10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

T ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

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

For the transition period from _______ to ________

Commission File Number – 0-20632

FIRST BANKS, INC.

(Exact name of registrant as specified in its charter)

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

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

(314) 854-4600

(Registrant’s telephone number, including area code)

___________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
8.15% Cumulative Trust Preferred Securities
(issued by First Preferred Capital Trust IV and	New York Stock Exchange
guaranteed by First Banks, Inc.)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ¨ Yes T No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   T Yes  ¨ No

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes  ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  T

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer T (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

¨ Yes  T No

None of the voting stock of the Company is held by non-affiliates.  All of the voting stock of the Company is owned by various trusts, which were established by and for the benefit of Mr. James F. Dierberg, the Company’s Chairman of the Board of Directors, and members of his immediate family.

At March 25, 2010, there were 23,661 shares of the registrant’s common stock outstanding.  There is no public or private market for such common stock.

FIRST BANKS, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	(Reserved)	22
Part II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	69
Item 8.	Financial Statements and Supplementary Data	69
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	69
Item 9A.	Controls and Procedures	69
Item 9B.	Other Information	70
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	70
Item 11.	Executive Compensation	74
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	80
Item 13.	Certain Relationships and Related Transactions, and Director Independence	81
Item 14.	Principal Accounting Fees and Services	82
Part IV
Item 15.	Exhibits, Financial Statement Schedules	82
Signatures		143

Special Note Regarding Forward-Looking Statements

and Factors that Could Affect Future Results

This Annual Report on Form 10-K contains certain forward-looking statements with respect to our financial condition, results of operations and business. Generally, forward-looking statements may be identified through the use of words such as: “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning or future or conditional terms such as: “will,” “would,” “should,” “could,” “may,” “likely,” “probably,” or “possibly.” Examples of forward-looking statements include, but are not limited to, estimates or projections with respect to our future financial condition, and expected or anticipated revenues with respect to our results of oper ations and our business. These forward-looking statements are subject to certain risks and uncertainties, not all of which can be predicted or anticipated. Factors that may cause our actual results to differ materially from those contemplated by the forward-looking statements herein include market conditions as well as conditions affecting the banking industry generally and factors having a specific impact on us, including but not limited to, the following factors whose order is not indicative of likelihood or significance:

Ø The decline in commercial and residential real estate sales volume and the likely potential for continuing lack of liquidity in the real estate markets;

Ø The risks associated with the high concentration of commercial real estate loans in our loan portfolio;

Ø The uncertainties in estimating the fair value of developed real estate and undeveloped land in light of declining demand for such assets and continuing lack of liquidity in the real estate markets;

Ø Negative developments and disruptions in the credit and lending markets, including the impact of the ongoing credit crisis on our business and on the businesses of our customers as well as other banks and lending institutions with which we have commercial relationships;

Ø Inaccessibility of funding sources on the same or similar terms on which we have historically relied if we are unable to maintain sufficient capital ratios;

Ø The risks associated with implementing our business strategy, including our ability to preserve and access sufficient capital to continue to execute our strategy;

Ø Rising unemployment and its impact on our customers’ savings rates and their ability to service debt obligations;

Ø Possible changes in interest rates may increase our funding costs and reduce earning asset yields, thus reducing our margins;

Ø The ability to attract and retain senior management experienced in the banking and financial services industry;

Ø Credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio including certain large individual loans;

Ø The sufficiency of our allowance for loan losses to absorb the amount of actual losses inherent in our existing loan portfolio;

Ø The accuracy of assumptions underlying the establishment of our allowance for loan losses and the estimation of values of collateral or cash flow projections and the potential resulting impact on the carrying value of various financial assets and liabilities;

Ø Liquidity risks;

Ø The ability to successfully acquire low cost deposits or alternative funding;

Ø Changes in the economic environment, competition, or other factors that may influence loan demand, deposit flows, the quality of our loan portfolio and loan and deposit pricing;

Ø The impact on our financial condition of unknown and/or unforeseen  liabilities arising from legal or administrative proceedings;

Ø The ability of First Bank to pay dividends to its parent holding company;

Ø Our ability to pay cash dividends on our preferred stock and interest on our junior subordinated debentures;

Ø The impact of possible future goodwill and other material impairment charges;

Ø The effects of increased Federal Deposit Insurance Corporation deposit insurance assessments;

Ø Our ability to comply with the terms of an agreement with our regulators pursuant to which we will agree to take certain corrective actions to improve our financial condition and results of operations;

Ø Our ability to raise sufficient capital, absent the successful completion of all or a significant portion of our Capital Plan as further discussed under Item 1. Business ¾Recent Developments;

Ø The threat of future terrorist activities, existing and potential wars and/or military actions related thereto, and domestic responses to terrorism or threats of terrorism;

Ø The effects of and changes in trade and monetary and fiscal policies and laws, including, but not limited to, the interest rate policies of the Federal Open Market Committee of the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program and the U.S. Treasury's Capital Purchase Program and Troubled Asset Relief Program authorized by the Emergency Economic Stabilization Act of 2008.

Ø Possible changes in general economic and business conditions in the United States in general and particularly in the communities and market segments we serve;

Ø Volatility and disruption in national and international financial markets;

Ø Government intervention in the U.S. financial system, as further discussed under “Item 1. Business ¾Supervision and Regulation” and “Item 1A. Risk Factors;”

Ø Changes in consumer spending, borrowings and savings habits;

Ø The impact of laws and regulations applicable to us and changes therein;

Ø The impact of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters;

Ø The impact of litigation generally and specifically arising out of our efforts to collect outstanding customer loans;

Ø Competitive conditions in the markets in which we conduct our operations, including competition from banking and non-banking companies with substantially greater resources than us, some of which may offer and develop products and services not offered by us;

Ø Our ability to control the composition of our loan portfolio without adversely affecting interest income;

Ø Possible changes in the creditworthiness of customers and the possible impairment of collectability of loans;

Ø The geographic dispersion of our offices;

Ø The impact our hedging activities may have on our operating results;

Ø The highly regulated environment in which we operate;

Ø Regulatory actions that impact First Banks, Inc. and First Bank, including the regulatory agreements entered into between the Company, First Bank, the Federal Reserve Bank of St. Louis and the State of Missouri Division of Finance, as further discussed under “Item 1. Business ¾Supervision and Regulation – Regulatory Matters;” and

Ø Our ability to respond to changes in technology or an interruption or breach in security of our information systems.

For a discussion of these and other risk factors that may impact these forward-looking statements, please refer to further discussion under “Item 1A. Risk Factors.” We wish to caution readers of this Annual Report on Form 10-K that the foregoing list of important factors may not be all-inclusive and specifically decline to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We do not have a duty to and will not update these forward-looking statements. Readers of this 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 these stateme nts.

PART I

Item 1.  Business

General. We, or First Banks or the Company, are a registered bank holding company incorporated in Missouri in 1978 and headquartered in St. Louis, Missouri. We operate through our wholly owned subsidiary bank holding company, The San Francisco Company, or SFC, headquartered in St. Louis, Missouri, and SFC’s wholly owned subsidiary bank, First Bank, also headquartered in St. Louis, Missouri. First Bank’s subsidiaries at December 31, 2009 are as follows:

Ø First Bank Business Capital, Inc., or FBBC;

Ø Missouri Valley Partners, Inc., or MVP;

Ø WIUS, Inc., formerly Universal Premium Acceptance Corporation and its wholly owned subsidiary, WIUS of California, Inc., formerly UPAC of California, Inc., or collectively, UPAC;

Ø FB Holdings, LLC, or FB Holdings;

Ø Small Business Loan Source LLC, or SBLS LLC;

Ø ILSIS, Inc.; and

Ø FBIN, Inc.

First Bank’s subsidiaries are wholly owned, except for FB Holdings, which was 53.23% owned by First Bank and 46.77% owned by First Capital America, Inc., or FCA, a corporation owned and operated by First Banks’ Chairman of the Board and members of his immediate family, as further described in Note 19 to the consolidated financial statements as of December 31, 2009. On April 30, 2009, First Bank and FCA entered into a Purchase Agreement providing for FCA to sell its 17.45% ownership in SBLS LLC to First Bank, as further described in Note 19 to our consolidated financial statements. As such, effective April 30, 2009, First Bank owned 100% of SBLS LLC.

