fair  value  of  the  common  stock  on the  date  of the contribution.  In addition, First Banks recognized a tax benefit of $2.5 million associated with this transaction.  The contribution of this stock eliminated the Company's  investment in Allegiant.  However, in conjunction with the settlement that occurred  during the fourth quarter of 2005,  First Banks  received  75,758 shares of common stock of National  City  Corporation,  successor to  Allegiant, with a fair value of  approximately  $2.5 million at the time of the settlement, which was treated as an adjustment to the purchase price of the acquisition.           On July 30, 2004,  First Banks completed its acquisition of CMC and its wholly owned banking  subsidiary,  Continental  Community Bank and Trust Company (CCB) for $4.2  million in cash,  and  redeemed  in full all of the  outstanding subordinated  promissory notes of CMC, including  accumulated accrued and unpaid interest,  totaling $4.5 million in aggregate.  The acquisition served to expand First Banks' banking franchise in Chicago,  Illinois. The transaction was funded through  internally  generated  funds.  CMC,  through CCB,  operated two banking offices in the Chicago  suburban  communities  of Aurora and Villa Park.  At the time of the  transaction,  CMC had  assets  of  $140.7  million,  loans,  net of unearned discount, of $73.6 million and deposits of $104.6 million.  Preliminary goodwill of $1.5 million was  subsequently  adjusted to  approximately  $100,000 during the third quarter of 2005,  and the core deposit  intangibles,  which are not  deductible  for tax  purposes  and are being  amortized  over  seven  years utilizing the straight-line  method,  were approximately  $2.0 million.  CMC was merged with and into SFC and CCB was merged with and into First Bank.           On August 31, 2004, SBLS LLC, a Nevada-based  limited liability company and  subsidiary  of First Bank,  purchased  substantially  all of the assets and assumed  certain  liabilities  of SBLS,  headquartered  in  Houston,  Texas,  in exchange  for cash and  certain  payments  contingent  on future  valuations  of specifically   identified  assets,   including  servicing  assets  and  retained interests  in   securitizations,   as  further  described  in  Note  24  to  the Consolidated Financial Statements. The transaction was funded through internally generated  funds. At the time of the  transaction,  SBLS LLC purchased from SBLS assets of $47.1 million,  including $24.0 million of SBA loans,  net of unearned discount, and $15.1 million of SBA servicing rights, and assumed $1.5 million of liabilities,  resulting  in a net cash  payment of $45.6  million.  Goodwill was approximately  $5.9 million and is deductible  for tax purposes.  In conjunction with this  transaction,  on August 30, 2004, First Bank granted to First Capital America, Inc. (FCA), a corporation owned by First Banks' Chairman and members of his immediate  family, an option to purchase  Membership  Interests of SBLS LLC. FCA  exercised  this option on June 30, 2005 and paid First Bank $7.4 million in cash. As a result of this transaction, SBLS LLC became 51.0% owned by First Bank and  49.0%  owned  by FCA,  and  accordingly,  effective  June 30,  2005,  FCA's ownership  interest is  recognized  as minority  interest in  subsidiary  in the consolidated  balance sheets and,  beginning July 1, 2006, the related  minority interest  in income or loss of  subsidiary  is  recognized  in the  consolidated statements of income.            On November 30, 2004, First Banks completed its acquisition of Hillside Investors,  Ltd.  (Hillside) and its wholly owned banking  subsidiary,  CIB Bank (collectively, CIB Bank), headquartered in Hillside, Illinois, for approximately $67.4 million in cash.  The  acquisition  served to  significantly  expand First Banks'  banking  franchise  in Chicago,  Illinois.  The  transaction  was funded through the  issuance of  subordinated  debentures  associated  with two private placements of $60.0 million in aggregate of trust preferred  securities  through newly formed affiliated statutory trusts, as further discussed in Note 12 to the Consolidated  Financial  Statements.  The  acquisition  was also funded  through borrowings  under  the  Company's  revolving  line of  credit  with a  group  of unaffiliated financial institutions. CIB Bank operated 16 banking offices in the Chicago, Illinois metropolitan area, including ten offices in Cook County, three offices in Lake  County,  two  offices  in Will  County and one office in DuPage County.  At the time of the  transaction,  CIB Bank had assets of $1.20 billion, loans, net of unearned  discount,  of $683.3 million,  investment  securities of $393.2  million  and  deposits  of  $1.10  billion.   Preliminary  goodwill  was approximately  $4.3  million  and the core  deposit  intangibles,  which are not deductible for tax purposes and are being  amortized over seven years  utilizing the straight-line method, were approximately $13.4 million. As further described below,  goodwill and core deposit intangibles were subsequently  adjusted during the first  quarter of 2005.  Hillside  was merged with and into SFC and CIB Bank was merged with and into First Bank.           The following table summarizes the estimated fair value of the Hillside assets  acquired  and  liabilities  assumed  at  the  date  of  acquisition.  As previously discussed,  the fair value adjustments  represented current estimates and were subject to further  adjustment as the valuation data was finalized,  as further described below.                                                                                    November 30, 2004                                                                         (dollars expressed in thousands)             Cash and cash equivalents.............................................     $  123,829          Investment securities.................................................        392,651           Loans, net of unearned discount.......................................        662,588          Allowance for loan losses.............................................        (26,373)                                                                                     ----------          Net loans.............................................................        636,215           Bank premises and equipment...........................................         11,449          Goodwill..............................................................          4,285          Core deposit intangibles..............................................         13,395          Deferred income taxes.................................................         13,348          Other assets..........................................................         20,836                                                                                     ----------              Total assets acquired.............................................     $1,216,008                                                                                     ==========           Deposits..............................................................     $1,102,041          Other borrowings......................................................         33,199          Deferred income taxes.................................................          1,375          Accrued expenses and other liabilities................................         12,010                                                                                     ----------              Total liabilities assumed.........................................      1,148,625                                                                                     ----------              Net assets acquired...............................................     $   67,383                                                                                     ==========             During  the  first  quarter  of  2005,  First  Banks  recorded  certain acquisition-related  adjustments  pertaining to its  acquisition of Hillside and CIB  Bank.   Acquisition-related   adjustments   included   additional  purchase accounting   adjustments  necessary  to  appropriately  adjust  the  preliminary goodwill  of $4.3  million  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.  The aggregate  adjustments  resulted in a purchase price  reallocation among goodwill,  core deposit  intangibles and bank premises and equipment.  The purchase price reallocation  resulted in the reallocation of $3.1 million of negative goodwill to core deposit  intangibles and bank premises and  equipment,  thereby  reducing such assets by $2.8 million and $2.4 million, net of the  related  tax  effect of $1.1  million  and  $941,000,  respectively. Following  the  recognition  of the  acquisition-related  adjustments,  goodwill    recorded was reduced from $4.3 million to zero and the core deposit intangibles, which are not  deductible  for tax purposes and are being  amortized  over seven years  utilizing the  straight-line  method,  were reduced from $13.4 million to $10.6 million,  net of the related tax effect. The individual  components of the $4.3 million  acquisition-related  adjustments  to goodwill and the $3.1 million purchase price reallocation recorded in the first quarter of 2005 are summarized as follows:           >>    a $1.6 million increase in goodwill to adjust time deposits,  net                of the related tax effect, to their estimated fair value;           >>    a $967,000  increase  in  goodwill  to adjust  other real  estate                owned,  net of the  related  tax effect,  to its  estimated  fair                value;           >>    a $10.0  million  reduction  in goodwill to adjust loans held for                sale,  net of the  related tax effect,  to their  estimated  fair                value.  These  adjustments  were based  upon the  receipt of loan                payoffs and  significantly  higher sales prices received over the                original  third-party  bid estimates,  for certain loans held for                sale. All of the acquired  nonperforming loans that had been held                for sale as of  December  31, 2004 had either been sold or repaid                as  of  March  31,  2005,   with  the  exception  of  one  credit                relationship, which was subsequently sold in April 2005;           >>    a $1.7  million  increase  in  goodwill,  net of the  related tax                effect,  and a related  decrease in core deposit  intangibles  of                $2.8 million, resulting from the purchase price reallocation; and           >>    a $1.4  million  increase  in  goodwill,  net of the  related tax                effect,  and a related decrease in bank premises and equipment of                $2.4 million, resulting from the purchase price reallocation.           On April  29,  2005,  First  Banks  completed  its  acquisition  of FBA Bancorp, Inc. (FBA) and its wholly owned subsidiary, First Bank of the Americas, S.S.B.  (FBOTA),  for $10.5 million in cash.  The  acquisition  served to expand First Banks' banking franchise in Chicago,  Illinois. The transaction was funded through internally generated funds. FBA was headquartered in Chicago,  Illinois, and through FBOTA,  operated three banking offices in the  southwestern  Chicago metropolitan communities of Back of the Yards, Little Village and Cicero. At the time of the acquisition, FBA had assets of $73.3 million, loans, net of unearned discount, of $54.3 million and deposits of $55.7 million.  Preliminary goodwill, which is not deductible for tax purposes,  was approximately  $2.8 million,  and the core deposit intangibles,  which are not deductible for tax purposes and are being  amortized  over seven years  utilizing  the  straight-line  method,  were approximately  $1.7  million.  FBA was merged  with and into SFC,  and FBOTA was merged with and into First Bank.           On September  23, 2005,  First Bank  completed  its  assumption  of the deposit  liabilities of the Roodhouse,  Illinois branch office of Bank and Trust Company,  an Illinois  commercial  bank,  for  $100,000 in cash.  At the time of assumption,  the deposit  liabilities  of the Roodhouse  branch office were $5.1 million. The core deposit intangibles, which are deductible for tax purposes and are being amortized over seven years utilizing the  straight-line  method,  were $100,000.           On  September  30,  2005,  First Banks  completed  its  acquisition  of International  Bank  of  California  (IBOC)  for  $33.7  million  in  cash.  The acquisition  served to further expand First Banks' banking franchise in Southern California,   providing  five   additional   banking  offices  in  Los  Angeles, California,  including  one branch in downtown Los Angeles and four  branches in eastern Los Angeles County, in Alhambra,  Arcadia,  Artesia and Rowland Heights. The transaction was funded with a portion of the proceeds of First Banks' $100.0 million term loan, as further discussed in Note 11 to the Consolidated Financial Statements.  At the time of the acquisition,  IBOC had assets of $151.6 million, loans,  net of  unearned  discount,  of $113.5  million  and  deposits of $132.1 million.  Preliminary  goodwill,  which is not deductible for tax purposes,  was approximately  $12.0 million,  and the core deposit  intangibles,  which are not deductible for tax purposes and are being  amortized over seven years  utilizing the straight-line  method, were approximately $3.8 million. IBOC was merged with and into First Bank.           On October 31, 2005,  First Banks completed its acquisition of Northway State Bank (NSB) for $10.3  million in cash.  The  acquisition  served to expand First Banks' banking franchise in Chicago,  Illinois. The transaction was funded through  internally   generated  funds.  NSB  was  headquartered  in  Grayslake, Illinois, and operated one banking office located in Lake County in the northern Chicago  metropolitan  area. At the time of the  acquisition,  NSB had assets of $50.4 million, loans, net of unearned discount, of $41.8 million and deposits of $45.2 million.  Preliminary goodwill,  which is not deductible for tax purposes,    was approximately $3.8 million, and the core deposit intangibles,  which are not deductible for tax purposes and are being  amortized over seven years  utilizing the straight-line method, were approximately  $909,000.  NSB was merged with and into First Bank.           Pending Acquisitions           On August 1,  2005,  First  Banks  executed  an  Agreement  and Plan of Reorganization,  which was restated as a Stock  Purchase  Agreement with certain shareholders  of First National Bank of Sachse (FNBS) on October 28, 2005,  that provided  for First Banks to acquire the  outstanding  common  stock of FNBS for $45.62 per share. FNBS operated one banking office in Sachse,  Texas, located in the northeast Dallas  metropolitan  area. As further described in Note 25 to the Consolidated Financial Statements, First Banks completed its acquisition of FNBS on January 3, 2006.           On  November  18,  2005,  First  Bank  executed a Branch  Purchase  and Assumption  Agreement  that provided for First Bank to acquire the branch office of Dallas  National Bank located at 4251 East Renner Road, in Richardson,  Texas (East  Renner  Branch).  As  further  described  in Note 25 to the  Consolidated Financial Statements, First Bank completed its purchase of assets and assumption of liabilities of the East Renner Branch on January 20, 2006.           On December 19,  2005,  First Banks  executed an Agreement  and Plan of Reorganization  providing for the acquisition of Pittsfield  Community  Bancorp, Inc.  (Bancorp)  and its wholly  owned  banking  subsidiary,  Community  Bank of Pittsfield  (Pittsfield),  for approximately $4.9 million in cash. Pittsfield is headquartered in Pittsfield,  Illinois and operates two banking offices,  one in Pittsfield,  Illinois,  and one in Mount Sterling,  Illinois.  The  transaction, which is subject to regulatory approvals, is expected to be completed during the second  quarter of 2006.  At December 31, 2005,  Pittsfield  reported  assets of approximately $17.0 million,  loans, net of unearned discount,  of approximately $10.7 million,  deposits of approximately $13.7 million and stockholders' equity of  approximately  $2.7  million.  As  further  described  in  Note  25  to  the Consolidated  Financial  Statements,  on March 7, 2006,  First  Bank  executed a Purchase and Assumption  Agreement  providing for the sale of the banking office located in Mount Sterling,  Illinois to Beardstown  Savings,  s.b.  (Beardstown) following the completion of First Banks' acquisition of Bancorp.           Subsequent to December 31, 2005,  First Banks and/or First Bank entered into  three  agreements  related  to  acquisition  transactions,  as more  fully described in Note 25 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  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 $542,000,  as summarized in the following table, is comprised of contractual obligations under salary continuation agreements to six individuals with remaining terms ranging from approximately one to ten years. As the  obligation  to make  payments  under  these  agreements  is  accrued at the consummation  date,  such  payments  do not have any impact on the  consolidated statements of income.  First Banks also incurs integration costs associated with acquisitions that are expensed in the consolidated  statements of income.  These costs relate  principally to additional  costs incurred in conjunction  with the information technology conversions of the respective entities.                A  summary  of  the  cumulative   acquisition  and  integration   costs attributable  to  the  Company's  acquisitions,  which  were  accrued  as of the consummation  dates  of the  respective  acquisition,  is  listed  below.  These acquisition and integration costs are reflected in accrued and other liabilities in the consolidated balance sheets.                                                                                       Information                                                                 Severance       Technology Fees        Total                                                                 ---------       ---------------        -----                                                                       (dollars expressed in thousands)               Balance at December 31, 2002........................    $ 2,351                28             2,379          Year Ended December 31, 2003:            Amounts accrued at acquisition date...............        100               350               450            Reversal to goodwill..............................        (39)             (108)             (147)            Payments..........................................     (1,000)             (270)           (1,270)                                                                  -------            ------            ------          Balance at December 31, 2003........................      1,412                --             1,412                                                                  -------            ------            ------          Year Ended December 31, 2004:            Amounts accrued at acquisition date...............        180               496               676            Payments..........................................       (831)             (496)           (1,327)                                                                  -------            ------            ------          Balance at December 31, 2004........................        761                --               761                                                                  -------            ------            ------            Year Ended December 31, 2005:            Amounts accrued at acquisition date...............        785             1,265             2,050            Payments..........................................     (1,004)           (1,131)           (2,135)                                                                  -------            ------            ------          Balance at December 31, 2005........................    $   542               134               676                                                                  =======            ======            ======      (3)      INVESTMENTS IN DEBT AND EQUITY SECURITIES           Securities   Available  for  Sale.  The  amortized  cost,   contractual maturity,  gross  unrealized  gains  and  losses  and fair  value of  investment securities available for sale at December 31, 2005 and 2004 were as follows:                                                               Maturity                                           -----------------------------------------                                                                                         Total       Gross                                                                              After      Amor-     Unrealized              Weighted                                             1 Year      1-5       5-10        10        tized   --------------     Fair    Average                                            or Less     Years      Years      Years      Cost    Gains   Losses     Value    Yield                                            -------     -----      -----      -----      ----    -----   ------     -----    -----                                                                      (dollars expressed in thousands)  December 31, 2005:     Carrying value:        U.S. Government sponsored                   agencies....................    $212,869    181,800      4,400         --    399,069     --   (4,725)   394,344   3.32%        Mortgage-backed securities.....         281      9,899     52,121    783,831    846,132    149  (22,156)   824,125   4.60        State and political           subdivisions................       5,574     17,242      8,864        710     32,390    293     (109)    32,574   3.79        Corporate debt securities......       7,721         --         --         --      7,721     --      (15)     7,706   4.58        Equity investments ............         156         --         --     16,995     17,151    961       --     18,112   4.64        Federal Home Loan Bank and           Federal Reserve Bank stock           (no stated maturity)........      34,428         --         --         --     34,428     --       --     34,428   4.87                                           --------    -------    -------    -------  ---------  -----  -------  ---------               Total...................    $261,029    208,941     65,385    801,536  1,336,891  1,403  (27,005) 1,311,289   4.21                                           ========    =======    =======    =======  =========  =====  =======  =========   ====      Fair value:        Debt securities................    $224,429    206,076     64,207    764,037        Equity securities..............      34,584         --         --     17,956                                           --------    -------    -------    -------               Total...................    $259,013    206,076     64,207    781,993                                           ========    =======    =======    =======      Weighted average yield............        3.27%      3.72%      4.33%      4.62%                                           ========    =======    =======    =======   December 31, 2004:     Carrying value:        U.S. Treasury..................    $  9,977         --         --         --      9,977     --       (3)     9,974   2.31%        U.S. Government sponsored           agencies....................     165,551    486,621     12,556         --    664,728    529   (2,736)   662,521   3.11        Mortgage-backed securities.....         244     12,435     77,558    941,140  1,031,377  3,661   (6,863) 1,028,175   4.55        State and political           subdivisions................       4,467     20,149     13,492      2,479     40,587    650      (10)    41,227   3.63        Corporate debt securities......       6,218         --         --         --      6,218     26       (1)     6,243   5.40        Equity investments ............         367         --         --     10,230     10,597    383       --     10,980   6.72        Federal Home Loan Bank and           Federal Reserve Bank stock           (no stated maturity)........      28,943         --         --         --     28,943     --       --     28,943   4.98                                           --------    -------    -------    -------  ---------  -----  -------  ---------               Total...................    $215,767    519,205    103,606    953,849  1,792,427  5,249   (9,613) 1,788,063   4.01                                           ========    =======    =======    =======  =========  =====  =======  =========   ====      Fair value:        Debt securities................    $186,472    517,273    103,989    940,406        Equity securities..............      29,310         --         --     10,613                                           --------    -------    -------    -------               Total...................    $215,782    517,273    103,989    951,019                                           ========    =======    =======    =======      Weighted average yield............        2.82%      3.28%      4.55%      4.61%                                           ========    =======    =======    =======             Securities Held to Maturity.  The amortized cost, contractual maturity, gross unrealized  gains and losses and fair value of investment  securities held to maturity at December 31, 2005 and 2004 were as follows:                                                           Maturity                                           --------------------------------------                                                                                      Total         Gross                                                                            After     Amor-       Unrealized                Weighted                                            1 Year     1-5       5-10        10       tized    ----------------     Fair     Average                                           or Less    Years     Years       Years     Cost     Gains     Losses     Value     Yield                                           -------    -----     -----       -----     ----     -----     ------     -----     -----                                                                      (dollars expressed in thousands)   December 31, 2005:     Carrying value:                  Mortgage-backed securities.....    $    --       --     6,970       8,495    15,465       9       (321)     15,153    5.09%        State and political          subdivisions.................      1,350    8,331       695         264    10,640      67        (69)     10,638    4.20                                           -------    -----     -----      ------    ------     ---       ----      ------    ----            Total......................    $ 1,350    8,331     7,665       8,759    26,105      76       (390)     25,791    4.73                                           =======    =====     =====      ======    ======     ===       ====      ======    ====      Fair value:        Debt securities................    $ 1,355    8,328     7,509       8,599                                           =======    =====     =====      ======      Weighted average yield............       4.40%    4.20%     5.03%       5.02%                                           =======    =====     =====      ======   December 31, 2004:     Carrying value:        Mortgage-backed securities.....    $    --       --     7,060      10,288    17,348      96         (1)     17,443    5.01%        State and political          subdivisions.................        545    5,150     1,977         266     7,938     211         (6)      8,143    4.52                                           -------    -----     -----      ------    ------     ---       ----      ------    ----            Total......................    $   545    5,150     9,037      10,554    25,286     307         (7)     25,586    4.86                                           =======    =====     =====      ======    ======     ===       ====      ======    ====      Fair value:        Debt securities................    $   556    5,340     9,080      10,610                                           =======    =====     =====      ======      Weighted average yield............       4.93%    4.13%     5.22%       4.89%                                           =======    =====     =====      ======            There were no sales of trading  securities  for the year ended December 31, 2005. Proceeds from sales of  available-for-sale  investment securities were $147.1 million,  $26.3 million and $6.0 million for the years ended December 31, 2005, 2004 and 2003,  respectively.  There were no gross gains realized on sales of available-for-sale investment securities in 2005. Gross gains of $257,100 and $576,600 were  realized on these sales during the years ended  December 31, 2004 and 2003,  respectively.  Gross losses of $2.9 million were realized on sales of available-for-sale  investment  securities  during the year ended  December  31, 2005. The gross loss of $2.9 million resulted from the sale of $150.0 million of available-for-sale  investment securities for liquidity purposes,  including the related termination of a $50.0 million term repurchase agreement on November 22, 2005, as further  described in Note 5 and Note 10 to the Consolidated  Financial Statements.  There were no gross losses realized on sales of  available-for-sale investment securities in 2004 and 2003.           In 2003,  First Banks also recognized  noncash gains of $6.3 million on the partial exchange of Allegiant common stock for a 100% ownership  interest in BSG, and a $2.3 million gain on the  subsequent  contribution  of the  remaining shares of Allegiant common stock to a charitable foundation.  In addition, First Banks  recognized  a  $431,000  impairment  loss due to an  other-than-temporary decline in the fair value of an equity fund investment.           Proceeds from calls of investment securities were $16.6 million,  $63.1 million and $41.5 million for the years ended December 31, 2005,  2004 and 2003, respectively.  There were no gross gains  realized on called  securities in 2005 and 2004. Gross gains of $11,200 were realized on these called securities during the year ended  December  31,  2003.  Gross  losses of $3,800  and  $1,900  were realized on these called securities during the years ended December 31, 2005 and 2003, respectively.  There were no gross losses realized on called securities in 2004.           First Bank is a member of the Federal Home Loan Bank (FHLB)  system and the Federal Reserve Bank (FRB) system and maintains  investments in FHLB and FRB stock.  These  investments  are recorded at cost,  which  represents  redemption value.  The  investment  in FRB stock is  maintained at a minimum of 6% of First Bank's  capital  stock and capital  surplus.  The  investment in FHLB of Chicago stock is  maintained at a minimum of 5% of advances.  The  investment in FHLB of Des Moines stock is maintained at an amount equal to 0.12% of First Bank's total assets as of December 31, 2004, up to a maximum of $10.0 million,  plus 4.45% of advances and 0.15% of outstanding standby letters of credit.            Investment  securities  with a carrying value of  approximately  $619.4 million and $731.8  million at December  31, 2005 and 2004,  respectively,  were pledged in connection  with deposits of public and trust funds,  securities sold under agreements to repurchase and for other purposes as required by law.           Gross unrealized losses on investment  securities and the fair value of the related  securities,  aggregated by  investment  category and length of time that individual  securities have been in a continuous  unrealized loss position, at December 31, 2005 and 2004, were as follows:                                                                      December 31, 2005                                    ---------------------------------------------------------------------------                                      Less than 12 months        12 months or more              Total                                    -----------------------  ------------------------   -----------------------                                       Fair      Unrealized     Fair       Unrealized      Fair      Unrealized                                       Value       Losses       Value        Losses        Value       Losses                                    ----------   ----------  ----------    ----------   ----------   ----------                                                            (dollars expressed in thousands) Available for sale:    U.S. Government sponsored             agencies...................   $  206,641     (2,374)     187,702       (2,351)       394,343     (4,725)    Mortgage-backed securities...      375,462     (8,368)     411,640      (13,788)       787,102    (22,156)    State and political      subdivisions...............       11,653        (97)         833          (12)        12,486       (109)    Corporate debt securities....        7,706        (15)          --           --          7,706        (15)                                    ----------    -------      -------      -------      ---------    -------          Total..................   $  601,462    (10,854)     600,175      (16,151)     1,201,637    (27,005)                                    ==========    =======      =======      =======      =========    =======  Held to maturity:    Mortgage-backed securities...   $   14,828       (321)          --           --         14,828       (321)    State and political      subdivisions...............        4,462        (58)         365          (11)         4,827        (69)                                    ----------    -------      -------      -------      ---------    -------           Total..................   $   19,290       (379)         365          (11)        19,655       (390)                                    ==========    =======      =======      =======      =========    =======                                                                   December 31, 2004                                    ---------------------------------------------------------------------------                                      Less than 12 months       12 months or more               Total                                    -----------------------  -----------------------    -----------------------                                       Fair      Unrealized     Fair      Unrealized       Fair      Unrealized                                       Value       Losses       Value       Losses         Value       Losses                                    ----------   ----------  ----------   ----------    ----------   ----------                                                            (dollars expressed in thousands) Available for sale:    U.S. Treasury................   $    9,974         (3)          --           --          9,974         (3)    U.S. Government sponsored      agencies...................      480,912     (2,736)          --           --        480,912     (2,736)    Mortgage-backed securities...      657,939     (6,863)          --           --        657,939     (6,863)    State and political      subdivisions...............        1,964        (10)          --           --          1,964        (10)    Corporate debt securities....          510         (1)          --           --            510         (1)                                    ----------    -------      -------      -------      ---------    -------          Total..................   $1,151,299     (9,613)          --           --      1,151,299     (9,613)                                    ==========    =======      =======      =======      =========    =======  Held to maturity:    Mortgage-backed securities...   $    3,161         (1)          --           --          3,161         (1)    State and political      subdivisions...............          926         (6)          --           --            926         (6)                                    ----------    -------      -------      -------      ---------    -------           Total..................   $    4,087         (7)          --           --          4,087         (7)                                    ==========    =======      =======      =======      =========    =======             U.S. Treasury,  U.S. Government  sponsored agencies and mortgage-backed securities - The unrealized losses on investments in mortgage-backed securities, U.S. Treasury securities and other agency securities were caused by fluctuations in interest rates.  The contractual  terms of these securities are guaranteed by government-sponsored  enterprises.  It is expected that the securities would not be settled at a price less than the amortized cost.  Because First Banks has the ability and intent to hold these  investments  until a market price  recovery or maturity, these investments are not considered  other-than-temporarily impaired. However,  First Banks may choose to sell certain  available-for-sale  investment securities at a loss for liquidity or other purposes,  if deemed  necessary.  At December 31, 2005, the unrealized losses for U.S. government  sponsored agencies for 12 months or more  included 14  securities,  and the  unrealized  losses for mortgage-backed securities for 12 months or more included 62 securities.           State and political  subdivisions  and corporate debt  securities - The unrealized  losses  on  investments  in state  and  political  subdivisions  and corporate debt  securities  were caused by fluctuations in interest rates. It is expected  that the  securities  would not be  settled  at a price  less than the amortized cost.  Because the decline in fair value is attributable to changes in interest rates and not credit  quality,  and because First Banks has the ability and intent to hold these  investments until a market price recovery or maturity, these  investments  are  not  considered   other-than-temporarily  impaired.  At December 31, 2005,  the unrealized  losses for state and political  subdivisions for 12 months or more included seven securities.  (4)      LOANS AND ALLOWANCE FOR LOAN LOSSES           Changes in the allowance  for loan losses for the years ended  December 31, 2005, 2004 and 2003 were as follows:                                                                          2005         2004          2003                                                                        ----         ----          ----                                                                       (dollars expressed in thousands)               Balance, beginning of year..............................   $ 150,707      116,451       99,439          Acquired allowances for loan losses.....................       1,989       33,752          757          Other adjustments (1)(2)................................          --         (479)          --                                                                     ---------      -------      -------                                                                       152,696      149,724      100,196                                                                     ---------      -------      -------          Loans charged-off.......................................     (33,123)     (50,643)     (55,773)          Recoveries of loans previously charged-off..............      19,757       25,876       23,028                                                                     ---------      -------      -------             Net loans charged-off................................     (13,366)     (24,767)     (32,745)                                                                     ---------      -------      -------          Provision for loan losses...............................      (4,000)      25,750       49,000                                                                     ---------      -------      -------          Balance, end of year....................................   $ 135,330      150,707      116,451                                                                     =========      =======      =======          ---------------          (1) In December 2003, First Bank established a $1.0 million specific reserve for estimated losses              on a $5.3 million letter of credit that was recorded in accrued and other liabilities in  the              consolidated balance sheets. In January 2004, the letter of credit was fully funded as a loan              and  the  related $1.0 million  specific  reserve  was  reclassified  from  accrued and other              liabilities to the allowance for loan losses.          (2) In June 2004,  First Bank  reclassified $1.5 million from the  allowance  for  loan losses to              accrued and other liabilities to establish a specific reserve associated  with the commercial              leasing  portfolio  sale  and  related  recourse  obligations  for  certain leases sold. This              liability has been reduced to $500,000 at December 31,  2005, as further described in Note 24              to the Consolidated Financial Statements.              At December 31, 2005 and 2004,  First Banks had $97.2 million and $85.8 million of impaired loans, consisting of loans on nonaccrual status. Interest on nonaccrual  loans that would have been recorded  under the original terms of the loans was $9.9  million,  $4.4  million  and $5.9  million  for the years  ended December 31, 2005, 2004 and 2003, respectively.  Of these amounts, $3.4 million, $716,000 and $2.6 million was recorded as interest income on such loans in 2005, 2004  and  2003,  respectively.  The  allowance  for  loan  losses  includes  an allocation for each impaired loan. The aggregate allocation of the allowance for loan losses related to impaired loans was approximately  $20.1 million and $21.4 million at  December  31,  2005 and 2004,  respectively.  The  average  recorded investment in impaired loans was $79.9 million,  $77.3 million and $69.6 million for the years ended December 31, 2005, 2004 and 2003,  respectively.  The amount of interest income recognized using a cash basis method of accounting during the time these loans were  impaired was $3.6  million,  $717,000 and $2.6 million in 2005, 2004 and 2003,  respectively.  At December 31, 2005 and 2004,  First Banks had $5.6 million and $28.7 million,  respectively,  of loans past due 90 days or more and still accruing interest.  First Banks did not have any acquired problem loans that are being accounted for under SOP 03-3 at December 31, 2005.           First Banks' primary market areas are the states of Missouri, Illinois, Texas and California.  At December 31, 2005 and 2004,  approximately 91% and 90% of the total loan  portfolio,  respectively,  and 83% and 82% of the commercial, financial and agricultural loan portfolio,  respectively, were made to borrowers within these states.           Real estate lending  constituted the only significant  concentration of credit risk. Real estate loans comprised  approximately  76% and 74% of the loan portfolio  at December  31, 2005 and 2004,  respectively,  of which 27% and 22%, respectively,  were made to  consumers  in the form of  residential  real estate mortgages  and home equity lines of credit.  First Bank also offers  residential real estate  mortgage loans with terms that require  interest only payments.  At December 31, 2005, the balance of such loans was $332.3 million, of which $194.6 million were held for portfolio and $137.7 million were held for sale.           In general,  First Banks is a secured lender.  At December 31, 2005 and 2004,  99% of the loan portfolio was  collateralized.  Collateral is required in accordance   with  the  normal   credit   evaluation   process  based  upon  the creditworthiness  of the  customer  and the  credit  risk  associated  with  the particular transaction.           Loans to directors,  their  affiliates and executive  officers of First Banks, Inc. were  approximately  $37.9 million and $31.0 million at December 31, 2005 and 2004, respectively, as further discussed in Note 19 to the Consolidated Financial Statements.       (5)      DERIVATIVE INSTRUMENTS           First Banks utilizes derivative financial  instruments to assist in the management of interest rate sensitivity by modifying the repricing, maturity and option  characteristics of certain assets and liabilities.  Derivative financial instruments  held by First Banks at December 31, 2005 and 2004 are summarized as follows:                                                                          December 31,                                                     ------------------------------------------------                                                              2005                      2004                                                     -----------------------  -----------------------                                                      Notional     Credit      Notional     Credit                                                       Amount     Exposure      Amount     Exposure                                                       ------     --------      ------     --------                                                             (dollars expressed in thousands)                Cash flow hedges........................   $ 300,000      114         500,000      1,233          Fair value hedges.......................      25,000      748         276,200      9,609          Interest rate floor agreement...........     100,000       70              --         --          Interest rate lock commitments..........       5,900       --           5,400         --          Forward commitments to sell             mortgage-backed securities...........      47,000       --          34,000         --                                                     =========      ===         =======      =====            The  notional  amounts  of  derivative  financial  instruments  do  not represent amounts exchanged by the parties and, therefore,  are not a measure of First Banks' credit exposure  through its use of these  instruments.  The credit exposure  represents  the  loss  First  Banks  would  incur  in  the  event  the counterparties  failed  completely  to  perform  according  to the  terms of the derivative  financial  instruments and the collateral held to support the credit exposure was of no value.           For the years  ended  December  31,  2005,  2004 and 2003,  First Banks realized net interest  income of $2.2 million,  $50.1 million and $64.6 million, respectively, on its derivative financial instruments.  First Banks recorded net losses on derivative  instruments,  which are included in noninterest  income in the consolidated  statements of income, of $1.1 million and $1.5 million for the years ended  December 31, 2005 and 2004,  respectively,  in  comparison to a net gain of $496,000 for the year ended December 31, 2003.           Cash Flow Hedges.  First Banks entered into the following interest rate swap  agreements,  designated as cash flow hedges,  to effectively  lengthen the repricing  characteristics of certain interest-earning assets to correspond more closely with their funding source with the objective of  stabilizing  cash flow, and accordingly, net interest income over time:           >>    During  September 2000,  March 2001,  April 2001,  March 2002 and                July 2003, First Banks entered into interest rate swap agreements                of $600.0 million, $200.0 million, $175.0 million, $150.0 million                and $200.0 million notional amount, respectively.  The underlying                hedged  assets are certain  loans within First Banks'  commercial                loan portfolio.  The swap agreements,  which have been designated                as cash flow  hedges,  provide for First Banks to receive a fixed                rate  of  interest  and  pay  an  adjustable   rate  of  interest                equivalent  to the  weighted  average  prime  lending  rate minus                2.70%, 2.82%, 2.82%, 2.80% and 2.85%, respectively.  The terms of                the swap  agreements  provide  for First Banks to pay and receive                interest on a quarterly  basis.  In  November  2001,  First Banks                terminated  $75.0 million  notional amount of the swap agreements                originally  entered into in April 2001,  which would have expired                in April 2006, in order to appropriately modify its overall hedge                position in  accordance  with its interest  rate risk  management                program. In addition,  the $150.0 million notional swap agreement                that was entered  into in March 2002  matured in March 2004,  the                $600.0 million notional swap agreements that were entered into in                September 2000 matured in September  2004, and the $200.0 million                notional  swap  agreement  that was  entered  into in March  2001                matured on March 21, 2005.  The amount  receivable by First Banks                under the swap  agreements  was $2.4  million and $2.7 million at                December 31, 2005 and 2004, respectively,  and the amount payable                by First Banks  under the swap  agreements  was $2.5  million and                $1.4 million at December 31, 2005 and 2004, respectively.           In October 2004, First Banks  implemented the guidance  required by the FASB's Derivatives Implementation Group on SFAS No. 133 Implementation Issue No. G25, Cash Flow Hedges:  Using the  First-Payments-Received  Technique in Hedging    the Variable Interest Payments on a Group of Non-Benchmark-Rate-Based Loans (DIG issue G25) and de-designated all of the specific  pre-existing cash flow hedging relationships  that  were  inconsistent  with the  guidance  in DIG  Issue  G25. Consequently,  the $4.1 million net gain associated with the de-designated  cash flow hedging relationships at September 30, 2004, is being amortized to interest income over the remaining lives of the respective hedging  relationships,  which ranged   from   approximately   six  months  to  three  years  at  the  date  of implementation.  First Banks elected to prospectively re-designate new cash flow hedging  relationships based upon minor revisions to the underlying hedged items as required by the  guidance in DIG Issue G25. The  implementation  of DIG Issue G25 did not and is not  expected  to have a  material  impact  on  First  Banks' consolidated  financial statements,  results of operations or interest rate risk management program.           The maturity dates, notional amounts,  interest rates paid and received and fair value of First Banks' interest rate swap agreements  designated as cash flow hedges as of December 31, 2005 and 2004 were as follows:                                               Notional        Interest Rate     Interest Rate      Fair                   Maturity Date             Amount             Paid            Received         Value                   -------------             ------             ----            --------         -----                                                           (dollars expressed in thousands)          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)                                           =========            ====              ====         ========           December 31, 2004:             March 21, 2005............    $ 200,000            2.43%             5.24%        $  1,155             April 2, 2006.............      100,000            2.43              5.45            2,678             July 31, 2007.............      200,000            2.40              3.08           (2,335)                                           ---------                                           --------                                           $ 500,000            2.42              4.42         $  1,498                                           =========            ====              ====         ========              Fair Value Hedges. First Banks entered into the following interest rate swap  agreements,  designated as fair value hedges,  to effectively  shorten the repricing characteristics of certain interest-bearing  liabilities to correspond more closely with their  funding  source with the objective of  stabilizing  net interest income over time:           >>    During  January  2001,  First Banks  entered  into $50.0  million                notional  amount of three-year  interest rate swap agreements and                $150.0 million  notional  amount of five-year  interest rate swap                agreements  that provided for First Banks to receive a fixed rate                of interest and pay an adjustable rate of interest  equivalent to                the  three-month  London  Interbank  Offering Rate  (LIBOR).  The                underlying  hedged  liabilities  were a portion  of First  Banks'                other time deposits.  The terms of the swap  agreements  provided                for First Banks to pay interest on a quarterly  basis and receive                interest on a semiannual  basis.  The amount  receivable by First                Banks under the swap  agreements was $3.9 million at December 31,                2004,  and the  amount  payable  by First  Banks  under  the swap                agreements  was $695,000 at December 31, 2004.  During  September                2003, First Banks discontinued hedge accounting  treatment on the                $50.0 million  notional  amount of three-year swap agreements due                to the loss of the highly  correlated hedge positions between the                swap  agreements  and  the  underlying  hedged  liabilities.  The                related $1.3 million basis  adjustment of the  underlying  hedged                liabilities was recorded as a reduction of interest  expense over                the remaining  weighted average maturity of the underlying hedged                liabilities,  which was approximately  three months. In addition,                the effect of the loss of the highly correlated hedge position on                the swap agreements  resulted in the recognition of a net loss of                $291,000,  which was included in  noninterest  income.  The $50.0                million   notional  swap  agreement   matured  in  January  2004.                Effective February 25, 2005, First Banks terminated the remaining                $150.0 million notional 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  adjustment of the  underlying                hedged  liabilities  was  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,  June 2002,  March  2003 and April  2003,  First                Banks entered into $55.2 million,  $46.0  million,  $25.0 million                and $46.0 million notional amount, respectively, of interest rate                swap  agreements  that provide for First Banks to receive a fixed                rate  of  interest  and  pay  an  adjustable   rate  of  interest                equivalent to the three-month LIBOR plus 2.30%,  1.97%, 2.55% and                2.58%,  respectively.  The underlying  hedged  liabilities  are a                portion of First Banks' subordinated debentures. The terms of the                swap  agreements  provide  for  First  Banks  to pay and  receive                interest on a quarterly basis. The amounts receivable and payable                by First Banks  under the swap  agreements  at December  31, 2005                were $506,000 and $420,000,  respectively.  There were no amounts                receivable or payable  under the swap  agreements at December 31,                2004.  The  $46.0  million  notional  amount  interest  rate swap                agreement  that was  entered  into in June 2002 was called by its                counterparty  in May 2003  resulting in final  settlement of this                interest  rate swap  agreement  in June 2003.  Effective  May 27,                2005,  First Banks terminated the $55.2 million and $46.0 million                notional swap agreements in order to appropriately  modify future                hedge  positions in  accordance  with First Banks'  interest rate                risk management program.  The resulting $854,000 basis adjustment                of the  underlying  hedged  liabilities,  in aggregate,  is 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.  As  further                discussed in Note 25 to the  Consolidated  Financial  Statements,                effective February 16, 2006, First Banks terminated the remaining                $25.0 million notional swap agreement.           The maturity dates, notional amounts,  interest rates paid and received and fair value of First Banks' interest rate swap agreements  designated as fair value hedges as of December 31, 2005 and 2004 were as follows:                                               Notional        Interest Rate     Interest Rate      Fair                   Maturity Date             Amount             Paid            Received         Value                   -------------             ------             ----            --------         -----                                                           (dollars expressed in thousands)           December 31, 2005:                                                           March 20, 2033 (1).........   $  25,000            6.57%             8.10%         $(1,460)                                           =========            ====              ====          =======           December 31, 2004:             January 9, 2006 (2)........   $ 150,000            2.06%             5.51%         $ 3,610             December 31, 2031 (3)......      55,200            4.27              9.00            2,171             March 20, 2033.............      25,000            4.52              8.10             (929)             June 30, 2033 (3)..........      46,000            4.55              8.15           (1,689)                                           ---------                                            -------                                           $ 276,200            3.14              6.88          $ 3,163                                           =========            ====              ====          =======          --------------          (1) The interest rate swap agreement was terminated effective February  16,  2006, as further              discussed in Note 25 to the Consolidated Financial Statements.          (2) The interest rate swap agreement was terminated effective February 25, 2005.          (3) The interest rate swap agreements were terminated effective May 27, 2005.            Interest  Rate Floor and Cap  Agreements.  On September 9, 2005,  First Bank entered into a $100.0  million  notional  amount  three-year  interest rate floor agreement in conjunction  with its interest rate risk management  program. The interest rate floor agreement provides for First Bank to receive a quarterly fixed rate of interest of 5.00% should the three-month LIBOR equal or fall below the  strike  price of 2.00%.  The  carrying  value of the  interest  rate  floor agreement, which is included in other assets in the consolidated balance sheets, was $70,000 at December 31, 2005.           During  2003 and 2004,  First Bank  entered  into five term  repurchase agreements under master repurchase  agreements with unaffiliated  third parties, as further discussed in Note 10 to the 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 and further  protecting  net interest  margin against changes in interest rates.  The interest rate floor  agreements  included within the term repurchase  agreements (and the interest rate cap agreements previously 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 the  consolidated  balance sheets and the related interest expense is  reflected  as  interest  expense  on other  borrowings  in the  consolidated statements  of  income.  As  further  described  in Note 10 to the  Consolidated    Financial  Statements,  on March 21,  2005,  in  accordance  with the  Company's interest rate risk management  program,  First Bank modified its term repurchase agreements under master repurchase agreements with unaffiliated third parties 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.  First Bank 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. As further described in Note 3 and Note 10 to the  Consolidated  Financial  Statements,  on November  22, 2005, First  Bank  terminated  its $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 the  underlying  securities  associated  with  the term repurchase  agreement.  In  addition,  as  further  described  in Note 25 to the Consolidated  Financial Statements,  on February 14, 2006, First Bank terminated its two $50.0 million term repurchase agreements with maturity dates of June 14, 2007.           Pledged  Collateral.  At December 31, 2005 and 2004,  First Banks had a $2.0 million and a $5.0 million  letter of credit,  respectively,  issued on its behalf to the counterparty and had pledged investment  securities  available for sale with a fair value of $5.1 million and $527,000, respectively, in connection with its interest rate swap  agreements.  At December 31, 2005,  First Banks had pledged cash of $1.8 million as collateral in connection  with its interest rate swap  agreements.  At December 31, 2004,  First Banks had accepted  cash of $6.0 million as collateral in connection with its interest rate swap agreements.           Interest  Rate  Lock   Commitments  /  Forward   Commitments   to  Sell Mortgage-Backed  Securities.  Derivative  financial  instruments issued by First Banks 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 the  consolidated  balance  sheets was  ($49,000) and $20,000 at December 31, 2005 and 2004, respectively.  (6)      SERVICING RIGHTS           Mortgage Banking Activities. At December 31, 2005 and 2004, First Banks serviced mortgage loans for others amounting to $1.01 billion and $1.06 billion, respectively.  Borrowers' escrow balances held by First Banks on such loans were $5.0  million  and $4.4  million at December  31,  2005 and 2004,  respectively. Changes in mortgage servicing rights,  net of amortization,  for the years ended December 31, 2005 and 2004 were as follows:                                                                                      2005          2004                                                                                  ----          ----                                                                          (dollars expressed in thousands)              Balance, beginning of year.......................................     $ 10,242       15,408          Servicing rights acquired during the period......................          435          155          Originated mortgage servicing rights.............................          904        1,221          Amortization.....................................................       (4,958)      (6,542)                                                                                --------       ------          Balance, end of year.............................................     $  6,623       10,242                                                                                ========       ======            First Banks did not incur any impairment of mortgage  servicing  rights during the years ended  December  31, 2005 and 2004.  During  2003,  First Banks recognized  impairment of $800,000 through a valuation allowance associated with a decline in the fair value of an individual  mortgage  servicing rights stratum below  its  carrying  value,  net  of  the  valuation  allowance.   First  Banks subsequently  reversed the impairment  valuation allowance in 2003 based upon an increase in the fair value of the mortgage  servicing  rights  stratum above the carrying value, net of the valuation allowance.              Amortization of mortgage servicing rights at December 31, 2005 has been estimated in the following table:                                                                                     (dollars expressed in thousands)          Year ending December 31:                  2006........................................................................   $ 3,266               2007........................................................................     1,991               2008........................................................................       881               2009........................................................................       352               2010........................................................................       133                                                                                              -------                   Total...................................................................   $ 6,623                                                                                              =======            Other Servicing Activities.  At December 31, 2005 and 2004, First Banks serviced SBA loans for others  amounting to $163.4  million and $174.7  million, respectively.  Changes in SBA servicing  rights,  net of  amortization,  for the years ended December 31, 2005 and 2004 were as follows:                                                                                            2005          2004                                                                                         ----          ----                                                                                  (dollars expressed in thousands)             Balance, beginning of year..............................................     $ 13,013           --          Servicing rights acquired during the year...............................           --       13,983          Originated servicing rights.............................................        1,065          373          Amortization............................................................       (2,230)        (884)          Changes in impairment valuation allowance...............................       (2,359)        (459)                                                                                       --------       ------          Balance, end of year....................................................     $  9,489       13,013                                                                                       ========       ======           First Banks recognized  impairment of $2.4 million and $459,000 for the years ended  December 31, 2005 and 2004,  respectively.  The  impairment of $2.4 million recorded for the year ended December 31, 2005 resulted from a decline in the fair value of the SBA servicing  assets below the carrying  value  primarily related to substantial  damage to several shrimping vessels within the servicing portfolio  caused by the  effects of  Hurricane  Katrina,  as well as  continued distress  affecting  the  U.S.  shrimping  industry  and the  ability  of  these borrowers to repay their loans.           Amortization  of SBA  servicing  rights at  December  31, 2005 has been estimated in the following table:                                                                                    (dollars expressed in thousands)           Year ending December 31:                 2006........................................................................   $ 1,640               2007........................................................................     1,382               2008........................................................................     1,161               2009........................................................................       974               2010........................................................................       816               Thereafter..................................................................     3,516                                                                                              -------                   Total...................................................................   $ 9,489                                                                                              =======  (7)      BANK  PREMISES  AND  EQUIPMENT,  NET  OF  ACCUMULATED  DEPRECIATION AND          AMORTIZATION           Bank premises and equipment were comprised of the following at December 31, 2005 and 2004:                                                                                         2005           2004                                                                                        ----           ----                                                                                 (dollars expressed in thousands)           Land....................................................................   $  33,191        29,566          Buildings and improvements..............................................     118,426       114,447          Furniture, fixtures and equipment.......................................     111,238       109,756          Leasehold improvements..................................................      25,494        24,348          Construction in progress................................................       2,269         4,074                                                                                     ---------       -------               Total..............................................................     290,618       282,191          Less accumulated depreciation and amortization..........................     145,677       137,705                                                                                     ---------       -------               Bank premises and equipment, net...................................   $ 144,941       144,486                                                                                     =========       =======             Depreciation and amortization  expense for the years ended December 31, 2005,  2004 and 2003 totaled $17.4  million,  $18.6  million and $20.1  million, respectively.           First  Banks  leases  land,   office  properties  and  equipment  under operating  leases.  Certain of the leases contain renewal options and escalation clauses.  Total rent expense was $15.5 million,  $13.2 million and $14.1 million for the years ended  December  31,  2005,  2004 and 2003,  respectively.  Future minimum lease payments under noncancellable operating leases extend through 2084 as follows:                                                                                     (dollars expressed in thousands)          Year ending December 31:                2006.........................................................................  $ 11,356              2007.........................................................................     9,375              2008.........................................................................     8,492              2009.........................................................................     7,431              2010.........................................................................     5,562              Thereafter...................................................................    18,231                                                                                             --------                  Total future minimum lease payments......................................  $ 60,447                                                                                             ========           First Banks also leases to  unrelated  parties a portion of its banking facilities.  Total rental income was $6.4 million, $5.8 million and $6.1 million for the years ended December 31, 2005, 2004 and 2003, respectively.  (8)      INTANGIBLE  ASSETS  ASSOCIATED  WITH  THE  PURCHASE OF SUBSIDIARIES AND          BRANCH OFFICES           Intangible  assets  associated  with the purchase of  subsidiaries  and branch offices, net of amortization, were comprised of the following at December 31, 2005 and 2004:                                                          2005                           2004                                             ---------------------------    --------------------------                                                Gross                         Gross                                               Carrying    Accumulated       Carrying     Accumulated                                                Amount    Amortization        Amount     Amortization                                                ------    ------------        ------     ------------                                                          (dollars expressed in thousands)  Amortized intangible assets:           Core deposit intangibles.............   $  36,555     (11,710)          32,823        (7,003)      Goodwill associated with        purchases of branch offices........       2,210      (1,146)           2,210        (1,003)                                              ---------     -------          -------        ------          Total............................   $  38,765     (12,856)          35,033        (8,006)                                              =========     =======          =======        ======  Unamortized intangible assets:      Goodwill associated with the        purchase of subsidiaries...........   $ 165,992                      155,642                                              =========                      =======           Amortization   of   intangibles   associated   with  the   purchase  of subsidiaries was $4.9 million, $2.9 million and $2.5 million for the years ended December 31, 2005,  2004 and 2003,  respectively.  As of December 31, 2005,  the remaining estimated life of the amortization period for core deposit intangibles and goodwill  associated  with  purchases of branch  offices was seven years and nine  years,  respectively.  Amortization  of  intangibles  associated  with the purchase of  subsidiaries  and branch  offices,  including  amortization of core deposit  intangibles  and branch  office  purchases,  has been  estimated in the following  table,  and does not take into  consideration  any  potential  future acquisitions or branch office purchases.                                                                                     (dollars expressed in thousands)           Year ending December 31:               2006.........................................................................   $  5,349             2007.........................................................................      5,349             2008.........................................................................      5,349             2009.........................................................................      3,446             2010.........................................................................      2,986             Thereafter...................................................................      3,430                                                                                             --------                 Total....................................................................   $ 25,909                                                                                             ========            Changes in the carrying amount of goodwill for the years ended December 31, 2005 and 2004 were as follows:                                                                    2005              2004                                                                  ----              ----                                                              (dollars expressed in thousands)              Balance, beginning of year......................     $ 156,849          145,548          Goodwill acquired during the year...............        18,579           11,665          Acquisition-related adjustments (1).............        (8,229)            (222)          Amortization - purchases of branch offices......          (143)            (142)                                                               ---------          -------          Balance, end of year............................     $ 167,056          156,849                                                               =========          =======          ---------------          (1)   Acquisition-related adjustments  recorded in 2005, as  further described in Note 2  to the                Consolidated Financial Statements, included $4.3 million recorded in  the first quarter of                2005 pertaining to the acquisition of CIB Bank, $1.4 million recorded in the third quarter                of 2005 pertaining to the acquisition  of  CMC, and $2.5 million  recorded  in  the fourth                quarter of 2005 pertaining to the acquisition of BSG.   (9)      MATURITIES OF TIME DEPOSITS           A summary of  maturities of time deposits of $100,000 or more and other time deposits as of December 31, 2005 is as follows:                                                              Time deposits of   Other time                                                            $100,000 or more    deposits         Total                                                            ----------------    --------         -----                                                                 (dollars expressed in thousands)          Year ending December 31:                  2006........................................     $  834,105      1,436,632       2,270,737              2007........................................        157,022        425,765         582,787              2008........................................         33,984        103,622         137,606              2009........................................         13,576         47,263          60,839              2010........................................         17,897         58,330          76,227              Thereafter..................................         20,324          5,654          25,978                                                               ----------      ---------       ---------                   Total..................................     $1,076,908      2,077,266       3,154,174                                                               ==========      =========       =========   (10)     OTHER BORROWINGS           Other  borrowings  were comprised of the following at December 31, 2005 and 2004:                                                                                    2005         2004                                                                                  ----         ----                                                                          (dollars expressed in thousands)           Securities sold under agreements to repurchase:                 Daily........................................................    $ 199,874     209,106              Term.........................................................      300,000     350,000          FHLB advances....................................................       39,300      35,644                                                                               ---------     -------                   Total...................................................    $ 539,174     594,750                                                                               =========     =======            The average  balance of other  borrowings was $571.7 million and $486.0 million, respectively, and the maximum month-end balance of other borrowings was $604.3 million and $605.6  million,  respectively,  for the years ended December 31, 2005 and 2004. The average rates paid on other  borrowings  during the years ended  December  31,  2005,   2004  and  2003  were  3.19%,   1.26%  and  1.02%, respectively. Interest expense on securities sold under agreements to repurchase was $16.5  million,  $5.4 million and $1.6 million for the years ended  December 31, 2005,  2004 and 2003,  respectively.  Interest  expense on FHLB advances was $1.6 million,  $716,000 and $535,000 for the years ended December 31, 2005, 2004 and 2003,  respectively.  The assets  underlying the daily securities sold under agreements  to  repurchase  and the FHLB  advances are held by First Banks.  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.  As further  discussed  in  Note 5 to the  Consolidated  Financial  Statements,  the interest rate floor  agreements  included within the term repurchase  agreements (and the  interest  rate cap  agreements  previously  included  within  the term repurchase agreements) represent embedded derivative instruments.  In accordance with the Company's  interest rate risk management  program,  First Bank modified    its  term  repurchase   agreements  under  master  repurchase   agreements  with unaffiliated  third parties on March 21, 2005 to terminate the interest rate cap agreements  previously  embedded within the agreements and simultaneously  enter into interest rate floor agreements, also embedded within the agreements.  These modifications  resulted in  adjustments to the interest rate spread to LIBOR for the agreements,  as set forth in the following  table. The modified terms of the repurchase  agreements  became  effective  immediately  following the respective quarterly  scheduled  interest  payment  dates that  occurred  during the second quarter  of 2005.  First  Bank did not incur any costs in  conjunction  with the modifications of the agreements.           