Prior to our acquisition of Coast Financial Holdings, Inc., or CFHI, in November 2007, First Bank was a wholly owned banking subsidiary of SFC. In November 2007, we completed our acquisition of CFHI, headquartered in Bradenton, Florida, and its wholly owned banking subsidiary, Coast Bank of Florida, or Coast Bank. The issued and outstanding shares of common stock of Coast Bank were exchanged for newly issued and outstanding shares of non-voting Series B common stock of First Bank, and Coast Bank was merged with and into First Bank. As a result, SFC was the owner of 100% of the outstanding shares of voting Series A common stock of First Bank and CFHI, a wholly owned subsidiary holding company of First Banks, was the owner of 100% of the outstanding shares of non-voting Series B common stock of First Bank. Thus, First Bank was 96. 82% owned by SFC and 3.18% owned by CFHI at December 31, 2008. On December 31, 2009, CFHI was merged with and into SFC, and thus, First Bank was 100% owned by SFC at December 31, 2009.

First Bank currently operates 184 branch offices in California, Florida, Illinois, Missouri and Texas, with 202 automated teller machines, or ATMs, across the five states. At December 31, 2009, we had assets of $10.58 billion, loans, net of unearned discount, of $6.61 billion, deposits of $7.06 billion and stockholders’ equity of $522.4 million.

Through First Bank, we offer a broad range of financial services, including commercial and personal deposit products, commercial and consumer lending, and many other financial products and services. Commercial and personal deposit products include demand, savings, money market and time deposit accounts. In addition, we market combined basic services for various customer groups, including packaged accounts for more affluent customers, and sweep accounts, lock-box deposits and cash management products for commercial customers. Commercial lending includes commercial, financial and agricultural loans, real estate construction and development loans, commercial real estate loans, small business lending and trade financing. Consumer lending includes residential real estate, home equity and installment lending. Other financial services include mortgage banking, debit cards, brokerage services, internet banking, remote deposit, ATMs, telephone banking, safe deposit boxes, and trust and private banking services. The revenues generated by First Bank and its subsidiaries consist primarily of interest income, generated from our loan and investment security portfolios, service charges and fees generated from deposit products and services, and fees and commissions generated by our mortgage banking and trust and private banking business units. Our extensive line of products and services are offered to customers primarily within our geographic areas, which include eastern Missouri, Illinois, southern and northern California, Houston and Dallas, Texas, and Florida, including Bradenton and the greater Tampa metropolitan area. Certain loan products are available nationwide.

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.

1

Ownership Structure. Various trusts, established by and administered by and for the benefit of Mr. James F. Dierberg and members of his immediate family, own all of our voting stock. Mr. Dierberg and his family, therefore, control our management and policies.

We have formed numerous affiliated Delaware or Connecticut business or statutory trusts. These trusts operate as financing entities and 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 more fully described in Note 12 to our consolidated financial statements. Prior to August 10, 2009, we paid interest on our subordinated debentures to our respective financing entities. In turn, our financing entities paid distributions to the h olders of the trust preferred securities. The interest payable on our subordinated debentures is included in interest expense in our consolidated statements of operations. On August 10, 2009, we announced the deferral of our regularly scheduled interest payments on our outstanding junior subordinated notes relating to our $345.0 million of trust preferred securities beginning with the regularly scheduled quarterly interest payments that would otherwise have been made in September and October 2009.

The trust preferred securities issued by First Preferred Capital Trust IV are publicly held and traded on the New York Stock Exchange, or NYSE. The remaining trust preferred securities were issued in private placements. The trust preferred securities have no voting rights except in certain limited circumstances.

On December 31, 2008, First Banks entered into a Letter Agreement, including a Securities Purchase Agreement – Standard Terms, or Purchase Agreement, with the United States Department of the Treasury, or the U.S. Treasury, pursuant to the Troubled Asset Relief Program Capital Purchase Program, or CPP. Under the terms of the Purchase Agreement, on December 31, 2008 we issued to the U.S. Treasury, 295,400 shares of senior preferred stock, or Class C Preferred Stock, and a warrant, or Warrant, to acquire up to 14,784.78478 shares of a separate series of senior preferred stock, or Class D Preferred Stock (at an exercise price of $1.00 per share), for an aggregate purchase price of $295.4 million, pursuant to the standard CPP terms and conditions for non-public companies as described and set forth in the Purchase Agreement and the Warrant. Pursuant to the terms of the Warrant, the U.S. Treasury exercised the Warrant on December 31, 2008 and paid the exercise price by having us withhold, from the shares of Class D Preferred Stock that would otherwise be delivered to the U.S. Treasury upon such exercise, shares of Class D Preferred Stock issuable upon exercise of the Warrant with an aggregate liquidation amount equal in value to the aggregate exercise price of $14,784.78. The senior preferred stock and the Warrant were issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Class C Preferred Stock and the Class D Preferred Stock are further described in Note 18 to our consolidated financial statements. The Purchase Agreement contains limitations on certain actions of the Company, including, but not limited to, payment of dividends, redemptions and acquisitions of the Company’s equity securities, and compensation of senior executive officers. On August 10, 2 009, we announced the deferral of the payment of cash dividends on our outstanding Class C Preferred Stock and Class D Preferred Stock beginning with the regularly scheduled quarterly dividend payments that would otherwise have been made in August 2009, however, we continue to record the declaration of such dividends and the related additional cumulative dividends on our deferred dividend payments in our consolidated financial statements. See Note 18 to our accompanying consolidated financial statements for further discussion regarding our Class C Preferred Stock and Class D Preferred Stock.  

Recent Developments.

Capital Plan. We have been working over the last two years to strengthen our capital ratios and improve our financial performance. Additionally, on August 10, 2009, we announced the adoption of our Capital Optimization Plan, or Capital Plan, designed to improve our capital ratios and financial performance through certain divestiture activities, asset reductions and expense reductions. We adopted our Capital Plan in order to, among other things, preserve our risk-based capital in the current and continuing economic downturn. We have completed, or are in the process of completing, a number of initiatives associated with our Capital Plan, including:

Ø The sale of certain assets and the transfer of certain liabilities of our Texas operations, or Texas, to Prosperity Bank, or Prosperity, under a Purchase and Assumption Agreement dated February 8, 2010. Under the terms of the agreement, Prosperity is to assume approximately $500.0 million of deposits associated with our 19 Texas retail branches, including certain commercial deposit relationships, for a premium of 5.5%. Prosperity is also expected to purchase at least $100.0 million of loans as well as certain other assets at par value, including premises and equipment, associated with our Texas operations. The transaction, which is subject to regulatory approvals and certain closing conditions, is expected to be completed during the second quarter of 2010.

2

Ø The sale of certain assets and the transfer of certain liabilities of our Chicago operations, or Chicago, to FirstMerit Bank, N.A., or FirstMerit, under a Purchase and Assumption Agreement, dated November 11, 2009. We completed the transaction with FirstMerit on February 19, 2010. Under the terms of the agreement, FirstMerit purchased approximately $301.2 million in loans as well as certain other assets, including premises and equipment, associated with our Chicago operations. FirstMerit also assumed substantially all of the deposits associated with our 24 Chicago retail branches, including certain commercial deposit relationships, for a premium of 3.50%, or approximately $42.1 million based on an average of approximately $1.20 billion of such deposits for the 30 days prior to the transaction closing date. We recognized a gain on sale related to this transaction of approximately $8.4 million during the fi rst quarter of 2010 after the write-off of goodwill and intangible assets allocated to Chicago of approximately $26.3 million. In addition, this transaction reduced our risk-weighted assets by approximately $346.0 million.

Ø The sale of certain asset-based lending loans to FirstMerit in conjunction with the Chicago transaction. On November 11, 2009, FBBC, First Bank’s wholly owned asset based lending subsidiary, entered into a Loan Purchase Agreement that provided for the sale of certain loans to FirstMerit. Under the terms of the agreement, FirstMerit purchased approximately $101.5 million of loans at a discount of approximately 8.5%. In conjunction with this transaction, which we closed on December 16, 2009, we recorded a loss on the sale of loans of $6.1 million during the fourth quarter of 2009 and reduced our risk-weighted assets by approximately $115.0 million.

Ø The sale of approximately $141.3 million of loans associated with our premium financing subsidiary, UPAC, to PFS Holding Company, Inc., Premium Financing Specialists, Inc., Premium Financing Specialists of California, Inc. and Premium Financing Specialists of the South, Inc., under a Purchase and Sale Agreement, dated December 3, 2009. We completed the sale on December 31, 2009 which resulted in a pre-tax loss on the sale of approximately $13.1 million during the fourth quarter of 2009 after the write-off of goodwill and intangibles allocated to the sale of approximately $20.0 million. This transaction also reduced our risk-weighted assets by approximately $146.0 million.

Ø The sale of approximately $64.4 million of restaurant franchise loans during the fourth quarter of 2009 to another financial institution at a small discount. We completed the sale of these loans on December 30, 2009 which resulted in a pre-tax loss of approximately $1.1 million during the fourth quarter of 2009. In addition, this transaction reduced our risk-weighted assets by approximately $64.4 million.