The maturity  dates,  par amounts,  interest  rate spreads and interest rate floor/cap  strike prices on First Bank's term  repurchase  agreements as of December 31, 2005 and 2004 were as follows:                                                                  Par               Interest Rate     Interest Rate Floor /                        Maturity Date                         Amount              Spread (1)(2)     Cap Strike Price (1)(2)                        -------------                         ------              -------------     -----------------------                                                        (dollars expressed                                                           in thousands)           December 31, 2005:                   January 12, 2007............................    150,000           LIBOR + 0.0050%         3.00% / Floor               June 14, 2007 (3)...........................     50,000           LIBOR - 0.3300%         3.00% / Floor               June 14, 2007 (3)...........................     50,000           LIBOR - 0.3400%         3.00% / Floor               August 1, 2007..............................     50,000           LIBOR + 0.0800%         3.00% / Floor                                                             ---------                                                             $ 300,000                                                             =========           December 31, 2004:               August 15, 2006 (4).........................  $  50,000           LIBOR - 0.8250%         3.00% / Cap               January 12, 2007............................    150,000           LIBOR - 0.8350%         3.50% / Cap               June 14, 2007...............................     50,000           LIBOR - 0.6000%         5.00% / Cap               June 14, 2007...............................     50,000           LIBOR - 0.6100%         5.00% / Cap               August 1, 2007..............................     50,000           LIBOR - 0.9150%         3.50% / Cap                                                             ---------                                                             $ 350,000                                                             =========          ---------------          (1)  As of December 31, 2005, the interest rates  paid on the term  repurchase agreements were  based on the               three-month 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.          (2)  As of December 31, 2004, the interest rates paid on  the  term  repurchase agreements were based on the               three-month LIBOR reset in arrears minus the spread amount shown above plus 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 exceeded the strike price associated with the  interest rate cap               agreements.          (3)  First Bank terminated  these repurchase  agreements on February 14, 2006, as further  described in Note               25 to the Consolidated Financial Statements.          (4)  First Bank terminated this term repurchase agreement on November 22, 2005,  resulting in  a  prepayment               penalty of $281,000 and the recognition of a $2.9 million loss  on the related  sale of the  underlying               securities  associated  with  the  term  repurchase  agreement, as  further  described in Note 3 to the               Consolidated Financial Statements.   (11)     NOTES PAYABLE           Notes payable were  comprised of the following at December 31, 2005 and 2004:                                                                                            2005              2004                                                                                          ----              ----                                                                                    (dollars expressed in thousands)              Revolving credit.........................................................    $      --           15,000          Term loan................................................................      100,000               --                                                                                       ---------           ------                Total..............................................................    $ 100,000           15,000                                                                                       =========           ======            On August 11,  2005,  First Banks  entered into an Amended and Restated Secured Credit  Agreement with a group of  unaffiliated  financial  institutions (Credit  Agreement)  in the  amount  of $122.5  million.  The  Credit  Agreement replaced a secured  credit  agreement  dated August 14, 2003,  and  subsequently amended on August 12, 2004, that provided a $75.0 million  revolving credit line and a  $25.0  million  letter  of  credit  facility  (collectively,  the  Credit Agreements). The Credit Agreement contains material changes to the structure and terms  of the  financing  arrangement,  the  most  significant  of  which is the addition of a term loan. The Credit Agreement provides a $15.0 million revolving credit facility (Revolving Credit), a $7.5 million letter of credit facility (LC    Facility)  and a $100.0  million term loan  facility  (Term  Loan).  Interest is payable on 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 paid monthly.  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.  Interest  is  payable  on outstanding principal loan balances of the Term Loan at a floating rate equal to LIBOR plus a margin determined by the outstanding loan balances and First Banks' net income for the preceding four calendar  quarters.  First Banks has not drawn any advances on the Revolving Credit.  First Banks borrowed $80.0 million on the Term Loan on August  11,  2005 and  borrowed  the  remaining  $20.0  million  on November 14, 2005. The outstanding principal balance of the Term Loan is payable in ten equal  quarterly  installments  of $5.0 million  commencing  on March 31, 2006,  with the  remainder  of the  Term  Loan  balance  to be  repaid  in full, including any unpaid interest,  upon maturity on August 10, 2008. Amounts may be borrowed  under the  Revolving  Credit until August 10, 2006,  at which time the principal and interest  outstanding is due and payable.  The Credit Agreement is secured  by  First  Banks'  ownership  interest  in  the  capital  stock  of its subsidiaries.  Under the Credit Agreements, there were outstanding borrowings of $100.0  million and $15.0  million at December 31, 2005 and 2004,  respectively. The  interest  rate for  outstanding  borrowings  under the Credit  Agreement at December 31, 2005 and 2004 was 5.38% and 3.44%, respectively.  Letters of credit issued to  unaffiliated  third parties on behalf of First Banks under the Credit Agreements  were $2.9  million and $6.3  million at December  31, 2005 and 2004, respectively, and had not been drawn on by the counterparties.           The 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. First  Banks  and  First  Bank  were in  compliance  with all  restrictions  and requirements of the Credit Agreements at December 31, 2005 and 2004.           The  average  balance  and  maximum  month-end  balance  of  borrowings outstanding under the Credit Agreements during the years ended December 31, 2005 and 2004 were as follows:                                                                                   2005              2004                                                                                ----              ----                                                                           (dollars expressed in thousands)              Average balance..................................................   $ 36,849            3,657          Maximum month-end balance........................................    100,000           15,000                                                                              ========           ======            The average rates paid on the outstanding  borrowings  during the years ended  December  31,  2005,  2004  and  2003  were  6.26%,   13.84%  and  5.09%, respectively.  Interest  expense  recognized  on  borrowings  under  the  Credit Agreement  includes  commitment,  arrangement and renewal fees. During 2004, the average rate paid on the outstanding  borrowings  reflects a marginal  increased level of  commitment,  arrangement  and renewal  fees on a much  smaller base of borrowings outstanding during the year, thereby causing the average rate paid to be significantly higher than in 2005 and 2003.  (12)     SUBORDINATED DEBENTURES           In February 1997, First Preferred  Capital Trust (First Preferred I), a newly  formed  Delaware  business  trust,  issued 3.45  million  shares of 9.25% cumulative trust preferred securities at $25 per share in an underwritten public offering,  and issued 106,702 shares of common  securities to First Banks at $25 per share. First Banks owned all of First Preferred I's common  securities.  The gross proceeds of the offering were used by First  Preferred I to purchase $88.9 million of 9.25% subordinated debentures from First Banks, maturing on March 31, 2027. The maturity date could have been shortened, at the option of First Banks, to a date not  earlier  than March 31, 2002 or extended to a date not later than March 31, 2046 if certain conditions were met. The subordinated  debentures were the sole asset of First  Preferred  I. In  connection  with the  issuance of the preferred securities,  First Banks made certain guarantees and commitments that, in the aggregate,  constituted a full and unconditional guarantee by First Banks of the  obligations of First  Preferred I under the First  Preferred I preferred securities.  First  Banks'  proceeds  from  the  issuance  of  the  subordinated debentures to First Preferred I, net of underwriting fees and offering expenses, were $85.8 million.  On May 5, 2003,  First Banks redeemed the cumulative  trust preferred  securities  at the  liquidate  value of $25 per  preferred  security, together with  distributions  accumulated and unpaid to the redemption  date. In    conjunction with this transaction, First Banks paid in full the $88.9 million of subordinated debentures. The funds necessary for the redemption were provided by the net proceeds  from the issuance of  additional  subordinated  debentures  to First Bank Statutory Trust and First Preferred Capital Trust IV of $25.3 million and $45.6 million,  respectively,  as further discussed below, and approximately $18.0 million of available  cash  reserves.  First Banks'  distributions  on the subordinated  debentures,  which were payable  quarterly  in arrears,  were $2.9 million for the year ended December 31, 2003.           In July 1998,  First  America  Capital  Trust  (FACT),  a newly  formed Delaware  business trust,  issued 1.84 million shares of 8.50%  cumulative trust preferred  securities at $25 per share in an underwritten  public offering,  and issued 56,908 shares of common securities to First Banks at $25 per share. First Banks owned all of FACT's common securities.  The gross proceeds of the offering were used by FACT to purchase  $47.4  million of 8.50%  subordinated  debentures from First Banks,  maturing on June 30, 2028.  The maturity date could have been shortened,  at the option of First  Banks,  to a date not earlier  than June 30, 2003 or extended  to a date not later than June 30,  2037 if certain  conditions were met. The subordinated debentures were the sole asset of FACT. In connection with the  issuance of the FACT  preferred  securities,  First Banks made certain guarantees  and  commitments  that,  in the  aggregate,  constituted  a full and unconditional guarantee by First Banks of the obligations of FACT under the FACT preferred   securities.   First  Banks'   proceeds  from  the  issuance  of  the subordinated debentures to FACT, net of underwriting fees and offering expenses, were $45.4 million.  On June 30, 2003, First Banks redeemed the cumulative trust preferred  securities at the  liquidation  value of $25 per preferred  security, together with  distributions  accumulated and unpaid to the redemption  date. In conjunction with this transaction, First Banks paid in full the $47.4 million of subordinated  debentures.  The funds  necessary for the redemption were provided from available cash reserves of $12.9 million and an advance of $34.5 million on First  Banks' note  payable.  First  Banks'  distributions  on the  subordinated debentures,  which were payable quarterly in arrears,  were $2.0 million for the year ended December 31, 2003.           In October 2000, First Preferred Capital Trust II (First Preferred II), a newly formed  Delaware  business  trust,  issued 2.3 million  shares of 10.24% cumulative trust preferred securities at $25 per share in an underwritten public offering,  and issued 71,135  shares of common  securities to First Banks at $25 per share. First Banks owned all of First Preferred II's common securities.  The gross proceeds of the offering were used by First Preferred II to purchase $59.3 million  of  10.24%  subordinated  debentures  from  First  Banks,  maturing  on September 30, 2030. The maturity date could have been  shortened,  at the option of First  Banks,  to a date not earlier  than  September  30,  2005,  if certain conditions  were met. The  subordinated  debentures were the sole asset of First Preferred II. In connection with the issuance of the preferred securities, First Banks  made  certain   guarantees  and  commitments   that,  in  the  aggregate, constituted a full and unconditional guarantee by First Banks of the obligations of First Preferred II under the First Preferred II preferred  securities.  First Banks'  proceeds  from the  issuance  of the  subordinated  debentures  to First Preferred  II,  net of  underwriting  fees and  offering  expenses,  were  $56.9 million.  On September  30, 2005,  First Banks  redeemed  the  cumulative  trust preferred  securities at the  liquidation  value of $25 per preferred  security, together with  distributions  accumulated and unpaid to the redemption  date. In conjunction  with this  transaction,  First  Banks paid in full its  outstanding $59.3  million of  subordinated  debentures  that were  issued by First Banks to First Preferred II. The funds  necessary for the redemption of the  subordinated debentures  were  provided  from a portion of the  proceeds of First Banks' Term Loan. First Banks' distributions on the subordinated  debentures issued to First Preferred II, which were payable quarterly in arrears, were $4.6 million for the year ended  December 31, 2005 and $6.1 million for the years ended  December 31, 2004 and 2003.           In November 2001,  First Preferred  Capital Trust III (First  Preferred III), a newly formed Delaware business trust, issued 2.2 million shares of 9.00% cumulative trust preferred securities at $25 per share in an underwritten public offering,  and issued 68,290  shares of common  securities to First Banks at $25 per share. First Banks owns all of First Preferred III's common securities.  The gross  proceeds of the  offering  were used by First  Preferred  III to purchase $56.9 million of 9.00%  subordinated  debentures  from First Banks,  maturing on December 31, 2031.  The maturity date may be  shortened,  at the option of First Banks,  to a date not earlier than December 31, 2006, if certain  conditions are met. The  subordinated  debentures are the sole asset of First Preferred III. In connection  with the  issuance  of the  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 First Preferred III under the First Preferred III preferred  securities.  First Banks' proceeds from the  issuance of the  subordinated  debentures  to First  Preferred  III, net of underwriting  fees and  offering  expenses,  were $54.6  million.  First  Banks'    distributions  on the  subordinated  debentures  issued to First  Preferred III, which are payable  quarterly  in arrears,  were $5.1 million for the years ended December 31, 2005, 2004 and 2003.           In April 2002, First Bank Capital Trust (FBCT), a newly formed Delaware business trust, issued 25,000 shares of variable rate cumulative trust preferred securities at $1,000 per share in a private placement,  and issued 774 shares of common  securities  to First Banks at $1,000 per share.  First Banks owns all of the common  securities of FBCT.  The gross proceeds of the offering were used by FBCT to purchase  $25.8 million of variable rate  subordinated  debentures  from First Banks,  maturing on April 22, 2032. The maturity date of the  subordinated debentures may be shortened,  at the option of First Banks to a date not earlier than April 22, 2007, if certain conditions are met. The subordinated  debentures are the  sole  asset of  FBCT.  In  connection  with  the  issuance  of the FBCT 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 FBCT under the FBCT preferred  securities.  First Banks' proceeds  from the  issuance  of the  subordinated  debentures  to FBCT,  net of offering  expenses,  were  $25.0  million.  The  distribution  rate on the  FBCT securities is equivalent to the six-month LIBOR plus 387.5 basis points,  and is payable  semi-annually  in  arrears on April 22 and  October  22.  First  Banks' distributions  on the subordinated  debentures  issued to FBCT were $1.9 million for the year  ended  December  31,  2005 and $1.4  million  for the years  ended December 31, 2004 and 2003.           In March  2003,  First Bank  Statutory  Trust  (FBST),  a newly  formed Connecticut  statutory  trust,  issued 25,000 shares of 8.10%  cumulative  trust preferred securities at $1,000 per share in a private placement,  and issued 774 shares of common securities to First Banks at $1,000 per share. First Banks owns all of the common  securities of FBST.  The gross  proceeds of the offering were used by FBST to purchase  $25.8 million of 8.10%  subordinated  debentures  from First Banks,  maturing on March 20, 2033. The maturity date of the  subordinated debentures may be shortened, at the option of First Banks, to a date not earlier than March 20, 2008, if certain conditions are met. The subordinated  debentures are the  sole  asset of  FBST.  In  connection  with  the  issuance  of the FBST 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 FBST under the FBST preferred  securities.  First Banks' proceeds  from the  issuance  of the  subordinated  debentures  to FBST,  net of offering  expenses,  were  $25.3  million.  First  Banks'  distributions  on the subordinated  debentures issued to FBST, which are payable quarterly in arrears, were $2.1  million for the years  ended  December  31,  2005 and 2004,  and $1.7 million for the year ended December 31, 2003.           In April 2003, First Preferred Capital Trust IV (First Preferred IV), a newly  formed  Delaware  business  trust,  issued 1.84  million  shares of 8.15% cumulative trust preferred securities at $25 per share in an underwritten public offering,  and issued 56,908  shares of common  securities to First Banks at $25 per share. First Banks owns all of First Preferred IV's common  securities.  The gross  proceeds  of the  offering  were used by First  Preferred  IV to purchase approximately  $47.4 million of 8.15% subordinated  debentures from First Banks, maturing on June 30, 2033. The maturity date may be shortened,  at the option of First Banks, to a date not earlier than June 30, 2008, if certain conditions are met. The  subordinated  debentures are the sole asset of First  Preferred IV. In connection  with the  issuance  of the  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 First Preferred IV under the First  Preferred IV preferred  securities.  First Banks' proceeds from the  issuance  of the  subordinated  debentures  to First  Preferred  IV, net of underwriting fees and offering expenses, were approximately $45.6 million. First Banks'  distributions on the subordinated  debentures  issued to First Preferred IV,  which are payable  quarterly  in arrears,  were $3.9  million for the years ended  December 31, 2005 and 2004,  and $2.9 million for the year ended December 31, 2003.           In September  2004,  First Bank  Statutory  Trust II (FBST II), a newly formed  Delaware  statutory  trust,  issued 20,000 shares of variable rate trust preferred securities at $1,000 per share in a private placement,  and issued 619 shares of common securities to First Banks at $1,000 per share. First Banks owns all of the common securities of FBST II. The gross proceeds of the offering were used by  FBST  II to  purchase  $20.6  million  of  variable  rate  subordinated debentures  from First Banks,  maturing on September 20, 2034. The maturity date of the subordinated  debentures may be shortened,  at the option of First Banks, to a date not earlier than  September 20, 2009, if certain  conditions  are met. The  subordinated  debentures are the sole asset of FBST II. In connection  with the  issuance of the FBST II  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 FBST II under the    FBST II preferred  securities.  Proceeds  from the issuance of the  subordinated debentures  to FBST II,  net of  offering  expenses,  were  $20.6  million.  The distribution  rate on the FBST II securities  is  equivalent to the  three-month LIBOR plus 205.0 basis points.  First Banks'  distributions  on the subordinated debentures issued to FBST II, which are payable quarterly in arrears,  were $1.1 million  and  $236,000  for  the  years  ended   December  31,  2005  and  2004, respectively.           In November 2004,  First Bank  Statutory  Trust III (FBST III), a newly formed  Delaware  statutory  trust,  issued 40,000 shares of variable rate trust preferred  securities  at $1,000  per share in a private  placement,  and issued 1,238  shares of common  securities  to First  Banks at $1,000 per share.  First Banks owns all of the common  securities of FBST III. The gross  proceeds of the offering  were used by FBST III to  purchase  $41.2  million  of  variable  rate subordinated  debentures  from First Banks,  maturing on December 15, 2034.  The maturity date of the subordinated  debentures may be shortened, at the option of First Banks, to a date not earlier than December 15, 2009, if certain conditions are met.  The  subordinated  debentures  are the  sole  asset  of FBST  III.  In connection with the issuance of the FBST III 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 FBST III under the FBST III  preferred  securities.  Proceeds  from the  issuance  of the subordinated  debentures  to FBST III,  net of  offering  expenses,  were  $41.2 million.  The distribution  rate on the FBST III securities is equivalent to the three-month  LIBOR plus 218.0 basis points.  First Banks'  distributions  on the subordinated  debentures  issued to FBST III,  which are  payable  quarterly  in arrears,  were $2.3 million and  $203,000 for the years ended  December 31, 2005 and 2004, respectively.           The  distributions   payable  on  all  of  First  Banks'   subordinated debentures are included in interest  expense in the  consolidated  statements of income.  Deferred  issuance  costs  associated  with First  Banks'  subordinated debentures  are  included  as a  reduction  of  subordinated  debentures  in the consolidated balance sheets and are amortized on a straight-line basis.           The  subordinated  debentures were issued to First Banks in conjunction with the  formation  of various  financing  entities  and the  issuance of trust preferred  securities by the financing  entities.  First Banks has six issues of trust preferred  securities as of December 31, 2005.  Subsequent to December 31, 2005,  First Banks,  through a newly formed  statutory trust  affiliate,  issued $40.0 million of subordinated debentures,  as more fully described in Note 25 to the  Consolidated  Financial  Statements.  The structure of the trust  preferred securities  currently  satisfies  the  regulatory  requirements  for  inclusion, subject to certain limitations, in First Banks' capital base.  (13)     INCOME TAXES           Provision  for income  taxes  attributable  to income  from  continuing operations for the years ended December 31, 2005, 2004 and 2003 consists of:                                                                               2005       2004       2003                                                                            ----       ----       ----                                                                         (dollars expressed in thousands)          Current provision for taxes:                  Federal................................................     $48,306     36,578      40,194              State..................................................       5,419      9,507      12,717                                                                          -------     ------     -------                                                                           53,725     46,085      52,911                                                                          -------     ------     -------          Deferred provision for taxes:              Federal................................................         116        236     (12,463)              State..................................................      (1,332)      (983)     (4,493)                                                                          -------     ------     -------                                                                           (1,216)      (747)    (16,956)                                                                          -------     ------     -------                   Total.............................................     $52,509     45,338      35,955                                                                          =======     ======     =======             The  effective  rates of  federal  income  taxes  for the  years  ended December  31,  2005,  2004 and 2003 differ from the federal  statutory  rates of taxation as follows:                                                                         Years Ended December 31,                                                     ----------------------------------------------------------                                                            2005                2004                2003                                                     -----------------   -----------------    -----------------                                                      Amount   Percent    Amount   Percent     Amount   Percent                                                      ------   -------    ------   -------     ------   -------                                                                 (dollars expressed in thousands) Income before provision for income taxes and       minority interest in loss of subsidiary......     $148,128            $128,246             $ 98,766                                                     ========            ========             ======== Provision for income taxes calculated   at federal statutory income tax rates........     $ 51,845   35.0%    $ 44,886    35.0%    $ 34,568    35.0% Effects of differences in tax reporting:   Tax-exempt interest income, net of       tax preference adjustment................         (814)  (0.5)        (791)   (0.6)        (911)   (0.9)   State income taxes...........................        