Ø The sale of Adrian N. Baker & Company, or ANB, to AHM Corporation Holdings, Inc., or AHM, under a Stock Purchase Agreement, dated September 18, 2009. Under the terms of the agreement, AHM purchased all of the capital stock of ANB for a purchase price of approximately $14.3 million. We completed the sale of ANB on September 30, 2009 which resulted in a pre-tax gain of approximately $120,000 during 2009 after the write-off of goodwill and intangibles allocated to ANB of approximately $13.0 million.

Ø The sale of two of our Illinois branch offices. On August 27, 2009, we entered into a Branch Purchase and Assumption Agreement providing for the sale of our Lawrenceville, Illinois branch office to The Peoples State Bank of Newton, or Peoples. Under the terms of the agreement, Peoples assumed approximately $23.7 million of deposits for a premium of 5.0% as well as certain other liabilities, and purchased approximately $13.5 million of loans as well as certain other assets, including premises and equipment, at par value. We closed the transaction on January 22, 2010 which resulted in a pre-tax gain of approximately $168,000 during the first quarter of 2010 after the write-off of goodwill allocated to the sale of approximately $1.0 million.

On August 31, 2009, we entered into a Branch Purchase and Assumption Agreement providing for the sale of our Springfield, Illinois branch office to First Bankers Trust Company, National Association, a subsidiary of First Bankers Trustshares, Inc., or First Bankers. Under the terms of the agreement, First Bankers assumed approximately $20.1 million of deposits for a premium of 5.01% as well as certain other liabilities, and purchased approximately $887,000 of loans as well as certain other assets, including premises and equipment, at par value. We completed the transaction on November 19, 2009 which resulted in a pre-tax gain of approximately $309,000 during the fourth quarter of 2009 after the write-off of goodwill allocated to the sale of approximately $1.0 million.

Ø The reduction of First Banks’ net risk-weighted assets to $7.56 billion at December 31, 2009, representing decreases of $1.91 billion from $9.48 billion at December 31, 2008 and $2.68 billion from $10.25 billion at December 31, 2007.

Ø Significant reductions in certain controllable expenses including, but not limited to, compensation, marketing and business development, information technology fees, travel and entertainment and office supplies, as further discussed under “¾Management’s Discussion and Analysis of Financial Condition and Results of Operations – Comparison of Results of Operations for 2009 and 2008 – Noninterest Expense.” These expense reductions resulted from a number of profit improvement initiatives that we implemented in conjunction with our Profit Improvement Plan.

3

We believe the successful completion of our Capital Plan, as described in more detail below under “¾Strategy,” would substantially improve our capital position. However, the successful completion of all or any portion of our Capital Plan is not assured, and no assurance can be made that we will be able to successfully complete all, or any portion of, our Capital Plan, or that our Capital Plan will not be materially modified in the future. Our decision to implement the Capital Plan reflects the adverse effect that the severe downturn in the commercial and residential real estate markets has had on our financial condition and results of operations. If we are not able to successfully complete a substantial portion of our Capital Plan, our business, financia l condition and results of operations may be materially and adversely affected and our ability to withstand continued adverse economic conditions could be threatened.

Regulatory Matters. In connection with the most recent regulatory examination of the Company and First Bank by the Federal Reserve Bank of St. Louis, or FRB, on March 24, 2010, the Company, SFC and First Bank entered into a Written Agreement, or Agreement, with the FRB requiring the Company and First Bank to take certain steps intended to improve their overall financial condition. Under the Agreement, we must prepare and file with the FRB within specified timeframes a number of specific plans designed to strengthen and/or address the following matters: (i) board oversight over the management and operations of the Company and the Bank; (ii) credit risk management practices; (iii) lending and credit administration policies and procedures; (iv) asset improv ement; (v) capital; (vi) earnings and overall financial condition; and (vii) liquidity and funds management. The Agreement is specifically enforceable by the FRB in court. See further discussion of the terms of the Agreement under “—Supervision and Regulation – Regulatory Matters.”

We believe that the successful completion of all or a significant portion of our Capital Plan, as discussed above, and our Profit Improvement, Liquidity and Asset Quality Improvement plans, as further discussed under “—Strategy,” will enable the Company and First Bank to meet the requirements of the Agreement and ensure that the Company and First Bank are able to comply with individual provisions of the Agreement. However, the successful completion of all or any portion of the plans is not assured, and if the Company or First Bank is unable to comply with the terms of the Agreement or any other applicable regulations, the Company and First Bank could become subject to additional, heightened supervisory actions and orders. If our regulators were to take such additional actions, the Company and First Bank could b ecome subject to various requirements limiting the ability to develop new business lines, mandating additional capital, and/or requiring the sale of certain assets and liabilities. Failure of the Company and First Bank to meet these conditions could lead to further enforcement action by the regulatory agencies. The terms of any such additional regulatory actions, orders or agreements could have a materially adverse effect on our business.

Prior to entering into the Agreement on March 24, 2010, the Company and First Bank had entered into informal agreements with the FRB and State of Missouri Division of Finance, or the MDOF. Each of the agreements were characterized by regulatory authorities as informal actions that were neither published nor made publicly available by the agencies and are used when circumstances warrant a milder form of action than a formal supervisory action, such as a written agreement or cease and desist order. The informal agreement with the MDOF is still in place and there have not been any modifications to the informal agreement with the MDOF since its inception in September 2008. See further discussion under “—Supervision and Regulation – Regulatory Matters.”

Discontinued Operations. We have applied discontinued operations accounting in accordance with Accounting Standards CodificationTM, or ASC, Topic 205-20, “Presentation of Financial Statements – Discontinued Operations,” to the assets and liabilities being sold related to Chicago, Texas and UPAC in addition to the operations of ANB and MVP as of December 31, 2009 and for the years ended December 31, 2009, 2008, 2007, 2006 and 2005. All financial information in this Annual Report on Form 10-K is reported on a continuing operations basis, unless otherwise noted. See Note 2 and Note 25 to our accompanying c onsolidated financial statements for further discussion regarding discontinued operations and subsequent events associated with discontinued operations.

4

Strategy.  Our strategy emphasizes deposit and noninterest income growth within our market areas, aggressive management of asset quality, liquidity and risk, and preservation and enhancement of risk-based capital in the current economic environment. Strategies developed to achieve earnings, growth and asset quality targets include i) expanding our deposit base; ii) improving our net interest margin; iii) increasing noninterest income; iv) further diversifying our loan portfolio; v) substantially improving asset quality; vi) controlling noninterest expenses; and vii) closely monitoring and managing our overall liquidity position. We have developed several plans around these actions, including the previously discussed Capital Plan, a Profit Improvement Plan, a Liqui dity Plan and an Asset Quality Improvement Plan.

In addition to the action items identified above with respect to our Capital Plan, we are also focused on the following actions which, if consummated, would improve our regulatory capital ratios and/or result in a reduction of our risk-weighted assets:

Ø Reduction of our concentration in real estate lending and further diversification of our loan portfolio from real estate lending to commercial and industrial lending;

Ø Reduction of our unfunded loan commitments with an original maturity greater than one year;

Ø Sale, merger or closure of individual branches or selected branch groupings;

Ø Sale and/or aggressive reduction of the retained assets and liabilities associated with our Chicago and Texas Regions; and

Ø Exploration of possible capital planning strategies to increase the overall level of Tier 1 risk-based capital at our holding company.

Our Profit Improvement Plan contains several actions around net interest margin and noninterest income enhancement and continued reduction of noninterest expenses including the following:

Ø Re-pricing our loan portfolio upward for market risk, including the implementation of interest rate floors on both commercial and consumer loans;

Ø Re-pricing our deposits to current market interest rates while maintaining appropriate deposit portfolio diversification;

Ø Utilization of low-yielding short-term investments to complete the divestitures of our Chicago and Texas Regions, as further discussed in the Capital Plan section above, in addition to increasing our investment securities portfolio and repaying maturing Federal Home Loan Bank, or FHLB, advances in 2010;

Ø Pursuing opportunities to generate noninterest income through sales of other real estate properties, branch offices and other assets;

Ø Increasing the volume of loans sold in the secondary market in our mortgage division;

Ø Evaluation of opportunities to reduce noninterest expenses subsequent to the completion of our divestiture activities as a result of our smaller asset base and lower deposit volumes;

Ø Continued reduction in certain controllable expense categories such as marketing and business development, travel and entertainment and data processing fees; and

Ø Evaluation of opportunities to minimize expenses related to the high level of nonperforming assets, including legal fees related to foreclosure matters and other real estate expenses related to property preservation, taxes, insurance and other items.

Our Liquidity Plan includes the following actions;

Ø Maintenance and continued generation of core deposits, including non-interest bearing demand, interest-checking, money market and savings deposits;

Ø Diversification of our loan portfolio, as previously discussed, including strategies surrounding potential sales or aggressive reductions of our retained Chicago and Texas loan portfolios;

Ø Increasing our investment securities portfolio;

Ø Establishment of a Liquidity Management Committee which meets at least monthly; and

Ø Development of an expanded and more efficient collateral management process to maximize potential borrowing relationships with the FHLB and FRB in the event further utilization of our additional alternative funding sources become necessary.

5

Our Asset Quality Improvement Plan includes the following actions intended to reduce the level of our nonperforming assets and loan charge-offs:

Ø Development of written action plans for all credit relationships over $3.0 million with approval by the Regional President and Regional Credit Officer;

Ø Active pursuit of troubled debt restructurings to position credits to return to performing status with sustained operating performance;

Ø Elimination or significant reduction of our potential exposure to our largest nonperforming credit relationships;

Ø Pursuit of opportunities to generate significant recoveries on previously charged-off loans;

Ø Modification of one-to-four family residential real estate loans under the Home Affordable Modification Program (HAMP) where deemed economically advantageous to our borrowers and us;

Ø Assessment of our commercial real estate portfolio for early risk recognition and identification of potential areas for deteriorating commercial real estate loans, with increased emphasis on non-owner occupied loans;

Ø Transfer of certain nonperforming and potential problem credits to our special asset groups for further review, evaluation and development of appropriate strategies for exiting these relationships or significantly reducing our potential exposure; and

Ø Further development of additional reporting mechanisms regarding asset quality related matters to assist management in further evaluating and assessing ongoing performance measurements and trends.

We believe the successful completion of the various components of these plans would substantially improve our financial performance and regulatory capital ratios. If we are not able to successfully complete a substantial portion of the action items contained within these plans, our business, financial condition, including our regulatory capital ratios, and results of operations may be materially and adversely affected and our ability to withstand continued adverse economic conditions could be threatened.

Lending Activities. As further discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations ¾Loans and Allowance for Loan Losses,” our business development efforts have historically been focused on the origination of the following general loan types: commercial, financial and agricultural loans; real estate construction and land development loans; commercial real estate mortgage loans; and to a lesser extent, residential real estate mortgage loans. Our lending strategy emphasizes quality and diversification. Throughout our organization, we employ a common credit underwriting policy. In addition to underwriting based on estimates and projection of finan cial 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.

Commercial, Financial and Agricultural. Our commercial, financial and agricultural loan portfolio was $1.69 billion, or 25.8% of total loans, at December 31, 2009, compared to $2.58 billion, or 30.1% of total loans, at December 31, 2008. Throughout 2008 and 2009, we have attempted to further diversify our loan portfolio by increasing our commercial, financial and agricultural lending opportunities. However, as further discussed under “Recent Developments —Capital Plan,” our recent loan sale transactions and reclassifications of loans to discontinued operations have reduced the percentage of commercial, financial and agricultural loans as a percentage of total loans. The primary component of commercial, financial and agricultural loans i s 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, Florida, Illinois, Missouri and Texas that 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, particularly deposit accounts, with our commercial borrowers.

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Real Estate Construction and Development. Our real estate construction and land development loan portfolio was $1.05 billion, or 16.0% of total loans, at December 31, 2009, compared to $1.57 billion, or 18.4% of total loans, at December 31, 2008. Real estate 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 initial financing. 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 financing for 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 located within our trade area but the particular project may be outside our normal trade area. Although we generally do not engage in developing commercial and residential construction lending business outside of our trade area, certain loans acquired in acquisitions from time to time have been related to projects outside of our trade area. 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 s ubstantial 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.

Commercial Real Estate. Our commercial real estate loan portfolio was $2.27 billion, or 34.6% of total loans, at December 31, 2009, compared to $2.56 billion, or 30.0% of total loans, at December 31, 2008. 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 loa ns 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, industrial and warehouse facilities and recreational properties. We typically only finance commercial real estate or rental properties that have lease commitments for a majority of the rentable space.

Residential Real Estate Mortgage. Our residential real estate mortgage loan portfolio was $1.28 billion, or 19.5% of total loans, at December 31, 2009, compared to $1.55 billion, or 18.1% of total loans, at December 31, 2008. Residential real estate mortgage loans are primarily loans secured by single-family, owner-occupied properties. These loans include both adjustable rate and fixed rate mortgage loans. We typically originate residential real estate mortgage loans for sale in the secondary mortgage market in the form of a mortgage-backed security or to various private third-party investors, although from time-to-time, we retain certain residential mortgage loans, including home equity loans, in our loan portfolio as directed by management’s busi ness strategies. Our residential real estate mortgage loans are primarily generated through our branch office network and are underwritten in accordance with conforming terms that allow the loans to be sold into the secondary market. We discontinued the origination of Alt A and Sub-prime mortgage loan products in 2007 and do not presently offer these loan products. 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.

Market Areas. As of December 31, 2009, First Bank’s 209 banking facilities were located in California, Florida, Illinois, Missouri and Texas. First Bank operates in the St. Louis metropolitan area, in eastern Missouri and throughout Illinois, including, until February 19, 2010, Chicago. First Bank also operates in southern California, including San Diego and 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; in Texas in the Houston and Dallas metropolitan areas, and in Florida, including Bradenton and the greater Tampa metropolitan area.

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The following table lists the geographic 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, 2009:

Geographic Area	Total Deposits (in millions)		Deposits as a Percentage of Total Deposits			Number of Locations
Southern California	$	2,081.0		23.6	%		41
St. Louis, Missouri metropolitan area		1,470.2		16.7			34
Northern California		1,229.6		14.0			21
Chicago (1)		1,221.2		13.9			24
Southern Illinois		944.9		10.7			24
Texas (2)		509.6		5.8			20
Northern and Central Illinois		485.5		5.5			14
Florida		441.0		5.0			19
Missouri (excluding the St. Louis metropolitan area)		422.5		4.8			12
Total deposits	$	8,805.5		100.0	%		209

________________________

(1) Includes deposits of approximately $1.22 billion associated with the sale of our 24 Chicago branch offices, which was completed on February 19, 2010. See Note 2 and Note 25 to our consolidated financial statements for further discussion of discontinued operations.

(2) Includes deposits of approximately $497.8 million associated with the announced sale of our 19 Texas branch offices, which is expected to be completed in the second quarter of 2010. See Note 2 and Note 25 to our consolidated financial statements for further discussion of discontinued operations.

Competition and Branch Banking. The activities in which First Bank engages are highly competitive. 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, and other financial services companies. Financial institutions compete based upon interest rates offered on deposit accounts and other credit and service charges, the types of products and quality of services rendered, the convenience of branch facilities, interest rates charged on loans 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, and finance companies, including trust companies, credit unions, mortgage companies, leasing 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 also continue to face competition in the acquisition of independent banks, savings banks, branch offices and other financial companies. Subject to regulatory approval, commercial banks operating in California, Florida, Illinois, Missouri and Texas are permitted to establish branches throughout their respective states, thereby creating the potential for additional competition in our service areas.

Deposit Insurance. Since First Bank is an institution chartered by the State of Missouri and a member of the FRB, both the MDOF and the FRB supervise, regulate and examine First Bank. First Bank is also regulated by the Federal Deposit Insurance Corporation, or FDIC, which previously provided deposit insurance of up to $100,000 for each insured depositor. Effective October 3, 2008, deposits at FDIC-insured institutions were insured up to $250,000 for each insured depositor until December 31, 2009, which was subsequently extended until December 31, 2013, at which time FDIC deposit insurance for all deposit accounts, except for certain retirement accounts, will return to $100,000 for each insured depositor. Insurance coverage for certain retirement accounts, which include all IRA deposit accounts, was increased permanently to $250,000 for each insured depositor in 2006.

In October 2008, the FDIC announced its temporary Transaction Account Guarantee Program as part of its Temporary Liquidity Guarantee Program, which provides full coverage for non-interest bearing transaction deposit accounts at FDIC-insured institutions that elect to participate in the program. The program applies to all personal and business checking deposit accounts at participating institutions that do not earn interest. The program strived to strengthen confidence and encourage liquidity in the banking system by providing full insurance coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount. This unlimited insurance coverage is temporary and remains in effect for participating institutions until June 30, 2010. We elected to participate in the FDIC’s Transaction Account Guarantee Prog ram.

In October 2008, the FDIC released a five-year recapitalization plan and a proposal to raise premiums to recapitalize the Deposit Insurance Fund, or DIF. In order to implement the restoration plan, the FDIC proposed to change both its risk-based assessment system and its base assessment rates. Assessment rates would increase by seven basis points across the range of risk weightings. In December 2008, the FDIC adopted a final rule, uniformly increasing the risk-based assessment rates by seven basis points, annually, resulting in a range of risk-based assessment rates of 12 basis points to 50 basis points. Changes to the risk-based assessment system include increasing premiums for institutions that rely on excessive amounts of brokered deposits, increasing premiums for excessive use of secured liabilities, and lowering premiums fo r smaller institutions with very high capital levels.