4,773    3.2        5,541     4.3        5,346     5.4   Reduction in prior year contingency reserve..       (2,116)  (1.4)      (2,825)   (2.2)          --      --   Bank owned life insurance, net of premium....       (1,602)  (1.1)      (1,670)   (1.3)      (1,762)   (1.8)   Other, net...................................          423    0.3          197     0.2       (1,286)   (1.3)                                                     --------   ----     --------    ----     --------    ----         Provision for income taxes.............     $ 52,509   35.5%    $ 45,338    35.4%    $ 35,955    36.4%                                                     ========   ====     ========    ====     ========    ====            The  $2.1  million  and  $2.8  million  reductions  in the  prior  year contingency  reserve,  reflected  in the  years  2005  and  2004,  respectively, resulted from reversals of state tax reserves no longer deemed necessary.           The tax effects of temporary  differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2005 and 2004 were as follows:                                                                                      December 31,                                                                                   ------------                                                                                2005         2004                                                                                ----         ----                                                                         (dollars expressed in thousands)      Deferred tax assets:             Net operating loss carryforwards................................   $  35,513      38,786          Deferred built-in loss carryforward.............................       3,824       8,988          Allowance for loan losses.......................................      57,137      64,866          Loans held for sale.............................................       5,562         175          Alternative minimum tax credits.................................       2,770       2,667          Interest on nonaccrual loans....................................       3,582       4,346          Servicing rights................................................      10,081       8,366          Deferred compensation...........................................       6,462       4,541          Net fair value adjustment for available-for-sale              investment securities.......................................       8,954       1,527          Net fair value adjustment for derivative instruments............       1,782          --          Partnership investments.........................................       4,161       1,244          State taxes.....................................................         515       1,996          Other...........................................................       6,349       7,662                                                                             ---------     -------              Gross deferred tax assets...................................     146,692     145,164                                                                             ---------     -------          Valuation allowance.............................................     (17,754)    (17,767)                                                                             ---------     -------              Deferred tax assets, net of valuation allowance.............     128,938     127,397                                                                             ---------     -------      Deferred tax liabilities:          Depreciation on bank premises and equipment.....................       8,407      11,567          Net fair value adjustment for derivative instruments............          --         524          Unrealized gains on investment securities.......................         144       3,386          Core deposit intangibles........................................       6,491       7,859          Discount on loans...............................................       4,878       4,412          Equity investments..............................................       6,331       6,970          Other ..........................................................         853          94                                                                             ---------     -------              Deferred tax liabilities....................................      27,104      34,812                                                                             ---------     -------              Net deferred tax assets.....................................   $ 101,834      92,585                                                                             =========     =======             The realization of First Banks' net deferred tax assets is based on the availability of carrybacks to prior taxable  periods,  the expectation of future taxable income and the  utilization of tax planning  strategies.  Based on these factors,  management  believes  it is more likely than not that First Banks will realize the recognized net deferred tax assets of $101.8 million at December 31, 2005.           There were no changes in the deferred tax asset valuation allowance for the year ended  December 31, 2003.  Changes in the deferred tax asset  valuation allowance for the years ended December 31, 2005 and 2004 were as follows:                                                                                   2005           2004                                                                                ----           ----                                                                         (dollars expressed in thousands)              Balance, beginning of year.....................................     $ 17,767            --          Purchase acquisitions..........................................           --        17,767          Adjustment to prior year purchase acquisitions.................          (13)           --                                                                              --------        ------          Balance, end of year...........................................     $ 17,754        17,767                                                                              ========        ======            Upon  completion of the  acquisition  of CIB Bank, the net deferred tax assets associated with the acquisition were evaluated to determine whether it is more likely than not that the net deferred tax assets will be  recognized in the future.  The  ability  to  utilize  the net  deferred  tax  assets  recorded  in connection  with the  acquisition is subject to a number of  limitations.  Among these  limitations is the restriction that any built-in loss (the fair value was less than the tax basis) that  existed at the date of  acquisition,  if realized within the first  five  years  subsequent  to the date of  acquisition,  will be disallowed  and must be carried  forward and  subjected to rules  similar to the rules for  carrying  forward net  operating  losses.  Based upon these  factors, management  determined that a valuation  allowance should be established for CIB Bank in the amount of $17.8  million.  Subsequent  reductions  in the  valuation allowance will be credited to intangible  assets associated with the purchase of subsidiaries.           At  December  31,  2005 and  2004,  the  accumulation  of prior  years' earnings  representing tax bad debt deductions was approximately  $29.8 million. If these tax bad debt  reserves  were  charged  for  losses  other than bad debt losses,  First Banks would be required to recognize taxable income in the amount of the charge. It is not contemplated that such tax-restricted retained earnings will be used in a manner that would create federal income tax liabilities.           At December 31, 2005 and 2004, for federal income taxes purposes, First Banks had net  operating  loss  carryforwards  relating to  pre-acquisition  tax losses of acquired entities of approximately  $101.5 million and $110.8 million, respectively.  At December 31, 2005,  the net operating loss  carryforwards  for First Banks expire as follows:                                                                                    (dollars expressed in thousands)          Year ending December 31:                 2006......................................................................   $   1,654              2007......................................................................       4,356              2008......................................................................      19,881              2009......................................................................       9,714              2010 - 2025...............................................................      65,862                                                                                           ---------                   Total................................................................   $ 101,467                                                                                           =========            During 2004, First Banks recognized built-in losses associated with the acquisition  of CIB Bank.  A  portion  of the  recognized  built-in  losses  was disallowed  for 2004 and is  required  to be  carried  forward  subject to rules similar to the rules for carrying forward net operating  losses.  Utilization of the recognized  built-in losses is allowed  subsequent to the utilization of any net operating loss  carryforwards  associated  with the acquisition of CIB Bank. Consequently,  at December 31,  2005,  First Banks had  deferred  built-in  loss carryforwards  of  approximately  $9.1  million.  Utilization  of  the  deferred built-in  loss  carryforwards  is allowed  beginning in the year 2016,  and such losses will expire in the year 2024.       (14)     EARNINGS PER COMMON SHARE           The  following  is a  reconciliation  of  the  basic  and  diluted  EPS computations for the years ended December 31, 2005, 2004 and 2003:                                                                                                     Per Share                                                                       Income        Shares         Amount                                                                       ------        ------         ------                                                               (dollars in thousands, except share and per share data)    Year ended December 31, 2005:          Basic EPS - income available to common stockholders........     $ 96,120       23,661      $ 4,062.36      Effect of dilutive securities:        Class A convertible preferred stock......................          769          516          (54.90)                                                                      --------      -------      ----------      Diluted EPS - income available to common stockholders......     $ 96,889       24,177      $ 4,007.46                                                                      ========      =======      ==========     Year ended December 31, 2004:      Basic EPS - income available to common stockholders........     $ 82,123       23,661      $ 3,470.80      Effect of dilutive securities:        Class A convertible preferred stock......................          769          565          (49.22)                                                                      --------      -------      ----------      Diluted EPS - income available to common stockholders......     $ 82,892       24,226      $ 3,421.58                                                                      ========      =======      ==========     Year ended December 31, 2003:      Basic EPS - income available to common stockholders........     $ 62,025       23,661      $ 2,621.39      Effect of dilutive securities:        Class A convertible preferred stock......................          769          600          (33.08)                                                                      --------      -------      ----------      Diluted EPS - income available to common stockholders......     $ 62,794       24,261      $ 2,588.31                                                                      ========      =======      ==========   (15)     CREDIT COMMITMENTS           First Banks is a party to  commitments  to extend credit and commercial and  standby  letters of credit in the  normal  course of  business  to meet the financing needs of its customers. These instruments involve, in varying degrees, elements  of  credit  risk  and  interest  rate  risk in  excess  of the  amount recognized in the consolidated balance sheets. The interest rate risk associated with these credit commitments  relates primarily to the commitments to originate fixed-rate  loans.  As  more  fully  discussed  in  Note 5 to  the  Consolidated Financial  Statements,  the interest rate risk of the  commitments  to originate fixed-rate   loans  has  been   hedged   with   forward   commitments   to  sell mortgage-backed securities. The credit risk amounts are equal to the contractual amounts,  assuming the amounts are fully  advanced and the  collateral  or other security is of no value.  First Banks uses the same credit  policies in granting commitments and conditional obligations as it does for on-balance sheet items.           Commitments  to extend fixed and variable rate credit,  and  commercial and standby letters of credit at December 31, 2005 and 2004 were as follows:                                                                                          December 31,                                                                               -------------------------                                                                                   2005          2004                                                                                   ----          ----                                                                            (dollars expressed in thousands)              Commitments to extend credit......................................   $ 2,785,028     2,311,529          Commercial and standby letters of credit..........................       191,634       180,785                                                                               -----------     ---------                                                                               $ 2,976,662     2,492,314                                                                               ===========     =========            Commitments  to extend  credit are  agreements to lend to a customer as long as there is no  violation of any  condition  established  in the  contract. Commitments  generally have fixed expiration dates or other termination  clauses and may require  payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent  future  cash  requirements.   Each  customer's   creditworthiness  is evaluated on a case-by-case basis. The amount of collateral obtained,  if deemed necessary upon extension of credit,  is based on management's  credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant, equipment, income-producing commercial properties or single family  residential  properties.  In the event of  nonperformance,  First Banks may obtain and liquidate the collateral to recover  amounts paid under its guarantees on these financial instruments.            Commercial and standby  letters of credit are  conditional  commitments issued to guarantee the performance of a customer to a third party.  The letters of  credit  are  primarily  issued  to  support  public  and  private  borrowing arrangements,   including   commercial   paper,   bond   financing  and  similar transactions.  Most letters of credit extend for less than one year.  The credit risk  involved  in  issuing  letters of credit is  essentially  the same as that involved  in  extending  loan  facilities  to  customers.  Upon  issuance of the commitments, First Banks typically holds marketable securities,  certificates of deposit, inventory, real property or other assets as collateral supporting those commitments  for which  collateral is deemed  necessary.  The standby letters of credit at December 31, 2005 expire, at various dates, all within 11 years.  (16)     FAIR VALUE OF FINANCIAL INSTRUMENTS           The fair value of financial instruments is management's estimate of the values at which the  instruments  could be  exchanged in a  transaction  between willing parties.  These estimates are subjective and may vary significantly from amounts  that would be  realized  in actual  transactions.  In  addition,  other significant  assets are not  considered  financial  assets  including  servicing assets,  deferred income tax assets,  bank premises and equipment and intangible assets  associated  with  the  purchase  of  subsidiaries  and  branch  offices. Furthermore,  the income  taxes that would be  incurred  if First  Banks were to realize any of the unrealized gains or unrealized  losses indicated  between the estimated fair values and corresponding carrying values could have a significant effect on the fair value  estimates  and have not been  considered in any of the estimates.           The  estimated  fair value of First  Banks'  financial  instruments  at December 31, 2005 and 2004 were as follows:                                                                   2005                           2004                                                     -------------------------      -------------------------                                                      Carrying       Estimated       Carrying       Estimated                                                        Value       Fair Value         Value       Fair Value                                                        -----       ----------         -----       ----------                                                                (dollars expressed in thousands) Financial Assets:         Cash and cash equivalents......................   $  286,652       286,652         267,110        267,110    Investment securities:        Trading....................................        3,389         3,389              --             --        Available for sale.........................    1,311,289     1,311,289       1,788,063      1,788,063        Held to maturity...........................       26,105        25,791          25,286         25,586    Net loans......................................    6,885,441     6,847,421       5,987,261      5,986,880    Derivative instruments.........................       (6,530)       (6,530)          4,681          4,681    Bank-owned life insurance......................      111,442       111,442         102,239        102,239    Accrued interest receivable....................       43,280        43,280          39,776         39,776    Interest rate lock commitments.................          (49)          (49)             20             20    Forward commitments to sell        mortgage-backed securities.................         (538)         (538)            (99)           (99)                                                      ==========     =========       =========      =========  Financial Liabilities:    Deposits:        Noninterest-bearing demand.................   $1,299,350     1,299,350       1,194,662      1,194,662        Interest-bearing demand....................      981,837       981,837         875,489        875,489        Savings....................................    2,106,470     2,106,470       2,249,644      2,249,644        Time deposits..............................    3,154,174     3,154,174       2,832,175      2,832,175    Other borrowings...............................      539,174       539,174         594,750        594,750    Notes payable..................................      100,000       100,000          15,000         15,000    Accrued interest payable.......................       21,023        21,023          14,376         14,376    Subordinated debentures........................      215,461       219,675         273,300        283,337                                                      ==========     =========       =========      =========  Off-Balance Sheet Financial Instruments...........   $       --            --              --             --                                                      ==========     =========       =========      =========            The following  methods and assumptions were used in estimating the fair value of financial instruments:           Cash and cash equivalents and accrued interest receivable: The carrying values reported in the consolidated balance sheets approximate fair value.           Investment securities: The fair value of trading and available-for-sale investment securities is the amount reported in the consolidated balance sheets. The fair  value of  held-to-maturity  investment  securities  is based on quoted market prices where available.  If quoted market prices were not available,  the fair value was based on quoted market prices of comparable instruments.            Net  loans:  The  fair  value of most  loans  held  for  portfolio  was estimated  utilizing  discounted cash flow  calculations  that applied  interest rates  currently  being offered for similar loans to borrowers with similar risk profiles. The fair value of loans held for sale, which is the amount reported in the  consolidated  balance  sheets,  is  based on  quoted  market  prices  where available. If quoted market prices were not available,  the fair value was based on quoted market prices of comparable  instruments.  The carrying value of loans is net of the allowance for loan losses and unearned discount.           Derivative instruments and bank-owned life insurance: The fair value of derivative instruments,  including cash flow hedges, fair value hedges, interest rate  floor  and  cap  agreements,  and  interest  rate  lock  commitments,  and bank-owned life insurance is based on quoted market prices where  available.  If quoted  market  prices  were not  available,  the fair value was based on quoted market prices of comparable instruments.           Forward commitments to sell mortgage-backed  securities: The fair value of forward  commitments  to sell  mortgage-backed  securities is based on quoted market  prices.  The fair value of these  commitments  has been reflected in the consolidated  balance  sheets in the  carrying  value of the loans held for sale portfolio.           Deposits: The fair value of deposits generally payable on demand (i.e., noninterest-bearing   and  interest-bearing  demand  and  savings  accounts)  is considered  equal  to their  respective  carrying  amounts  as  reported  in the consolidated  balance sheets. The fair value of demand deposits does not include the  benefit  that  results  from  the  low-cost  funding  provided  by  deposit liabilities  compared to the cost of  borrowing  funds in the  market.  The fair value disclosed for time deposits was estimated utilizing a discounted cash flow calculation  that applied  interest  rates  currently  being  offered on similar deposits to a schedule of aggregated monthly maturities of time deposits.           Other  borrowings,  notes  payable and accrued  interest  payable:  The carrying values reported in the  consolidated  balance sheets  approximate  fair value.           Subordinated  debentures:  The fair  value is  based on  quoted  market prices.           Off-Balance Sheet Financial Instruments:  The fair value of commitments to  extend  credit,  standby  letters  of credit  and  financial  guarantees  is estimated  using the fees  currently  charged to enter into similar  agreements, taking into account the remaining terms of the agreements, the likelihood of the counterparties  drawing on such financial  instruments and the credit worthiness of the counterparties.  These fees in aggregate are not considered material, and as such, were not assigned a value for purposes of this disclosure.  (17)     EMPLOYEE BENEFITS           First Banks' 401(k) plan is a  self-administered  savings and incentive plan covering  substantially  all employees.  Employer match  contributions  are determined annually under the plan by First Banks' Board of Directors.  Employee contributions  were  limited to $14,000 of gross  compensation  for 2005.  Total employer  contributions under the plan were $2.4 million,  $2.1 million and $1.7 million for the years ended December 31, 2005, 2004 and 2003, respectively.  The plan assets are held and managed under a trust agreement with First Bank's trust department.  (18)     PREFERRED STOCK           First Banks has two classes of preferred stock outstanding. The Class A preferred  stock is  convertible  into shares of common stock at a rate based on the ratio of the par value of the preferred stock to the current market value of the common stock at the date of  conversion,  to be  determined  by  independent appraisal at the time of  conversion.  Shares of Class A preferred  stock may be redeemed  by  First  Banks at any  time at  105.0%  of par  value.  The  Class B preferred stock may not be redeemed or converted. The redemption of any issue of preferred  stock  requires  the prior  approval of the Board of Governors of the Federal Reserve System (Federal Reserve).           The holders of the Class A and Class B preferred stock have full voting rights.  Dividends  on the Class A and Class B  preferred  stock are  adjustable quarterly  based  on the  highest  of the  Treasury  Bill  Rate or the Ten  Year Constant  Maturity  Rate  for the  two-week  period  immediately  preceding  the beginning  of the  quarter.  This rate shall not be less than 6.0% nor more than 12.0% on the Class A preferred  stock,  or less than 7.0% nor more than 15.0% on the Class B preferred stock. The annual dividend rates for the Class A and Class B preferred stock were 6.0% and 7.0%, respectively, for the years ended December 31, 2005, 2004 and 2003.       (19)     TRANSACTIONS WITH RELATED PARTIES           Outside of normal customer  relationships,  no directors or officers of First Banks, no shareholders  holding over 5% of First Banks' voting  securities and no  corporations or firms with which such persons or entities are associated currently  maintain or have  maintained,  since the  beginning  of the last full fiscal year, any significant business or personal relationships with First Banks or its subsidiaries,  other than that which arises by virtue of such position or ownership  interest in First Banks or its  subsidiaries,  except as described in the following paragraphs.           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 $29.6 million,  $26.6 million and $26.8 million for the years ended December 31, 2005,  2004 and 2003,  respectively.  First Services,  L.P.  leases  information technology  and other  equipment  from First Bank.  During 2005,  2004 and 2003, First  Services,  L.P.  paid  First Bank $4.3  million,  $4.3  million  and $4.2 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  $2.6  million,  $3.3 million and $3.2 million for the years ended December  31,  2005,  2004  and  2003,  respectively,  in  commissions  paid  by unaffiliated  third-party companies.  The commissions received were primarily in connection with the sales of annuities,  securities and other insurance products to customers of First Bank.           First 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  $379,000,  $514,000 and $492,000 for the years ended December 31, 2005, 2004 and 2003, respectively, 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 $335,000, $297,000 and $255,000 for the years ended December 31, 2005, 2004 and 2003, respectively.           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  $37.9  million and $31.0  million at December  31, 2005 and 2004, 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.           First Banks pays  compensation  to its Chairman and certain  members of his immediate  family.  Mr. Steven F.  Schepman,  the son-in-law of First Banks' Chairman,  and Director of First Banks since July 2004 and Senior Vice President and Chief  Financial  Officer of First Banks since August 2005,  received salary and bonus compensation of $195,000 and $182,100 for the years ended December 31, 2005 and 2004,  respectively.  Mr. Michael J. Dierberg,  the son of First Banks' Chairman,  and  Director  and  General  Counsel of First  Banks until July 2004, received  salary and bonus  compensation  of $62,300 for the year ended December 31, 2004.           On August 30, 2004,  First Bank granted to FCA, a corporation  owned by First Banks' Chairman and members of his immediate  family,  a written option to purchase 735 Membership  Interests of SBLS LLC, a wholly owned limited liability company of First Bank, at a price of $10,000 per  Membership  Interest,  or $7.4 million in  aggregate.  The option could have been  exercised by FCA at any time    prior to its expiration,  which was extended to June 30, 2005. On June 30, 2005, FCA   exercised   this  option  and  paid  First  Bank  $7.4  million  in  cash. Consequently,  SBLS LLC became  51.0% owned by First Bank and 49.0% owned by FCA as of June 30, 2005.           On June 30,  2005,  SBLS LLC  executed a  Multi-Party  Agreement by and among SBLS LLC, First Bank,  Colson Services Corp.,  physical 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 warehouse line of credit for loan funding purposes.  The Agreement  provides for a maximum credit  line of $50.0  million  and has an  initial  term of three  years with a maturity date of June 30, 2008. At the end of the first year, First Bank, at its option, may extend the existing maturity date by one additional year, subject to certain conditions.  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 $31.4 million at December 31, 2005.  Interest  expense recorded under the Agreement by SBLS LLC since its  inception on June 30, 2005 was $1.9  million.  However,  the balance of the advances  under the  Agreement and the related  interest  expense recognized  by SBLS LLC are fully  eliminated  for purposes of the  Consolidated Financial Statements.           On August 5, 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  provides  for WWT to  provide  information  technology services  associated  with the  deployment  of personal  computers to First Bank employees in an effort to further  modernize  the  technological  infrastructure throughout  the First Bank branch  banking  network.  Mr.  David L.  Steward,  a director  of First  Banks and a member of the Audit  Committee  of First  Banks, serves as the  Chairman of the Board of  Directors  of WWTHC.  Prior to entering into this contract, the Audit Committee of First Banks reviewed and approved the utilization of WWT for information  technology  services with fees not to exceed $500,000 for the year ended  December 31, 2005.  As of December 31, 2005,  First Bank had made payments of $471,000 under the contract.           During 2005,  First Bank  contributed  $2.5 million and $1.5 million to The  Dierberg   Foundation  and  the  Dierberg   Operating   Foundation,   Inc., respectively,  charitable  foundations  created  by First  Banks'  Chairman  and members of his immediate family. There were no charitable contributions to these organizations  during 2004. During 2003, First Banks contributed  231,779 shares of  Allegiant  common  stock with a fair value of $5.1  million to The  Dierberg Foundation.   In  conjunction  with  this  transaction,   First  Banks  recorded charitable contribution expense of $5.1 million, which was partially offset by a gain on the contribution of these  available-for-sale  investment  securities of $2.3 million,  representing  the difference  between the cost basis and the fair value of the common stock on the date of the  contribution.  In addition,  First Banks recognized a tax benefit of $2.5 million associated with this transaction. The  contribution  of the common stock  eliminated  First Banks'  investment  in Allegiant.           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 years ended December 31, 2005, 2004 and 2003, First Banks purchased products of approximately $320,000, $189,000 and $150,000, in aggregate, respectively, from these entities.  (20)     BUSINESS SEGMENT RESULTS           First Banks'  business  segment is First Bank. The reportable  business segment is consistent with the management  structure of First Banks,  First Bank and the internal reporting system that monitors performance. First Bank provides similar products and services in its defined geographic areas through its branch network.  The products and services  offered include a broad range of commercial and personal deposit products,  including demand, savings, money market and time deposit  accounts.  In addition,  First Bank markets combined basic services for various  customer  groups,   including   packaged  accounts  for  more  affluent customers,  and sweep accounts,  lock-box deposits and cash management  products for  commercial  customers.  First Bank also offers both consumer and commercial loans.  Consumer  lending  includes  residential  real  estate,  home equity and installment  lending.  Commercial  lending  includes  commercial,  financial and agricultural loans, real estate  construction and development loans,  commercial real  estate  loans,  asset-based  loans and trade  financing.  Other  financial services   include   mortgage   banking,   debit  cards,   brokerage   services, credit-related insurance, 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.           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 predominant  practices  within the banking  industry. Such  principles  and  practices are  summarized  in Note 1 to the  Consolidated Financial Statements. The business segment results are summarized as follows:                                                                               Corporate, Other                                                                            and Intercompany                                                 First Bank                 Reclassifications (1)           Consolidated Totals                                     --------------------------------  ----------------------------  -------------------------------                                        2005       2004       2003       2005      2004      2003       2005      2004       2003                                        ----       ----       ----       ----      ----      ----       ----      ----       ----                                                                     (dollars expressed in thousands) Balance sheet information:            Investment securities.............. $1,324,219  1,803,454  1,042,809    16,564     9,895     6,905  1,340,783  1,813,349  1,049,714 Loans, net of unearned discount....  7,020,771  6,137,968  5,328,075        --        --        --  7,020,771  6,137,968  5,328,075 Goodwill...........................    167,056    156,849    145,548        --        --        --    167,056    156,849    145,548 Total assets.......................  9,148,931  8,720,331  7,097,635    21,402    12,510     9,305  9,170,333  8,732,841  7,106,940 Deposits...........................  7,601,162  7,161,636  5,977,042   (59,331)   (9,666)  (15,427) 7,541,831  7,151,970  5,961,615 Notes payable......................         --         --         --   100,000    15,000    17,000    100,000     15,000     17,000 Subordinated debentures............         --         --         --   215,461   273,300   209,320    215,461    273,300    209,320 Stockholders' equity...............    931,192    877,473    766,397  (252,254) (276,580) (216,582)   678,938    600,893    549,815                                     ==========  =========  =========  ========  ========  ========  =========  =========  =========  Income statement information:  Interest income.................... $  493,182    394,196    390,340       758       586       813    493,940    394,782    391,153 Interest expense...................    145,608     79,260     85,524    22,651    15,507    18,502    168,259     94,767    104,026                                     ----------  ---------  ---------  --------  --------  --------  ---------  ---------  ---------      Net interest income...........    347,574    314,936    304,816   (21,893)  (14,921)  (17,689)   325,681    300,015    287,127 Provision for loan losses..........     (4,000)    25,750     49,000        --        --        --     (4,000)    25,750     49,000                                     ----------  ---------  ---------  --------  --------  --------  ---------  ---------  ---------      Net interest income after        provision for loan losses...    351,574    289,186    255,816   (21,893)  (14,921)  (17,689)   329,681    274,265    238,127 Noninterest income.................     95,529     84,077     79,813      (786)     (591)    7,895     94,743     83,486     87,708 Noninterest expense................    273,142    226,183    216,373     3,154     3,322    10,696    276,296    229,505    227,069                                     ----------  ---------  ---------  --------  --------  --------  ---------  ---------  ---------      Income before provision for        income taxes and minority        interest in loss of        subsidiary..................    173,961    147,080    119,256   (25,833)  (18,834)  (20,490)   148,128    128,246     98,766 Provision for income taxes.........     61,517     54,682     44,871    (9,008)   (9,344)   (8,916)    52,509     45,338     35,955                                     ----------  ---------  ---------  --------  --------  --------  ---------  ---------  ---------      Income before minority        interest in loss of        subsidiary..................    112,444     92,398     74,385   (16,825)   (9,490)  (11,574)    95,619     82,908     62,811 Minority interest in loss      of subsidiary.................     (1,287)        --         --        --        --        --     (1,287)        --         --                                     ----------  ---------  ---------  --------  --------  --------  ---------  ---------  ---------      Net income.................... $  113,731     92,398     74,385   (16,825)   (9,490)  (11,574)    96,906     82,908     62,811                                     ==========  =========  =========  ========  ========  ========  =========  =========  ========= - --------------- (1)  Corporate and other includes $13.4 million, $9.8 million and $11.6 million of interest expense on subordinated debentures,      after applicable income tax benefit of $7.2 million, $5.3 million and $6.3 million for the years ended  December 31, 2005,      2004 and 2003, respectively.   (21)     REGULATORY CAPITAL           First  Banks and First Bank are subject to various  regulatory  capital requirements administered by the federal and state banking agencies.  Failure to meet minimum capital  requirements can initiate  certain  mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct  material  effect on First Banks'  financial  statements.  Under  capital adequacy  guidelines and the regulatory  framework for prompt corrective action, First Banks and First Bank must meet specific  capital  guidelines  that involve quantitative measures of assets, liabilities and certain off-balance sheet items as  calculated  under  regulatory  accounting  practices.  Capital  amounts  and classifications  are also subject to  qualitative  judgments  by the  regulators about components, risk weightings and other factors.           Quantitative  measures  established  by  regulation  to ensure  capital adequacy  require  First  Banks and First Bank to maintain  minimum  amounts and ratios  of  total  and  Tier  1  capital  (as  defined  in the  regulations)  to risk-weighted  assets,  and of Tier 1  capital  to  average  assets.  Management believes, as of December 31, 2005 and 2004, First Banks and First Bank were each    well  capitalized.  As of December 31, 2005, the most recent  notification  from First Banks' primary  regulator  categorized  First Banks and First Bank as well capitalized under the regulatory  framework for prompt corrective  action. To be categorized  as well  capitalized,  First  Banks  and First  Bank must  maintain minimum total  risk-based,  Tier 1 risk-based and Tier 1 leverage  ratios as set forth in the following table.           At December 31, 2005 and 2004,  First Banks' and First Bank's  required and actual capital ratios were as follows:                                                                                                     To be Well                                                        Actual                                Capitalized Under                                                  ------------------       For Capital        Prompt Corrective                                                   2005        2004     Adequacy Purposes     Action Provisions                                                   ----        ----     -----------------     -----------------  Total capital (to risk-weighted assets):           First Banks.............................    10.14%       10.61%          8.0%                 10.0%      First Bank..............................    10.66        10.73           8.0                  10.0  Tier 1 capital (to risk-weighted assets):      First Banks.............................     8.88         8.43           4.0                   6.0      First Bank..............................     9.41         9.47           4.0                   6.0  Tier 1 capital (to average assets):      First Banks.............................     8.13         7.89           3.0                   5.0      First Bank..............................     8.61         8.86           3.0                   5.0            On March 1, 2005,  the Board 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 8.47% and 7.74%,  respectively,  as of December 31, 2005.  In October 2005,  the  Federal  Reserve,  in  conjunction  with  various  other  regulatory agencies,  announced  plans  to  consider  various  proposed  revisions  to U.S. risk-based capital standards that would enhance risk sensitivity of the existing framework.  The comment  period ended in January  2006.  First Banks is awaiting further  guidance  from the Board  pending  the  outcome  of the newly  proposed revisions,  and is continuing to evaluate the proposed changes and their overall impact on the Company's financial condition and results of operations.  (22)     DISTRIBUTION OF EARNINGS OF FIRST BANK           First Bank is restricted by various state and federal regulations as to the amount of dividends  that are  available  for payment to First  Banks,  Inc. Under  the most  restrictive  of  these  requirements,  the  future  payment  of dividends from First Bank is limited to approximately  $81.5 million at December 31, 2005, unless prior permission of the regulatory authorities is obtained.       (23)     PARENT COMPANY ONLY FINANCIAL INFORMATION           Following  are  condensed  balance  sheets of First  Banks,  Inc. as of December 31, 2005 and 2004,  and  condensed  statements of income and cash flows for the years ended December 31, 2005, 2004 and 2003:                                       CONDENSED BALANCE SHEETS                                                                                   December 31,                                                                               -----------------                                                                               2005         2004                                                                               ----         ----                                                                        (dollars expressed in thousands)                              Assets                              ------     Cash deposited in First Bank...........................................    $   59,036       8,359 Cash deposited in unaffiliated financial institutions..................         1,789          --                                                                            ----------     -------      Total cash........................................................        60,825       8,359 Investment securities..................................................        16,564       9,895 Investment in subsidiaries.............................................       931,690     879,316 Other assets...........................................................         3,425       2,665                                                                            ----------     -------      Total assets......................................................    $1,012,504     900,235                                                                            ==========     =======                Liabilities and Stockholders' Equity               ------------------------------------  Notes payable..........................................................    $  100,000      15,000 Subordinated debentures................................................       215,461     273,300 Accrued expenses and other liabilities.................................        18,105      11,042                                                                            ----------     -------      Total liabilities.................................................       333,566     299,342 Stockholders' equity...................................................       678,938     600,893                                                                            ----------     -------      Total liabilities and stockholders' equity........................    $1,012,504     900,235                                                                            ==========     =======                               CONDENSED STATEMENTS OF INCOME                                                                              Years Ended December 31,                                                                        ---------------------------------                                                                          2005         2004        2003                                                                          ----         ----        ----                                                                        (dollars expressed in thousands)  Income:    Dividends from subsidiaries.....................................    $ 94,050      40,000       67,000    Management fees from subsidiaries...............................      31,975      27,853       23,992    Gain on sale of available-for-sale investment securities........          --          --        8,218    Other...........................................................       1,049         710        1,301                                                                        --------      ------      -------       Total income.................................................     127,074      68,563      100,511                                                                        --------      ------      ------- Expense:    Interest........................................................      22,860      15,597       18,664    Salaries and employee benefits..................................      23,238      20,699       19,366    Legal, examination and professional fees........................       3,959       2,943        3,903    Charitable contributions........................................         100          43        5,134    Other...........................................................       8,687       8,114        6,852                                                                        --------      ------      -------       Total expense................................................      58,844      47,396       53,919                                                                        --------      ------      -------       Income before benefit for income taxes and equity         in undistributed earnings of subsidiaries..................      68,230      21,167       46,592 Benefit for income taxes...........................................      (9,004)     (9,344)      (8,891)                                                                        --------      ------      -------       Income before equity in undistributed earnings         of subsidiaries............................................      77,234      30,511       55,483 Equity in undistributed earnings of subsidiaries...................      19,672      52,397        7,328                                                                        --------      ------      -------       Net income...................................................    $ 96,906      82,908       62,811                                                                        ========      ======      =======                                 CONDENSED STATEMENTS OF CASH FLOWS                                                                              Years Ended December 31,                                                                        ----------------------------------                                                                           2005         2004        2003                                                                           ----         ----        ----                                                                         (dollars expressed in thousands)  Cash flows from operating activities:       Net income......................................................     $  96,906      82,908       62,811   Adjustments to reconcile net income to net cash provided by      operating activities:        Net income of subsidiaries.................................      (113,722)    (92,397)     (74,328)        Dividends from subsidiaries................................        94,050      40,000       67,000        Other, net.................................................         4,882      (3,262)         292                                                                        ---------     -------     --------          Net cash provided by operating activities................        82,116      27,249       55,775                                                                        ---------     -------     --------  Cash flows from investing activities:   Increase in investment securities...............................        (5,304)       (915)          --   Investment in common securities of affiliated business      and statutory trusts.........................................            --      (1,857)      (2,197)   Payments from redemption of investment in common securities      of affiliated business and statutory trusts..................         1,778          --        4,090   Acquisitions of subsidiaries....................................       (52,400)    (76,067)          --   Capital (contributions) reductions (to) from subsidiaries.......            --     (15,000)      10,000   Other, net......................................................         1,340         (39)          --                                                                        ---------     -------     --------          Net cash (used in) provided by investing activities......       (54,586)    (93,878)      11,893                                                                        ---------     -------     --------  Cash flows from financing activities:   Advances drawn on notes payable.................................       100,000      15,000       34,500   Repayments of notes payable.....................................       (15,000)    (17,000)     (24,500)   Proceeds from issuance of subordinated debentures...............            --      61,857       70,907   Repayments of subordinated debentures...........................       (59,278)         --     (136,341)   Payment of preferred stock dividends............................          (786)       (786)        (786)                                                                        ---------     -------     --------          Net cash provided by (used in) financing activities......        24,936      59,071      (56,220)                                                                        ---------     -------     --------          Net increase (decrease)in cash...........................        52,466      (7,558)      11,448 Cash, beginning of year...........................................         8,359      15,917        4,469                                                                        ---------     -------     -------- Cash, end of year.................................................     $  60,825       8,359       15,917                                                                        =========     =======     ========  Noncash investing activities:   Cash paid for interest..........................................     $  18,690      13,527       16,489                                                                        =========     =======     ========   (24)     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 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.            On June 30, 2004,  First Bank  recorded a liability of $2.0 million for recourse  obligations  related to the  completion  of the sale of a  significant portion of the leases in its commercial leasing  portfolio.  For value received, First  Bank,  as  seller,  indemnified  the  buyer of  certain  leases  from any liability or loss resulting from defaults  subsequent to the sale.  First Bank's indemnification  for  the  recourse   obligations  is  limited  to  a  specified percentage,  ranging from 15% to 25%, of the aggregate  lease  purchase price of specific pools of leases sold. As of December 31, 2005 and 2004,  this liability was  $500,000  and  $1.6  million,  respectively,  reflecting  a  change  in the estimated  probable loss based upon the payments  received from the borrowers of the specific pools of leases sold and the performance of the portfolio.           On August 31, 2004, SBLS LLC acquired  substantially  all of the assets and assumed certain  liabilities of SBLS, as further  discussed in Note 2 to the Consolidated  Financial  Statements.  The Amended and  Restated  Asset  Purchase Agreement (Asset Purchase  Agreement)  governing this  transaction  provides for certain payments to the seller  contingent on future  valuations of specifically identified  assets,   including  servicing  assets  and  retained  interests  in securitizations. SBLS LLC was not required to make any payments to the seller as of September 30, 2005, the first  measurement  date under the terms of the Asset Purchase Agreement.  