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On May 22, 2009, the FDIC board agreed to impose an emergency special assessment of five basis points on all FDIC-insured financial institutions’ assets minus its Tier 1 capital as of June 30, 2009 to restore the DIF to an acceptable level. The assessment, which was payable on September 30, 2009, is in addition to a planned increase in premiums and a change in the method in which standard quarterly premiums are assessed, which the FDIC board previously approved as discussed above. We recorded an emergency special assessment of $4.8 million in the second quarter of 2009.

On November 17, 2009, the FDIC adopted a Notice of Proposed Rulemaking, or NPR, that required certain insured institutions to prepay, on December 30, 2009, their estimated quarterly risk-based deposit insurance assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. The FDIC Board also voted to maintain current assessment rates through December 31, 2010, to adopt a uniform three-basis point increase in assessment rates for all of 2011 and 2012, and to extend the restoration period from seven to eight years. The FDIC exempted First Bank from the prepayment requirement. This action does not impact our regularly scheduled quarterly assessments, which will continue to be payable quarterly.

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 debt holders or 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.

Nonbank Subsidiaries.Many of our nonbank subsidiaries are also subject to regulation by other applicable federal and state agencies. Our small business lending subsidiary is regulated by the U.S. Small Business Administration, or SBA. Our insurance premium financing subsidiary is subject to regulation by applicable state insurance regulatory agencies. Our other nonbank subsidiaries are subject to the laws and regulations of both the federal government and the various states in which they conduct business.

Securities and Exchange Commission. We are also under the jurisdiction of the United States Securities and Exchange Commission, or SEC, and certain state securities commissions for matters relating to the offering and sale of our securities. We are subject to disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the SEC. The securities issued by one of our affiliated trusts are registered under the Securities Exchange Act of 1934 and are listed on the NYSE under the trading symbol “FBSPrA,” and therefore, we are subject to certain rules and regulations of the NYSE.

United States Department of the Treasury. As further described above under “Item 1 —Business – Ownership Structure,” on December 31, 2008, we completed the sale to the U.S. Treasury of $295.4 million of newly-issued non-voting preferred stock as part of the CPP. The U.S. Treasury has certain supervisory and oversight duties and responsibilities under the CPP and, pursuant to the terms of the Purchase Agreement, the U.S. Treasury is empowered to unilaterally amend any provision of the Purchase Agreement with us to the extent required to comply with any changes in applicable federal statutes. In addition, in the event that we do not pay dividends on the preferred stock issued to the U.S. Treasury for an aggregate of six quarters, th e U.S. Treasury shall have the right to elect two directors to our Board.  

SIGTARP. The Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, was established pursuant to Section 121 of the Emergency Economic Stabilization Act of 2008, or EESA, and has the duty, among other things, to conduct, supervise, and coordinate audits and investigations of the purchase, management and sale of assets by the U.S. Treasury under the CPP, including the shares of non-voting preferred shares purchased from us.

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Regulatory Matters. In connection with the most recent regulatory examination of the Company and First Bank by the FRB, on March 24, 2010, the Company, SFC and First Bank entered into an Agreement with the FRB requiring the Company and First Bank to take certain steps intended to improve their overall financial condition. Under the Agreement, we must prepare and file with the FRB within specified timeframes a number of specific plans designed to strengthen and/or address the following matters: (i) board oversight over the management and operations of the Company and Bank; (ii) credit risk management practices; (iii) lending and credit administration polici es and procedures; (iv) asset improvement; (v) capital; (vi) earnings and overall financial condition; and (vii) liquidity and funds management. Many of these plans have been developed and certain related actions have already been taken and previously provided to the FRB.

The Agreement requires, among other things, that the Company and First Bank obtain prior approval from the FRB and the MDOF in order to pay dividends. In addition, the Company must obtain prior approval from the FRB to (i) take any other form of payment from First Bank representing a reduction in capital of First Bank; (ii) make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities; (iii) incur, increase or guarantee any debt; or (iv) purchase or redeem any shares of the Company’s stock. Pursuant to the terms of the Agreement, the Company and First Bank are also required, within 60 days of the date of the Agreement, to submit an acceptable written plan to the FRB to maintain sufficient capital at the Company, on a consolidated basis, and at First Bank, on a standalone basi s. In addition, the Agreement also provides that the Company and First Bank must notify the FRB if the risk-based capital ratios of either entity fall below those set forth in the capital plans that are approved by the FRB. We must also notify the FRB before appointing any new directors or senior executive officers or changing the responsibilities of any senior executive officer position. The Agreement also requires the Company and First Bank to comply with certain restrictions regarding indemnification and severance payments. The Agreement is specifically enforceable by the FRB in court.

The Company and First Bank must furnish periodic progress reports to the FRB regarding compliance with the Agreement. The Agreement will remain in effect until stayed, modified, terminated or suspended by the FRB.

The Agreement formally identifies matters we have been independently working to resolve throughout 2008 and 2009. During this time, we have been in frequent communication with both the FRB and the MDOF about these matters and have been working diligently to implement many of the matters contemplated by the Agreement, principally through our Capital Plan, which we announced publicly in August 2009. The Capital Plan was adopted in order to, among other things, preserve our risk-based capital in the current and continuing economic downturn.

The description of the Agreement above represents a summary and is qualified in its entirety by the full text of the Agreement, which is filed herewith as Exhibit 10.19 to this Annual Report on Form 10-K.

Prior to entering into the Agreement on March 24, 2010, the Company and First Bank had entered into informal agreements with the FRB and the MDOF. Each of the agreements were characterized by regulatory authorities as informal actions that were neither published nor made publicly available by the agencies and are used when circumstances warrant a milder form of action than a formal supervisory action, such as a written agreement or cease and desist order. The informal agreement with the MDOF is still in place and there have not been any modifications to the informal agreement with the MDOF since its inception in September 2008.

Under the terms of the prior informal agreement with the FRB, the Company agreed, among other things, to provide certain information to the FRB including, but not limited to, financial performance updates, notice of plans to materially change its fundamental business and notice to issue trust preferred securities or raise additional equity capital. In addition, the Company agreed not to declare any dividends on its common or preferred stock or make any distributions of interest or other sums on its trust preferred securities without the prior approval of the FRB.

First Bank, under its agreement with the MDOF and its prior informal agreement with the FRB, agreed to, among other things, prepare and submit plans and reports to the agencies regarding certain matters including, but not limited to, the performance of First Bank’s loan portfolio. In addition, First Bank agreed not to declare or pay any dividends or make certain other payments without the prior consent of the MDOF and the FRB and to maintain its Tier 1 capital ratio at no less than 7.00%. As further described in Note 21 to our accompanying consolidated financial statements, at December 31, 2009, First Bank’s Tier 1 capital ratio was 9.11%, or approximately $159.6 million over the minimum level required by the agreement. Also as further described in Note 21 to our accompanying consolidated financial statements, management ha s concluded that the Company and First Bank were in full compliance with all provisions of the respective informal agreements as of December 31, 2009.

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 “satisf actory” 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.”

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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:

Ø 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);

Ø Acquiring all or substantially all of the assets of another bank or bank holding company; or

Ø 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 abov e 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% and the minimum consolidated ratio of Tier I capital (as described below) to risk-adjusted assets required for bank holding companies is 4%. 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 noncontrolling 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 securi ties, 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.

As further described in Note 21 to our consolidated financial statements appearing elsewhere in this report, we were categorized as undercapitalized at December 31, 2009 and well capitalized as of December 31, 2008, and First Bank was categorized as well capitalized as of December 31, 2009 and 2008 under the federal capital requirements. The primary reason for our categorization as undercapitalized at December 31, 2009 resulted from a reduction in our Leverage Ratio to 3.52% at December 31, 2009, which is below the 4% minimum threshold required by the federal capital requirements. Our Leverage Ratio fell below the 4% minimum threshold during the quarter ended December 31, 2009. Also 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.

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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:

Ø “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;

Ø “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);

Ø “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);

Ø “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

Ø “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. See further discussion above under “—Regulatory Matters.” 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,” requireme nts 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. The dividend limitations are further described in Note 22 to our consolidated financial statements appearing elsewhere in this report. In addition, First Bank has agreed that it will not declare or pay any dividends or make certain other payments to us without the prior consent of the MDOF and the FRB, as previously discussed under “—Regulatory Matters.”

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.

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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, or Sarbanes-Oxley, was enacted. Sarbanes-Oxley imposes a myriad of corporate governance and accounting measures designed to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of disclosures under securities laws. All public companies that file periodic reports with the SEC are affected by Sarbanes-Oxley.