As of December 31, 2005 and 2004, SBLS LLC had not recorded a liability for the obligations  associated with these contingent  payments,  as the likelihood  that SBLS LLC will be required to make future payments under the Asset Purchase Agreement is not ascertainable at the present time.           In the ordinary  course of business,  First Banks and its  subsidiaries become involved in legal  proceedings.  Management,  in consultation  with legal counsel,  believes the ultimate  resolution of these proceedings will not have a material  adverse effect on the financial  condition or results of operations of First Banks and/or its subsidiaries.  (25)     SUBSEQUENT EVENTS (UNAUDITED)           On January 3, 2006, First Banks completed its acquisition of a majority of the outstanding common stock of FNBS, Sachse,  Texas, for approximately $20.8 million in cash. The acquisition served to expand First Banks' banking franchise in Texas. The transaction was funded through internally  generated funds. At the time of the  acquisition,  FNBS had  assets  of  $76.2  million,  loans,  net of unearned discount, of $49.3 million, deposits of $66.2 million and stockholders' equity of $9.9  million.  The  assets  acquired  and  liabilities  assumed  were recorded at their estimated fair value on the  acquisition  date. The fair value adjustments  represent current estimates and are subject to further  adjustments as  the  valuation  data  is  finalized.  Preliminary  goodwill,  which  is  not deductible  for tax  purposes,  was  approximately  $9.0  million,  and the core deposit  intangibles,  which are not  deductible  for tax  purposes  and will be amortized over five years utilizing the straight-line method, were approximately $3.6 million. FNBS was merged with and into First Bank.           On January 18, 2006,  First Banks executed a Stock  Purchase  Agreement providing  for  the  acquisition  of  First  Independent  National  Bank  (First Independent)  for  approximately  $19.2 million in cash.  First  Independent  is headquartered in Plano, Texas and operates two banking offices in Plano,  Texas, located in Collin County.  In addition,  First  Independent is in the process of opening a de novo branch banking  office located in the Preston Forest  Shopping Center in  Dallas  County.  The  transaction,  which is  subject  to  regulatory approvals,  is expected to be completed  during the second  quarter of 2006.  At December 31, 2005, First Independent had assets of approximately  $75.4 million, loans, net of unearned  discount,  of approximately  $61.1 million,  deposits of approximately  $66.1  million and  stockholders'  equity of  approximately  $8.0 million.           On January 20, 2006,  First Bank completed its  acquisition of the East Renner Branch. At the time of the acquisition, the East Renner Branch had assets of  approximately  $667,000,  including  loans,  net of  unearned  discount,  of approximately $144,000, and deposits of approximately $1.1 million.           First Banks  transferred  approximately  $59.7 million of nonperforming loans to its held for sale portfolio on December 31, 2005 and actively  marketed the loans for sale  through an  independent  third  party.  On January 30, 2006, First  Banks  received a payoff on one of these  nonaccrual  loans held for sale that had a carrying  value of $12.4  million at December 31,  2005.  This credit relationship  was acquired with the acquisition of CIB Bank. In conjunction with this loan payoff,  First Banks  recognized  a loan  recovery of $5.0 million and interest  income  and late fees of $2.0  million.  In March  2006,  First  Banks completed  the sale of a majority of the remaining  nonaccrual  loans that had a carrying  value of  approximately  $32.5 million in  aggregate,  at December 31,    2005.  First  Bank  recorded  a  gain,   before   applicable  income  taxes,  of approximately  $1.7 million on the sale of these loans.  First Bank continues to actively  market the  remaining  nonaccrual  loans that had a carrying  value of approximately $14.9 million at December 31, 2005.           On January 31, 2006,  First Bank  executed a Stock  Purchase  Agreement providing for the acquisition of KIF, Inc. (KIF), an Iowa  corporation,  and its wholly owned subsidiaries,  Universal Premium Acceptance Corporation, a Missouri corporation,   and  UPAC  of   California,   Inc.,  a  California   corporation, (collectively,  UPAC) for  approximately  $52.8 million in cash. In  conjunction with the  acquisition  of UPAC,  First Banks will repay in full the  outstanding balance  of the  subordinated  notes of UPAC,  which  was  approximately  $114.2 million at December  31,  2005.  UPAC is an insurance  premium  finance  company headquartered  in the Kansas  City suburb of Lenexa,  Kansas and  operates in 49 states,  including offices in St. Louis, Chicago, Los Angeles,  Dallas,  Boston, Cleveland,  Fort  Lauderdale,  Minneapolis,  New  York  City,  Philadelphia  and Portland.  The  transaction,  which is subject to certain  state  approvals,  is expected to be  completed  during the second  quarter of 2006.  At December  31, 2005, UPAC had assets of  approximately  $146.6 million,  loans of approximately $144.2 million and stockholders' equity of approximately $17.3 million.           On February 14, 2006,  First Bank terminated its two $50.0 million term repurchase  agreements  with maturity  dates of June 14, 2007,  and recognized a $1.6 million loss on the related sale of the  underlying  securities  associated with the term repurchase agreements.           On February 16, 2006, First Banks terminated its single remaining $25.0 million notional fair value interest rate swap agreement.  The underlying hedged liabilities  were  a  portion  of  First  Banks'  subordinated  debentures.   In conjunction  with this  transaction,  First Banks  recorded the  resulting  $1.7 million basis adjustment of the underlying hedged  liabilities and the remaining balance of the basis  adjustments  associated  with the fair value interest rate swap agreements that were terminated  effective May 27, 2005, totaling $834,000, in its  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.           On March 1,  2006,  First  Bank  Statutory  Trust IV (FBST IV), a newly formed  Delaware  statutory  trust,  issued 40,000 shares of variable rate trust preferred  securities  at $1,000  per share in a private  placement,  and issued 1,238  shares of common  securities  to First  Banks at $1,000 per share.  First Banks owns all of the common  securities  of FBST IV. The gross  proceeds of the offering  were  used by FBST IV to  purchase  $41.2  million  of  variable  rate subordinated  debentures  from First  Banks,  maturing  on March 15,  2036.  The maturity date of the subordinated  debentures may be shortened, at the option of First Banks,  to a date not earlier than March 15, 2011,  if certain  conditions are  met.  The  subordinated  debentures  are the  sole  asset  of FBST  IV.  In connection  with the issuance of the FBST IV 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 FBST IV under  the FBST IV  preferred  securities.  Proceeds  from the  issuance  of the subordinated  debentures  to FBST  IV,  net of  offering  expenses,  were  $41.2 million.  The  distribution  rate on the FBST IV securities is equivalent to the three-month  LIBOR plus 142.0 basis points,  and is payable quarterly in arrears beginning June 15, 2006.           On March 7,  2006,  First  Bank  executed  a  Purchase  and  Assumption Agreement  providing  for the sale of the  Pittsfield  banking  office  in Mount Sterling,  Illinois to  Beardstown  following  the  completion  of First  Banks' acquisition  of  Bancorp,  as further  described  in Note 2 to the  Consolidated Financial Statements. The transaction, which is subject to regulatory approvals, is expected to be completed during the second quarter of 2006.                                                                       FIRST BANKS, INC.                                    QUARTERLY CONDENSED FINANCIAL DATA -- UNAUDITED  - ----------------------------------------------------------------------------------------------------------------------                                                                                   2005 Quarter Ended                                                                 ----------------------------------------------------                                                                  March 31     June 30    September 30   December 31                                                                  --------     -------    ------------   -----------                                                               (dollars expressed in thousands, except per share data)         Interest income............................................   $ 112,228      117,188      127,801       136,723   Interest expense...........................................      34,149       39,367       45,155        49,588                                                                 ---------     --------     --------      --------      Net interest income.....................................      78,079       77,821       82,646        87,135   Provision for loan losses..................................          --       (8,000)          --         4,000                                                                 ---------     --------     --------      --------      Net interest income after provision for loan losses.....      78,079       85,821       82,646        83,135   Noninterest income.........................................      21,101       25,803       24,535        23,304   Noninterest expense........................................      63,755       69,773       67,439        75,329                                                                 ---------     --------     --------      --------      Income before provision for income taxes and minority        interest in loss of subsidiary........................      35,425       41,851       39,742        31,110   Provision for income taxes.................................      13,298       15,005       13,265        10,941                                                                 ---------     --------     --------      --------      Income before minority interest in loss of subsidiary...      22,127       26,846       26,477        20,169   Minority interest in loss of subsidiary....................          --           --       (1,036)         (251)                                                                 ---------     --------     --------      --------      Net income..............................................   $  22,127       26,846       27,513        20,420                                                                 =========     ========     ========      ========    Earnings per common share:      Basic...................................................   $  926.87     1,129.05     1,154.52        851.91                                                                 =========     ========     ========      ========       Diluted.................................................   $  915.04     1,110.42     1,139.46        846.12                                                                 =========     ========     ========      ========                                                                                    2004 Quarter Ended                                                                 ----------------------------------------------------                                                                  March 31     June 30    September 30   December 31                                                                  --------     -------    ------------   -----------                                                               (dollars expressed in thousands, except per share data)    Interest income............................................   $  96,127       96,585       99,461       102,609   Interest expense...........................................      21,474       20,979       23,853        28,461                                                                 ---------     --------     --------      --------      Net interest income.....................................      74,653       75,606       75,608        74,148   Provision for loan losses..................................      12,750        3,000        7,500         2,500                                                                 ---------     --------     --------      --------      Net interest income after provision for loan losses.....      61,903       72,606       68,108        71,648   Noninterest income.........................................      20,559       20,104       21,982        20,841   Noninterest expense........................................      52,602       55,405       58,391        63,107                                                                 ---------     --------     --------      --------      Income before provision for income taxes................      29,860       37,305       31,699        29,382   Provision for income taxes.................................      11,591       11,302       11,951        10,494                                                                 ---------     --------     --------      --------      Net income..............................................   $  18,269       26,003       19,748        18,888                                                                 =========     ========     ========      ========    Earnings per common share:      Basic...................................................   $  763.81     1,093.42       826.33        787.25                                                                 =========     ========     ========      ========       Diluted.................................................   $  753.93     1,074.06       815.20        780.71                                                                 =========     ========     ========      ========                                    FIRST BANKS, INC.                                INVESTOR INFORMATION - --------------------------------------------------------------------------------  FIRST BANKS, INC. PREFERRED SECURITIES - --------------------------------------           The  preferred  securities  of First  Preferred  Capital  Trust III are traded on the Nasdaq  National Market System with the ticker symbol "FBNKM." The preferred  securities of First Preferred  Capital Trust III are represented by a global  security that has been  deposited with and registered in the name of The Depository  Trust Company,  New York, New York (DTC).  The beneficial  ownership interests of these preferred  securities are recorded through the DTC book-entry system. The high and low preferred  securities prices and the dividends declared for 2005 and 2004 are summarized as follows:                       FIRST PREFERRED CAPITAL TRUST III (ISSUE DATE - NOVEMBER 2001) - FBNKM                                                                     2005                  2004                                                             ------------------    -----------------   Dividend                                                               High      Low       High       Low      Declared                                                               ----      ---       ----       ---     ----------                         First quarter...................................   $ 27.50    26.25      27.95     27.00    $ 0.562500          Second quarter..................................     27.05    26.00      27.00     25.55      0.562500          Third quarter...................................     27.09    25.75      29.10     26.04      0.562500          Fourth quarter..................................     26.40    25.75      27.55     26.55      0.562500                                                                                                      ----------                                                                                                      $ 2.250000                                                                                                      ==========            The preferred securities of First Preferred Capital Trust IV are traded on the New York Stock  Exchange with the ticker  symbol  "FBSPrA." The preferred securities  of First  Preferred  Capital  Trust IV are  represented  by a global security  that has been  deposited  with and  registered in the name of DTC. The beneficial  ownership  interests  of these  preferred  securities  are  recorded through the DTC book-entry system. The high and low preferred  securities prices and the dividends declared for 2005 and 2004 are summarized as follows:                         FIRST PREFERRED CAPITAL TRUST IV (ISSUE DATE - APRIL 2003) - FBSPrA                                                                     2005                 2004                                                             ------------------    ----------------    Dividend                                                               High      Low       High       Low      Declared                                                               ----      ---       ----       ---     ----------                         First quarter...................................   $ 27.80    26.00      28.60     27.35    $ 0.509375          Second quarter..................................     27.55    25.75      28.00     25.70      0.509375          Third quarter...................................     27.40    26.28      28.00     25.80      0.509375          Fourth quarter..................................     27.61    25.97      28.00     26.81      0.509375                                                                                                      ----------                                                                                                      $ 2.037500                                                                                                      ==========                 FOR INFORMATION CONCERNING FIRST BANKS, PLEASE CONTACT:                 Allen H. Blake                          Terrance M. McCarthy                     Steven F. Schepman            President and                           Senior Executive Vice President          Senior Vice President               Chief Executive Officer                 and Chief Operating Officer              and Chief Financial Officer            600 James S. McDonnell Blvd.            600 James S. McDonnell Blvd.             600 James S. McDonnell Blvd.            Mail Code - M1-199-014                  Mail Code - M1-199-071                   Mail Code - M1-199-014            Hazelwood, Missouri 63042               Hazelwood, Missouri 63042                Hazelwood, Missouri 63042            Telephone - (314) 592-5000              Telephone - (314) 592-5000               Telephone - (314) 592-5000            www.firstbanks.com                      www.firstbanks.com                       www.firstbanks.com            ------------------                      ------------------                       ------------------             TRANSFER AGENTS:                                     FBNKM                                                 FBSPrA                                     -----                                                 ------                       U.S. Bank Corporate Trust Services                       Computershare Investor Services, LLC                      One Federal Street, Third Floor                          2 North LaSalle Street                      Boston, Massachusetts 02110                              Chicago, Illinois 60602                      Telephone - (800) 934-6802                               Telephone - (312) 588-4990                      www.usbank.com                                           www.computershare.com                      --------------                                           ---------------------                                          SIGNATURES           Pursuant to the  requirements  of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.                                          FIRST BANKS, INC.                                          By: /s/ 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)  Date:    March 27, 2006           Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated.              Signatures                         Title                   Date - --------------------------------------------------------------------------------  /s/ James F. Dierberg                        Director             March 27, 2006 - -------------------------------------     James F. Dierberg  /s/ Allen H. Blake                           Director             March 27, 2006 - -------------------------------------     Allen H. Blake  /s/ Terrance M. McCarthy                     Director             March 27, 2006 - -------------------------------------     Terrance M. McCarthy  /s/ Steven F. Schepman                       Director             March 27, 2006 - -------------------------------------     Steven F. Schepman  /s/ Gordon A. Gundaker                       Director             March 27, 2006 - -------------------------------------     Gordon A. Gundaker  /s/ David L. Steward                         Director             March 27, 2006 - -------------------------------------     David L. Steward  /s/ Douglas H. Yaeger                        Director             March 27, 2006 - -------------------------------------     Douglas H. Yaeger                                        INDEX TO EXHIBITS             Exhibit            Number                      Description            ------                      -----------              2.1      Stock  Purchase  Agreement by and among First Banks,  Inc.,                      The San Francisco  Company,  CIB Marine  Bancshares,  Inc.,                      Hillside  Investors,  Ltd., and CIB Bank,  dated August 12,                      2004  (incorporated  herein by reference to Exhibit 10.6 to                      the Company's  Current  Report on Form 8-K dated August 12,                      2004).              3.1      Restated  Articles  of  Incorporation  of the  Company,  as                      amended  (incorporated  herein by reference to Exhibit 3(i)                      to the  Company's  Annual  Report on Form 10-K for the year                      ended December 31, 1993).              3.2      By-Laws of the Company (incorporated herein by reference to                      Exhibit   3.2  to   Amendment   No.  2  to  the   Company's                      Registration  Statement  on Form  S-1,  File No.  33-50576,                      dated September 15, 1992).              4.1      Agreement  as to Expenses  and  Liabilities  between  First                      Banks,  Inc. and First  Preferred  Capital Trust III, dated                      November  15, 2001  (relating  to First  Preferred  Capital                      Trust III ("First Preferred III")) (filed as Exhibit 4.8 to                      the Company's  Registration Statement on Form S-2, File No.                      333-71652, dated October 15, 2001).              4.2      Agreement  as to Expenses  and  Liabilities  between  First                      Banks,  Inc. and First  Preferred  Capital  Trust IV, dated                      April 1, 2003 (relating to First Preferred Capital Trust IV                      ("First Preferred IV"))  (incorporated  herein by reference                      to Exhibit 10.20 to the Company's  Quarterly Report on Form                      10-Q for the quarter ended June 30, 2003).              4.3      Preferred  Securities  Guarantee  Agreement  by and between                      First Banks,  Inc. and State Street Bank and Trust  Company                      of Connecticut,  National  Association,  dated November 15,                      2001  (relating to First  Preferred  III) (filed as Exhibit                      4.7 to the  Company's  Registration  Statement on Form S-2,                      File No. 333-71652, dated October 15, 2001).              4.4      Preferred  Securities  Guarantee  Agreement  by and between                      First Banks, Inc. and Fifth Third Bank, dated April 1, 2003                      (relating to First  Preferred IV)  (incorporated  herein by                      reference  to  Exhibit  10.21  to the  Company's  Quarterly                      Report on Form 10-Q for the quarter ended June 30, 2003).              4.5      Indenture  between First Banks,  Inc. and State Street Bank                      and Trust Company of Connecticut,  National Association, as                      Trustee,   dated  November  15,  2001  (relating  to  First                      Preferred  III)  (filed  as  Exhibit  4.1 to the  Company's                      Registration  Statement  on Form S-2,  File No.  333-71652,                      dated October 15, 2001).              4.6      Indenture  between First Banks,  Inc. and Fifth Third Bank,                      as  Trustee,   dated  April  1,  2003  (relating  to  First                      Preferred IV) (incorporated  herein by reference to Exhibit                      10.22 to the  Company's  Quarterly  Report on Form 10-Q for                      the quarter ended June 30, 2003).              4.7      Amended and  Restated  Trust  Agreement  among First Banks,                      Inc., as Depositor,  State Street Bank and Trust Company of                      Connecticut,  National  Association,  as Property  Trustee,                      Wilmington  Trust  Company,  as Delaware  Trustee,  and the                      Administrative  Trustees, dated November 15, 2001 (relating                      to  First  Preferred  III)  (filed  as  Exhibit  4.5 to the                      Company's  Registration  Statement  on Form  S-2,  File No.                      333-71652, dated October 15, 2001).              4.8      Amended and  Restated  Trust  Agreement  among First Banks,                      Inc., as Depositor,  Fifth Third Bank, as Property Trustee,                      Wilmington  Trust  Company,  as Delaware  Trustee,  and the                      Administrative  Trustees,  dated April 1, 2003 (relating to                      First  Preferred IV)  (incorporated  herein by reference to                      Exhibit  10.23 to the  Company's  Quarterly  Report on Form                      10-Q for the quarter ended June 30, 2003).              4.9      Indenture  between  First  Banks,   Inc.,  as  Issuer,  and                      Wilmington Trust Company, as Trustee, dated as of April 10,                      2002  (incorporated  herein by reference to Exhibit 4.15 to                      the Company's Quarterly Report on Form 10-Q for the quarter                      ended June 30, 2002).              4.10     Guarantee  Agreement for First Bank Capital Trust, dated as                      of April 10,  2002  (incorporated  herein by  reference  to                      Exhibit 4.16 to the Company's Quarterly Report on Form 10-Q                      for the quarter ended June 30, 2002).                4.11     Amended  and  Restated  Declaration  of Trust of First Bank                      Capital  Trust,  dated as of April 10,  2002  (incorporated                      herein  by  reference  to  Exhibit  4.17  to the  Company's                      Quarterly  Report on Form 10-Q for the  quarter  ended June                      30, 2002).              4.12     Floating Rate Junior Subordinated Debt Security Certificate                      of First Banks,  Inc.,  dated April 10, 2002  (incorporated                      herein  by  reference  to  Exhibit  4.18  to the  Company's                      Quarterly  Report on Form 10-Q for the  quarter  ended June                      30, 2002).              4.13     Capital  Security  Certificate of First Bank Capital Trust,                      dated  as  of  April  10,  2002  (incorporated   herein  by                      reference to Exhibit 4.19 to the Company's Quarterly Report                      on Form 10-Q for the quarter ended June 30, 2002).              4.14     Indenture  between First Banks,  Inc., as Issuer,  and U.S.                      Bank National  Association,  as Trustee,  dated as of March                      20, 2003 (incorporated  herein by reference to Exhibit 10.6                      to Amendment No. 4 to the Company's  Registration Statement                      on Form S-2, File No. 333-102549, dated March 24, 2003).              4.15     Amended and Restated Declaration of Trust by and among U.S.                      Bank National Association,  as Institutional Trustee, First                      Banks,  Inc., as Sponsor,  and Allen H. Blake,  Terrance M.                      McCarthy and Lisa K. Vansickle, as Administrators, dated as                      of March 20,  2003  (incorporated  herein by  reference  to                      Exhibit   10.7  to  Amendment   No.  4  to  the   Company's                      Registration  Statement on Form S-2,  File No.  333-102549,                      dated March 24, 2003).              4.16     Guarantee  Agreement by and between  First Banks,  Inc. and                      U.S. Bank National Association,  dated as of March 20, 2003                      (incorporated  herein  by  reference  to  Exhibit  10.8  to                      Amendment No. 4 to the Company's  Registration Statement on                      Form S-2, File No. 333-102549, dated March 24, 2003).              4.17     Placement  Agreement by and among First Banks,  Inc., First                      Bank Statutory Trust and SunTrust  Capital  Markets,  Inc.,                      dated  as  of  March  20,  2003  (incorporated   herein  by                      reference  to  Exhibit  10.9  to  Amendment  No.  4 to  the                      Company's  Registration  Statement  on Form  S-2,  File No.                      333-102549, dated March 24, 2003).              4.18     Junior  Subordinated  Debenture of First Banks, Inc., dated                      as of March 20, 2003  (incorporated  herein by reference to                      Exhibit   10.10  to  Amendment   No.  4  to  the  Company's                      Registration  Statement on Form S-2,  File No.  333-102549,                      dated March 24, 2003).              4.19     Capital  Securities  Subscription  Agreement  by and  among                      First Bank  Statutory  Trust,  First  Banks,  Inc.  and STI                      Investment  Management,  Inc.,  dated as of March 20,  2003                      (incorporated  herein  by  reference  to  Exhibit  10.11 to                      Amendment No. 4 to the Company's  Registration Statement on                      Form S-2, File No. 333-102549, dated March 24, 2003).              4.20     Common  Securities  Subscription  Agreement  by and between                      First Bank Statutory Trust and First Banks,  Inc., dated as                      of March 20,  2003  (incorporated  herein by  reference  to                      Exhibit   10.12  to  Amendment   No.  4  to  the  Company's                      Registration  Statement on Form S-2,  File No.  333-102549,                      dated March 24, 2003).              4.21     Debenture  Subscription  Agreement  by  and  between  First                      Banks,  Inc. and First Bank  Statutory  Trust,  dated as of                      March 20, 2003 (incorporated herein by reference to Exhibit                      10.13  to  Amendment  No. 4 to the  Company's  Registration                      Statement on Form S-2, File No. 333-102549, dated March 24,                      2003).              4.22     Indenture  between  First  Banks,   Inc.,  as  Issuer,  and                      Wilmington Trust Company, as Trustee, dated as of September                      20, 2004 (incorporated  herein by reference to Exhibit 4.26                      to the  Company's  Annual  Report on Form 10-K for the year                      ended December 31, 2004).              4.23     Amended  and  Restated  Declaration  of Trust by and  among                      Wilmington  Trust  Company,  as Delaware  Trustee,  and the                      Institutional  Trustee,  First Banks, Inc., as Sponsor, and                      Allen H. Blake, Terrance M. McCarthy and Lisa K. Vansickle,                      as   Administrators,   dated  as  of  September   20,  2004                      (incorporated  herein by  reference  to Exhibit 4.27 to the                      Company's  Annual  Report on Form  10-K for the year  ended                      December 31, 2004).                 4.24     Guarantee  Agreement by and between  First Banks,  Inc. and                      Wilmington  Trust  Company,  dated as of September 20, 2004                      (incorporated  herein by  reference  to Exhibit 4.28 to the                      Company's  Annual  Report on Form  10-K for the year  ended                      December 31, 2004).              4.25     Placement  Agreement by and among First Banks,  Inc., First                      Bank Statutory  Trust II and FTN Financial  Capital Markets                      and Keefe,  Bruyette & Woods, as Placement Agents, dated as                      of September 10, 2004 (incorporated  herein by reference to                      Exhibit 4.29 to the  Company's  Annual  Report on Form 10-K                      for the year ended December 31, 2004).              4.26     Floating  Rate  Junior  Subordinated   Deferrable  Interest                      Debenture of First Banks,  Inc.,  dated as of September 20,                      2004  (incorporated  herein by reference to Exhibit 4.30 to                      the Company's Annual Report on Form 10-K for the year ended                      December 31, 2004).              4.27     Capital  Securities  Subscription  Agreement  by and  among                      First Bank Statutory Trust II, First Banks,  Inc. and First                      Tennessee Bank National Association,  dated as of September                      20, 2004 (incorporated  herein by reference to Exhibit 4.31                      to the  Company's  Annual  Report on Form 10-K for the year                      ended December 31, 2004).              4.28     Capital  Securities  Subscription  Agreement by and between                      First  Bank  Statutory  Trust II,  First  Banks,  Inc.  and                      Preferred Term  Securities XV, Ltd.,  dated as of September                      20, 2004 (incorporated  herein by reference to Exhibit 4.32                      to the  Company's  Annual  Report on Form 10-K for the year                      ended December 31, 2004).              4.29     Capital Securities  Certificate P-1 of First Bank Statutory                      Trust II, dated September 20, 2004 (incorporated  herein by                      reference to Exhibit 4.33 to the Company's Annual Report on                      Form 10-K for the year ended December 31, 2004).              4.30     Capital Securities  Certificate P-2 of First Bank Statutory                      Trust II, dated September 20, 2004 (incorporated  herein by                      reference to Exhibit 4.34 to the Company's Annual Report on                      Form 10-K for the year ended December 31, 2004).              4.31     Indenture  between  First  Banks,   Inc.,  as  Issuer,  and                      Wilmington Trust Company, as Trustee,  dated as of November                      23, 2004 (incorporated  herein by reference to Exhibit 4.35                      to the  Company's  Annual  Report on Form 10-K for the year                      ended December 31, 2004).              4.32     Amended  and  Restated  Declaration  of Trust by and  among                      Wilmington  Trust  Company,  as Delaware  Trustee,  and the                      Institutional  Trustee,  First Banks, Inc., as Sponsor, and                      Terrance  M.   McCarthy,   Peter  D.  Wimmer  and  Lisa  K.                      Vansickle, as Administrators, dated as of November 23, 2004                      (incorporated  herein by  reference  to Exhibit 4.36 to the                      Company's  Annual  Report on Form  10-K for the year  ended                      December 31, 2004).              4.33     Guarantee  Agreement by and between  First Banks,  Inc. and                      Wilmington  Trust  Company,  dated as of November  23, 2004                      (incorporated  herein by  reference  to Exhibit 4.37 to the                      Company's  Annual  Report on Form  10-K for the year  ended                      December 31, 2004).              4.34     Placement  Agreement by and among First Banks,  Inc., First                      Bank Statutory Trust III and FTN Financial  Capital Markets                      and Keefe,  Bruyette & Woods, as Placement Agents, dated as                      of November 22, 2004  (incorporated  herein by reference to                      Exhibit 4.38 to the  Company's  Annual  Report on Form 10-K                      for the year ended December 31, 2004).              4.35     Floating  Rate  Junior  Subordinated   Deferrable  Interest                      Debenture  of First Banks,  Inc.,  dated as of November 23,                      2004  (incorporated  herein by reference to Exhibit 4.39 to                      the Company's Annual Report on Form 10-K for the year ended                      December 31, 2004).              4.36     Capital  Securities  Subscription  Agreement  by and  among                      First Bank Statutory Trust III, First Banks, Inc. and First                      Tennessee Bank National  Association,  dated as of November                      23, 2004 (incorporated  herein by reference to Exhibit 4.40                      to the  Company's  Annual  Report on Form 10-K for the year                      ended December 31, 2004).              4.37     Capital Securities  Certificate P-1 of First Bank Statutory                      Trust III, dated November 23, 2004 (incorporated  herein by                      reference to Exhibit 4.41 to the Company's Annual Report on                      Form 10-K for the year ended December 31, 2004).                 10.1     Shareholders'  Agreement by and among James F.  Dierberg II                      and Mary W.  Dierberg,  Trustees  under the Living Trust of                      James F.  Dierberg II, dated July 24, 1989,  Michael  James                      Dierberg and Mary W.  Dierberg,  Trustees  under the Living                      Trust of Michael James Dierberg, dated July 24, 1989; Ellen                      C. Dierberg and Mary W. Dierberg, Trustees under the Living                      Trust of Ellen C. Dierberg  dated July 17, 1992,  and First                      Banks,  Inc.  (incorporated  herein by reference to Exhibit                      10.3 to the Company's  Registration  Statement on Form S-1,                      File No 33-50576, dated August 6, 1992).              10.2     AFS Customer Agreement by and between First Banks, Inc. and                      Advanced Financial Solutions,  Inc., dated January 29, 2004                      (incorporated  herein by  reference  to Exhibit 10.1 to the                      Company's  Quarterly  Report on Form  10-Q for the  quarter                      ended March 31, 2004).              10.3     Management  Services  Agreement by and between First Banks,                      Inc. and First Bank, dated February 28, 2004  (incorporated                      herein  by  reference  to  Exhibit  10.2  to the  Company's                      Quarterly  Report on Form 10-Q for the quarter  ended March                      31, 2004).              10.4     Service  Agreement by and between First Services,  L.P. and                      First Banks, Inc., dated May 1, 2004  (incorporated  herein                      by  reference to Exhibit  10.3 to the  Company's  Quarterly                      Report on Form 10-Q for the quarter ended June 30, 2004).              10.5     Service  Agreement by and between First Services,  L.P. and                      First  Bank,  dated  May 1,  2004  (incorporated  herein by                      reference to Exhibit 10.4 to the Company's Quarterly Report                      on Form 10-Q for the quarter ended June 30, 2004).              10.6     Service  Agreement  by and between  First  Banks,  Inc. and                      First  Services,  L.P.,  dated  May 1,  2004  (incorporated                      herein  by  reference  to  Exhibit  10.5  to the  Company's                      Quarterly  Report on Form 10-Q for the  quarter  ended June                      30, 2004).              10.7*    First Banks,  Inc.  Executive  Incentive  Compensation Plan                      (incorporated  herein by reference to Exhibit  10.10 to the                      Company's  Annual  Report on Form  10-K for the year  ended                      December 31, 2004).              10.8*    First Banks, Inc.  Nonqualified  Deferred Compensation Plan                      (incorporated  herein by reference to Exhibit  10.11 to the                      Company's  Annual  Report on Form  10-K for the year  ended                      December 31, 2004).              10.9*    First Amendment to First Banks, Inc.  Nonqualified Deferred                      Compensation  Plan  (incorporated  herein by  reference  to                      Exhibit 10.12 to the  Company's  Annual Report on Form 10-K                      for the year ended December 31, 2004).              10.10    Amended  and  Restated  Secured  Credit  Agreement  ($100.0                      million Term Loan Facility,  $15.0 million Revolving Credit                      Facility and $7.5 million Letter of Credit Facility), dated                      as of August 11, 2005,  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 (incorporated herein by reference to Exhibit 10                      to the  Company's  Quarterly  Report  on Form  10-Q for the                      quarter ended September 30, 2005).              14.1     Code  of  Ethics  for  Principal   Executive   Officer  and                      Financial  Professionals  (incorporated herein by reference                      to Exhibit 14 to the  Company's  Annual Report on Form 10-K                      for the year ended December 31, 2003).              21.1     Subsidiaries of the Company - 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.              *        Exhibits designated by an asterisk in the Index to Exhibits                      relate to management contracts and/or compensatory plans or                      arrangements.                                                                                                   EXHIBIT 21.1                                  FIRST BANKS, INC.                                    SUBSIDIARIES   The  following is a list of our subsidiaries and the jurisdiction of incorporation or organization:                                                                              Jurisdiction of Incorporation                                   Name of Subsidiary                              of Organization                                   ------------------                              ---------------      The San Francisco Company                                                            Delaware           First Bank                                                                   Missouri                    First Land Trustee Corp.                                            Missouri                    First Bank Business Capital, Inc. (1)                               Missouri                    Missouri Valley Partners, Inc.                                      Missouri                    Bank of San Francisco Realty Investors, Inc.                       California                    Small Business Loan Source LLC (2)                                   Nevada                    Small Business Loan Source Funding Corporation                      Delaware   ---------------  (1) Formerly FB Commercial Finance, Inc.  (2) First Bank owns 51% of Small Business Loan Source LLC.                                                                          EXHIBIT 31.1                             CERTIFICATIONS REQUIRED BY                        RULE 13a-(14)(a) OR RULE 15d-14(a)                     UNDER THE SECURITIES EXCHANGE ACT OF 1934   I, Allen H. Blake, certify that:  1.   I have  reviewed  this Annual  Report on Form 10-K (the  "Report") of First      Banks, Inc. (the "Registrant");  2.   Based on my knowledge, this Report does not contain any untrue statement of      a material  fact or omit to state a  material  fact  necessary  to make the      statements made, in light of the circumstances  under which such statements      were made,  not  misleading  with  respect  to the  period  covered by this      Report;  3.   Based on my  knowledge,  the  financial  statements,  and  other  financial      information  included  in  this  Report,  fairly  present  in all  material      respects the financial  condition,  results of operations and cash flows of      the Registrant as of, and for, the periods presented in this Report;  4.   The  Registrant's  other  certifying  officer(s) and I are  responsible for      establishing and maintaining disclosure controls and procedures (as defined      in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:       a)   Designed  such  disclosure  controls  and  procedures,  or caused such           disclosure   controls  and   procedures  to  be  designed   under  our           supervision,  to ensure  that  material  information  relating  to the           Registrant,  including its consolidated subsidiaries, is made known to           us by others within those entities,  particularly during the period in           which this Report is being prepared;       b)   Evaluated the  effectiveness of the Registrant's  disclosure  controls           and procedures and presented in this Report our conclusions  about the           effectiveness of the disclosure controls and procedures, as of the end           of the period covered by this Report based on such evaluation; and       c)   Disclosed  in this  Report  any  change in the  Registrant's  internal           control over financial reporting that occurred during the Registrant's           most recent fiscal quarter (the Registrant's  fourth fiscal quarter in           the case of an annual  report)  that has  materially  affected,  or is           reasonably  likely to materially  affect,  the  Registrant's  internal           control over financial reporting; and  5.   The Registrant's other certifying officer(s) and I have disclosed, based on      our most recent evaluation of internal control over financial reporting, to      the Registrant's auditors and the audit committee of the Registrant's board      of directors (or persons performing the equivalent functions):       a)   All significant  deficiencies and material weaknesses in the design or           operation  of internal  control  over  financial  reporting  which are           reasonably  likely to  adversely  affect the  Registrant's  ability to           record, process, summarize and report financial information; and       b)   Any fraud, whether or not material,  that involves management or other           employees who have a  significant  role in the  Registrant's  internal           control over financial reporting.   Date: March 27, 2006                                     FIRST BANKS, INC.                                      By: /s/ Allen H. Blake                                        -----------------------------------------                                            Allen H. Blake                                            President and Chief Executive Officer                                            (Principal Executive Officer)                                                                          EXHIBIT 31.2                             CERTIFICATIONS REQUIRED BY                        RULE 13a-(14)(a) OR RULE 15d-14(a)                     UNDER THE SECURITIES EXCHANGE ACT OF 1934   I, Steven F. Schepman, certify that:  1.   I have  reviewed  this Annual  Report on Form 10-K (the  "Report") of First      Banks, Inc. (the "Registrant");  2.   Based on my knowledge, this Report does not contain any untrue statement of      a material  fact or omit to state a  material  fact  necessary  to make the      statements made, in light of the circumstances  under which such statements      were made,  not  misleading  with  respect  to the  period  covered by this      Report;  3.   Based on my  knowledge,  the  financial  statements,  and  other  financial      information  included  in  this  Report,  fairly  present  in all  material      respects the financial  condition,  results of operations and cash flows of      the Registrant as of, and for, the periods presented in this Report;  4.   The  Registrant's  other  certifying  officer(s) and I are  responsible for      establishing and maintaining disclosure controls and procedures (as defined      in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:       a)   Designed  such  disclosure  controls  and  procedures,  or caused such           disclosure   controls  and   procedures  to  be  designed   under  our           supervision,  to ensure  that  material  information  relating  to the           Registrant,  including its consolidated subsidiaries, is made known to           us by others within those entities,  particularly during the period in           which this Report is being prepared;       b)   Evaluated the  effectiveness of the Registrant's  disclosure  controls           and procedures and presented in this Report our conclusions  about the           effectiveness of the disclosure controls and procedures, as of the end           of the period covered by this Report based on such evaluation; and       c)   Disclosed  in this  Report  any  change in the  Registrant's  internal           control over financial reporting that occurred during the Registrant's           most recent fiscal quarter (the Registrant's  fourth fiscal quarter in           the case of an annual  report)  that has  materially  affected,  or is           reasonably  likely to materially  affect,  the  Registrant's  internal           control over financial reporting; and  5.   The Registrant's other certifying officer(s) and I have disclosed, based on      our most recent evaluation of internal control over financial reporting, to      the Registrant's auditors and the audit committee of the Registrant's board      of directors (or persons performing the equivalent functions):       a)   All significant  deficiencies and material weaknesses in the design or           operation  of internal  control  over  financial  reporting  which are           reasonably  likely to  adversely  affect the  Registrant's  ability to           record, process, summarize and report financial information; and       b)   Any fraud, whether or not material,  that involves management or other           employees who have a  significant  role in the  Registrant's  internal           control over financial reporting.   Date: March 27, 2006                                     FIRST BANKS, INC.                                      By: /s/ Steven F. Schepman                                        -----------------------------------------                                            Steven F. Schepman                                            Senior Vice President and                                            Chief Financial Officer                                            (Principal Financial and Accounting                                            Officer)                                                                           EXHIBIT 32.1                             CERTIFICATIONS PURSUANT TO                              18 U.S.C. SECTION 1350            I,  Allen H.  Blake,  President  and Chief  Executive  Officer of First Banks,  Inc.  (the  "Company"),   certify,   pursuant  to  Section  906  of  the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:           (1)   The  Annual  Report on Form 10-K of the  Company  for the  annual                period ended December 31, 2005 (the "Report") fully complies with                the  requirements  of Sections  13(a) or 15(d) of the  Securities                Exchange Act of 1934; and           (2)   The information  contained in the Report fairly presents,  in all                material  respects,   the  financial  condition  and  results  of                operations of the Company.   Date:  March 27, 2006                                     By: /s/ Allen H. Blake                                        -----------------------------------------                                            Allen H. Blake                                            President and Chief Executive Officer                                            (Principal Executive Officer)                                                                           EXHIBIT 32.2                             CERTIFICATIONS PURSUANT TO                              18 U.S.C. SECTION 1350            I,  Steven F.  Schepman,  Senior  Vice  President  and Chief  Financial Officer of First Banks, Inc. (the "Company"),  certify,  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:           (1)   The  Annual  Report on Form 10-K of the  Company  for the  annual                period ended December 31, 2005 (the "Report") fully complies with                the  requirements  of Sections  13(a) or 15(d) of the  Securities                Exchange Act of 1934; and           (2)   The information  contained in the Report fairly presents,  in all                material  respects,   the  financial  condition  and  results  of                operations of the Company.   Date:  March 27, 2006                                      By: /s/ Steven F. Schepman                                         ----------------------------------------                                             Steven F. Schepman                                             Senior Vice President and                                             Chief Financial Officer                                             (Principal Financial and                                             Accounting Officer)       -----END PRIVACY-ENHANCED MESSAGE-----