Sarbanes-Oxley addresses, among other matters: (i) the creation of an independent accounting oversight board to oversee the audit of public companies and auditors who perform such audits; (ii) auditor independence provisions which restrict non-audit services that independent accountants may provide to their audit clients; (iii) additional corporate governance and responsibility measures which require the chief executive officer and chief financial officer to certify financial statements, to forfeit salary and bonuses in certain situations, and protect whistleblowers and informants; (iv) expansion of the audit committee’s authority and responsibility by requiring that the audit committee have direct control of the outside auditor, be able to hire and fire the auditor, and approve all non-audit services; (v) requirements that audit committee members be independent; (vi) disclosure of a code of ethics; and (vii) enhanced penalties for fraud and other violations. The provisions of Sarbanes-Oxley also require that management assess the effectiveness of internal control over financial reporting and that the independent auditor issue an attestation report on management’s report on internal control over financial reporting. As we are a non-accelerated filer, management’s report on internal control over financial reporting was not subject to attestation by the Company’s Independent Registered Public Accounting Firm as of December 31, 2009 pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report, as further discussed under “Item 9A — Controls and Procedures.”

The USA Patriot Act. The USA Patriot Act, or 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.

Reserve Requirements; Federal Reserve System and Federal Home Loan Bank System. 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 those systems. First Bank was in compliance with these requirements at December 31, 2009, with investments of $27.6 million in stock of the FRB and $36.7 million in stock of the Federal Home Loan Bank of Des Moines. First Bank also holds an investment of $791,000 in stock of the Federal Home Loan Bank of San Francisco, as a nonmember, to collateralize certain FHLB advances assumed in conjunction with certain acquisition transacti ons.

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.

First Bank has established a borrowing relationship with the FRB, which is primarily secured by commercial loans, and provides an additional liquidity facility that may be utilized for contingency purposes. Advances drawn on First Bank’s established borrowing relationship require prior approval of the FRB, and First Bank did not have any FRB borrowings outstanding at December 31, 2009. First Bank also has established a borrowing relationship with the FHLB. The borrowing relationship is secured by one-to-four family residential, multi-family residential and commercial real estate loans. First Bank requests advances and/or repays advances from the FHLB based on its current and future projected liquidity needs. First Bank’s borrowing capacity with the FH LB was approximately $353.1 million and First Bank had FHLB advances outstanding of $600.0 million at December 31, 2009.

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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: (i) changes in the discount rate on member bank borrowings and the targeted federal funds rate; (ii) the availability of credit at the discount window; (iii) open market operations; (iv) the imposition of changes in reserve requirements against deposits of domestic banks; (v) the imposition of changes in reserve requirements against deposits and assets of foreign branches; and (vi) 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.

EESA. In response to the financial crisis affecting the banking system and financial markets, on October 3, 2008, the EESA was signed into law and established the CPP. As part of the CPP, the U.S. Treasury provided funding to eligible financial institutions through the purchase of capital stock and other financial instruments for the purpose of stabilizing and providing liquidity to the U.S. financial markets. In connection with EESA, there have been numerous actions by the Federal Reserve Board, Congress, the U.S. Treasury, the FDIC and others to further the economic and banking industry stabilization efforts under EESA. It remains unclear at this time if further legislative and regulatory measures will be implemented under EESA and what impact those measures may have on us.

ARRA. The American Recovery and Reinvestment Act of 2009, or ARRA, was signed into law on February 17, 2009 by President Obama. ARRA includes a wide variety of programs intended to stimulate the economy and provide for extensive infrastructure, energy, health, and education needs. In addition, ARRA imposes certain new executive compensation and corporate expenditure limits on all current and future CPP recipients, including us, until the institution has repaid the U.S. Treasury, which repayment is now permitted under ARRA without penalty and without the need to raise new capital, subject to the U.S. Treasury’s consultation with the CPP recipient̵ 7;s primary regulatory agency.

Incentive Compensation. On October 22, 2009, the Federal Reserve issued a comprehensive proposal on incentive compensation policies, or the Incentive Compensation Proposal, intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The Incentive Compensation Proposal, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements shoul d (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. Any deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or perform other actions. The Incentive Compensation Proposal provides that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk-management control or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies. In addition, on January 12, 2010, the FDIC announced that it would seek publi c comment on whether banks with compensation plans that encourage risky behavior should be charged higher deposit insurance assessment rates than such banks would otherwise be charged.

The scope and content of the U.S. banking regulators’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future. It cannot be determined at this time whether compliance with such policies will adversely affect our ability to hire, retain and motivate our key employees. See further discussion under Item 11 ¾ Executive Compensation.

Recent Regulatory Developments. There have been a number of legislative and regulatory proposals that would have an impact on the operation of banking/financial holding companies and their bank and non-bank subsidiaries. It is impossible to predict whether or in what form these proposals may be adopted in the future and, if adopted, what their effect will be on us.

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The House of Representatives has recently passed the Wall Street Reform and Consumer Protection Act. This legislation, if it becomes effective, would, among other things (i) create the Consumer Financial Protection Agency to regulate consumer financial products and services, (ii) create a Financial Stability Council that would identify and impose additional regulatory oversight on large financial firms, (iii) create a new process for the bankruptcy and liquidation of large financial institutions and finance such dissolutions with a Systemic Dissolution Fund that would be funded with assessments on large institutions, (iv) require a shareholder “say on pay” vote on executive compensation and require financial firms to disclose certain information regarding incentive-based compensation for employees, (v) strengthen the SEC’s powers to regulate securities markets, (vi) regulate the over-the-counter derivatives marketplace, and (vii) adopt certain mortgage reforms and anti-predatory lending restrictions. The Senate is currently considering a similar bill, the Homeowner Protection and Wall Street Accountability Act. If such legislation would be signed into law, we may be subject to some or all of the new restrictions and requirements. This new law may also require the Company to change or adapt some of its current policies and procedures.

Employees

As of March 25, 2010, we employed approximately 1,890 employees. None of the employees are subject to a collective bargaining agreement. We consider our relationships with our employees to be good.

Item 1A.  Risk Factors

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 and Factors that Could Affect Future Results” appearing at the beginning of this report. The order of the risk factors described below is not indicative of likelihood or significance.

Our results of operations, financial condition and business may be materially, adversely affected if we fail to successfully implement our Capital Plan. Our Capital Plan contemplates a number of different strategies intended to reduce our costs, increase our risk-based capital ratios and enable us to withstand and better respond to continuing adverse market conditions. There can be no assurance, however, that we will be able to successfully implement each or every component of our Capital Plan in a timely manner or at all, and a number of events and conditions must occur in order for the plan to achieve its intended effect. If we are not able to successfully complete our Capital Plan, we could be adversely impacted and our ability to withstand continued adverse economic co nditions could be threatened.

We expect to seek or may be compelled to seek additional capital in the future, but capital may not be available when it is needed.  As a result of our Leverage Ratio being 3.52%, or below the 4% minimum threshold required by the federal capital requirements, we are considered undercapitalized at December 31, 2009. 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. A number of financial institutions have recently raised considerable amounts of capital as a result of deterioration in their results of operations and financial condition arising from the turmoil in the mortgage loan m arket, deteriorating economic conditions, declines in real estate values and other factors, which may diminish our ability to raise additional capital. Our previously announced Capital Plan also contemplates raising additional capital in an effort to improve our capital position.

Our ability to raise additional capital, as part of our Capital Plan or otherwise, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside of our control, and on our financial performance. Accordingly, we cannot be assured of our ability to raise additional capital, as part of our Capital Plan or otherwise, or on terms acceptable to us. If we are unable to raise additional capital, as part of our Capital Plan or otherwise on terms satisfactory to us, our financial condition, results of operations, business prospects and our regulatory capital ratios and those of First Bank may be materially and adversely affected. If we are unable to raise additional capital, as part of our Capital Plan or otherwise, we may also be subjected to increased regulatory supervisio n, which could result in the imposition of additional regulatory restrictions on our operations and/or regulatory enforcement actions and could also potentially limit our future growth opportunities. These restrictions could negatively impact our ability to manage or expand our operations in a manner that we may deem beneficial to our stockholders and debt holders and could result in significant increases in our operating expenses or decreases in our revenues.

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The Company, SFC and First Bank entered into an Agreement with the Federal Reserve Bank of St. Louis. As further described under “—Recent Developments” and “—Supervision and Regulation – Regulatory Matters,” the Company, SFC and First Bank entered into an Agreement with the FRB. Although we cannot predict the ramifications that would result from the failure to comply with each of the provisions of the Agreement, the failure to comply could have a material adverse effect on our business, financial condition, results of operations and cash flows. Furthermore, under the Agreement, the Company, SFC and First Bank must receive approval from the FRB prior to paying any dividends on its capital stock or making any interest payments on the Company’s outstanding subordinated debentures, which represent the source of distributions to holders of trust preferred securities.

The enactment of the EESA and the ARRA, and governmental actions pursuant to them, may significantly affect our financial condition, results of operations and liquidity. EESA, which established the CPP, was signed into law in October 2008. As part of the CPP, the U.S. Treasury provided up to $700 billion of funding to eligible financial institutions through the purchase of capital stock and other financial instruments for the purpose of stabilizing and providing liquidity to the U.S. financial markets. Then, on February 17, 2009, President Obama signed ARRA, a sweeping economic stimulus and recovery package intended to stimulate the economy and provide for broa d infrastructure, energy, health, and education needs. There can be no assurance as to the actual impact that EESA or its programs, including the CPP and ARRA or its programs, will have on the national economy or the financial markets. The failure of these significant legislative measures to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations, or our access to credit. There have been numerous actions undertaken in connection with or following EESA and ARRA by the Federal Reserve Board, Congress, the U.S. Treasury, the FDIC and others in efforts to address the liquidity and credit crisis in the financial industry that followed the sub-prime mortgage market meltdown which began in 2007. These measures include homeowner relief that encourages loan restructuring and modification; the establishment of significant liquidity and credit facilities for financial instit utions and investment banks; the lowering of the federal funds rate; emergency action against short selling practices; a temporary guaranty program for money market funds; the establishment of a commercial paper funding facility to provide back-stop liquidity to commercial paper issuers; and coordinated international efforts to address illiquidity and other weaknesses in the banking sector. The purpose of these legislative and regulatory actions is to help stabilize the U.S. banking system. EESA, ARRA and the other regulatory initiatives described above may not have their desired effects. If the volatility in the financial markets continues and economic conditions fail to improve, or they worsen, our business, financial condition and results of operations could be materially and adversely affected.

Changes in economic conditions could negatively and materially impact our business. Our business is directly affected by factors such as economic, political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in government monetary and fiscal policies and inflation, all of which are beyond our control. A continued deterioration in economic conditions or lack of improvement in economic conditions may result in the following consequences, any of which could negatively and materially impact or continue to negatively and materially impact our business:

Ø Loan delinquencies may continue to increase or remain at elevated levels;

Ø Problem assets and foreclosures may continue to increase or remain at elevated levels;

Ø Unemployment may continue to increase;

Ø Demand for our products and services may decline;

Ø Low cost or noninterest bearing deposits may decrease; and

Ø Collateral pledged to us by our customers for loans made by us, especially residential and commercial real estate property, may decline or continue to decline in value, in turn reducing our customers’ borrowing power, and thereby reducing the value of the underlying assets and collateral associated with our existing loans.

Our emphasis on commercial real estate lending and real estate construction and development lending has increased our credit risk.A substantial portion of our loans are secured by commercial real estate. Commercial real estate and real estate construction and development loans were $2.27 billion and $1.05 billion, respectively, at December 31, 2009, representing 34.6% and 16.0%, respectively, of our loan portfolio. As discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Loans and Allowance for Loan Losses,” we have experienced increasing amounts of nonperforming loans within our real estate construction and development po rtfolio and commercial real estate portfolio, reflective of declining market conditions surrounding land acquisition and development loans as a result of increased developer inventories, slower lot and home sales, and declining market values. Adverse developments affecting real estate in one or more of our markets could further increase the credit risk associated with our loan portfolio.

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Weakness in the real estate market has adversely affected us and may continue to do so.As discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Loans and Allowance for Loan Losses,” we have experienced deterioration within our residential real estate mortgage loan portfolio throughout the previous three years, primarily in our Alt A and sub-prime loan portfolios. Our residential real estate mortgage loans were $1.28 billion at December 31, 2009, representing 19.5% of our loan portfolio. The effects of ongoing mortgage market challenges, as well as the ongoing correction in residential real estate market prices and reduced levels of home sales could result in further price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans held, mortgage loan originations and gains recognized on the sale of mortgage loans. In the event our allowance for loan losses is insufficient to cover such losses, our financial condition and results of operations may be adversely affected.

Our allowance for loan losses may not be sufficient to cover our actual loan losses, which could adversely affect our results of operations or financial condition. As a lender, we are exposed to the risk that our loan customers may not repay their loans according to their contractual terms and that the collateral securing the payment of these loans may be insufficient to assure repayment in full. We have experienced, and may continue to experience, significant loan losses, which could continue to have a material adverse effect on our results of operations. Management makes various assumptions and judgments about the collectability of our loan portfolio, which are based in part on:

Ø Current economic conditions and their estimated effects on specific borrowers;

Ø An evaluation of the existing relationships among loans, potential loan losses and the present level of the allowance for loan losses;

Ø Management’s internal review of the loan portfolio, including existing compliance with established policies and procedures; and

Ø Results of examinations of our loan portfolio by regulatory agencies.

We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, that represents management’s best estimate of probable incurred loan losses inherent in our loan portfolio. Additional loan losses will likely continue to occur in the future and may occur at a rate greater than we have experienced historically. In determining the amount of the allowance for loan losses, we rely on an analysis of our loan portfolio, experience, and evaluation of general economic, political and regulatory conditions, industry and geographic concentrations, and certain other factors. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and judgment and requires us to make significant estimates of current credi t risk and future trends, all of which may undergo material changes. If our assumptions and analysis prove to be incorrect, our current allowance for loan losses may not be sufficient. In addition, adjustments may be necessary to allow for unexpected volatility or deterioration in the local or national economy or other factors such as changes in interest rates that may be beyond our control. In addition, federal and state regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs, based on judgments different than those of management. Any increase in our allowance for loan losses or loan charge-offs could have a material adverse effect on our results of operations.

Our nonperforming loans, which consist of nonaccrual loans and troubled debt restructurings, may also impact the sufficiency of our allowance for loan losses. Nonperforming loans totaled $735.5 million as of December 31, 2009, representing an increase of $293.1 million, or 66.2%, from $442.4 million at December 31, 2008.

In addition to those loans currently identified and classified as nonperforming loans, management is aware that other possible credit problems may exist with certain borrowers. These include loans that are migrating from grades with lower risks of loss probabilities into grades with higher risks of loss probabilities as performance and potential repayment issues surface. We monitor these loans and adjust the loss rates in our allowance for loan losses accordingly. The most severe of these loans are credits that are classified as substandard loans due to either less than satisfactory performance history, lack of borrower’s paying capacity, or potentially inadequate collateral. Substandard, or potential problem loans, totaled $323.7 million at December 31, 2009, representing an increase of $99.7 million, or 44.5%, from $224. 1 million at December 31, 2008.

We are subject to credit quality risks and our credit policies may not be sufficient to avoid losses. We are subject to the risk of losses resulting from the failure of borrowers, guarantors and related parties to pay interest and principal amounts on their loans. Our credit policies and credit underwriting and monitoring and collection procedures may not prevent losses, particularly during periods in which the local, regional or national economy suffers a general decline. If borrowers fail to repay their loans according to the contractual terms of the loans, our financial condition and results of operations will be adversely affected.

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Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business. An inability to raise funds through traditional deposits, brokered deposits, borrowings, the sale of securities or loans and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities and on terms which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated or adverse regulato ry action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations and the continued deterioration in credit markets.

We rely on commercial and retail deposits, advances from the FHLB of Des Moines and other borrowings to fund our operations. Although we have historically been able to replace maturing deposits and advances as necessary, we might not be able to replace such funds in the future if, among other things, our results of operations or financial condition or the results of operations or financial condition of the FHLB of Des Moines or market conditions were to change.

There can be no assurance these sources of funds will be adequate for our liquidity needs and we may be compelled to seek additional sources of financing in the future. Likewise, we may seek additional debt in the future to achieve our business objectives, in connection with future acquisitions or for other reasons. There can be no assurance additional borrowings, if sought, would be available to us or, if available, would be on terms acceptable to us. The ability of banks and holding companies to raise capital or borrow in the debt markets has been negatively affected by the recent adverse economic trend. If additional financing sources are unavailable or not available on reasonable terms, our financial condition, results of operations and future prospects could be materially adversely affected.

We actively monitor the depository institutions that hold our cash operating account balances. It is possible that access to our cash equivalents will be impacted by adverse conditions in the financial markets. Our emphasis is primarily on safety of principal and we seek to diversify our cash balances among counterparties to minimize exposure to any one of these entities. The financial statements and other relevant data of the counterparties are routinely reviewed as part of our asset/liability management process. Balances in our accounts with financial institutions in the U.S. may exceed the FDIC insurance limits. While we monitor and adjust the balances in our accounts as appropriate, these balances could be impacted if the financial institutions fail and could be subject to other adverse conditions in the financial markets. At December 31, 2009, our cash and cash equivalents totaled $2.52 billion, of which $2.36 billion was maintained in our cash operating account at the FRB.

First Banks is a separate and distinct legal entity from its subsidiaries. First Banks’ liquidity position is affected by the amount of cash and other liquid assets on hand, payment of interest and dividends on debt and equity instruments issued by First Banks (all of which are presently suspended or deferred), capital contributions First Banks makes into its subsidiaries, any redemption of debt for cash issued by First Banks, proceeds we raise through the issuance of debt and/or equity instruments through First Banks, if any, and dividends received from our subsidiaries. First Banks’ unrestricted cash totaled $7.4 million at December 31, 2009. First Banks’ future liquidity position may be adversely affected if a combination of the following events occurs:

· First Bank continues to experience net losses and, accordingly, is unable or prohibited by its regulators to pay a dividend to First Banks sufficient to satisfy First Banks’ operating cash flow needs;

· We deem it advisable, or are required by the FRB, to use cash maintained by First Banks to support the capital position of First Bank;

· First Bank fails to remain “well-capitalized” and, accordingly, First Bank is required to pledge additional collateral against its FHLB borrowings and is unable to do so; or

· First Banks has difficulty raising cash through the future issuance of debt or equity instruments or by accessing additional sources of credit.

First Banks’ financial flexibility may be severely constrained if we are unable to maintain our access to funding or if adequate financing on terms acceptable to us is not available in the marketplace. If we are required to rely more heavily on more expensive funding sources to support our business, our revenues may not increase proportionately to cover our costs. In this case, our operating margins could be materially adversely affected. A lack of liquidity and/or cost-effective funding alternatives could materially adversely affect our business, financial condition and results of operations.

We rely on dividends from our subsidiaries for most of our revenue. First Banks is a separate and distinct legal entity from its subsidiaries. We receive substantially all of our revenue from dividends from our subsidiaries. These dividends are the principal source of funds to pay dividends on our preferred stock and interest and principal on our debt. Various federal and/or state laws and regulations limit the amount of dividends that First Bank and certain nonbank subsidiaries may pay to First Banks. In the event First Bank is unable to pay dividends, we may not be able to service our debt (including our subordinated debentures issued in connection with the issuance of our outstanding trust preferred securities), pay obligations or pay dividends on our preferred stock, i ncluding the preferred stock we issued to the U.S. Treasury. The inability to receive dividends from First Bank could have a material adverse effect on our business, financial condition and results of operations. As further described under “Item 1. Business ¾Supervision and Regulation,” First Bank has agreed not to declare or pay any dividends without the prior consent of the MDOF and the FRB. First Bank did not make any dividend payments during the year ended December 31, 2009.

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Concern of customers over deposit insurance may cause a decrease in deposits. With ongoing increased concerns about bank failures, customers increasingly are concerned about the extent to which their deposits are insured by the FDIC. Customers may withdraw deposits in an effort to ensure that the amount they have on deposit with their bank is fully insured. Decreases in deposits may adversely affect our liquidity position, funding costs and results of operations.

The Company may be adversely affected by the soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure d ue to us. Any such losses could have a material adverse affect on our financial condition and results of operations.

Markets have experienced, and may continue to experience, periods of high volatility accompanied by reduced liquidity. Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. Under these extreme conditions, hedging and other risk management strategies may not be as effective at mitigating losses as they would be under more normal market conditions. Moreover, under these conditions, market participants are particularly exposed to trading strategies employed by many market participants simultaneously and on a large scale, such as crowded trades. Our risk management and monitoring processes seek to quantify and mitigate risk to more extreme market moves. Severe market events have histori cally been difficult to predict, however, and we could realize significant losses if unprecedented extreme market events were to occur, such as the recent conditions in the global financial markets and global economy.

Because of our participation in the CPP under the EESA, we are subject to several restrictions, including restrictions on our ability to declare or pay dividends and repurchase capital stock and trust preferred securities, as well as restrictions on compensation paid to our executive officers.Pursuant to the terms of the Purchase Agreement, our ability to declare or pay dividends on any of our shares is limited. Specifically, we are unable to make any distributions on our trust preferred securities or dividends on pari passu preferred shares if we are in arrears on the payment of dividends on our Class C Preferred Stock and Class D Preferred Stock. In addition, we are not permitted to increase dividends on our common shares above the amount of the last quarterly cash dividend per share declared without the U.S. Treasury’s approval unless all of the Class C Preferred Stock and Class D Preferred Stock has been redeemed or transferred by the U.S. Treasury to unaffiliated third parties. Further, our trust preferred securities and pari passu preferred shares may not be repurchased if we are in arrears on the payment of Class C Preferred Stock and Class D Preferred Stock dividends. The terms of the Purchase Agreement allow the U.S. Treasury to impose additional restrictions, including those on dividends and including unilateral amendments required to comply with changes in applicable federal law. We are unable to predict the potential impact of any such amendments. We expect the U.S. Treasury, our bank regulators and other agencies of the U.S. Government to continue to m onitor our use of the CPP proceeds. Our failure to comply with the terms and conditions of the program or the Purchase Agreement may subject us to a regulatory enforcement action or legal proceedings brought by the U.S. Government.

In addition, pursuant to the terms of the Purchase Agreement, we adopted the U.S. Treasury’s current standards for executive compensation and corporate governance for the period during which the U.S. Treasury holds our equity securities issued pursuant to the Purchase Agreement. These standards generally apply to our executive officers identified in the Summary Compensation Table on page 76 and the twenty next most highly compensated employees. The impact of the executive compensation standards, as described under Item 11 ¾Executive Compensation, may result in the loss of current members of our management team and could adversely affect our ability to compete for talent in the industry.

Negative perception could adversely affect our business, impacting our financial condition, results of operations and cash flows. Risk of negative perception or publicity is inherent in any business. Although the Company takes steps to minimize reputation risk in dealing with customers and other constituencies, the Company is inherently exposed to the risk of negative perception by the public and our customers as a result of, but not limited to, our participation in the CPP under the EESA and as a result of actions imposed by our regulators. The risk of negative perception by the public and our customers may adversely affect the Company’s ability to maintain and attract customers and employees.

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We could be required to further write down goodwill and other intangible assets. When we acquire a business, a portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. The amount of the purchase price that is allocated to goodwill and other intangible assets is determined by the excess of the purchase price over the net identifiable assets acquired. At December 31, 2009, our goodwill and other identifiable intangible assets were $144.4 million. Under current accounting standards, if we determine goodwill or intangible assets are impaired, we are required to write down the carrying value of these assets. We conduct a review at least annually to determine whether goodwill and other identifiable intangible assets are impaired. We completed such an impairment analysis during the fourth quarter of 2009 and recorded an impairment charge of $75.0 million, as further described in Note 8 to our consolidated financial statements. We cannot provide assurance, however, that we will not be required to record an additional impairment charge in the future. Any additional impairment charge would have an adverse effect on our financial condition and results of operations.

Our controls and procedures may fail or be circumvented. Our management regularly reviews and updates the Company’s internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurance that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, financial condition and results of operations.

The Company’s deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings. The FDIC insures deposits at FDIC-insured financial institutions, including First Bank. The FDIC charges the insured financial institutions premiums to maintain the DIF at a certain level. Current economic conditions have increased bank failures and expectations for further failures, in which case the FDIC ensures payments of deposits up to insured limits from the DIF. The DIF is monitored and the premiums charged to FDIC-insured financial institutions are adjusted by the FDIC based on a number of factors in order to maintain the fund at a level the FDIC deems acceptable to fund future payments.

In October 2008, the FDIC released a five-year recapitalization plan and a proposal to raise premiums to recapitalize the fund. In order to implement the restoration plan, the FDIC proposed to change both its risk-based assessment system and its base assessment rates. Assessment rates would increase by seven basis points across the range of risk weightings. In December 2008, the FDIC adopted a final rule, uniformly increasing the risk-based assessment rates by seven basis points, annually, resulting in a range of risk-based assessment rates of 12 basis points to 50 basis points. Changes to the risk-based assessment system include increasing premiums for institutions that rely on excessive amounts of brokered deposits, increasing premiums for excessive use of secured liabilities, and lowering premiums for smaller institutions wit h very high capital levels.

On May 22, 2009, the FDIC board agreed to impose an emergency special assessment of five basis points on all FDIC-insured financial institutions to restore the DIF to an acceptable level. The assessment, which was payable on September 30, 2009, is in addition to a planned increase in premiums and a change in the method in which standard quarterly premiums are assessed, which the FDIC board previously approved. First Bank’s emergency special assessment was approximately $4.8 million. The increases in deposit insurance premium assessments have increased and may continue to increase our expenses and adversely impact our earnings.

The value of securities in the Company’s investment securities portfolio may be negatively affected by continued disruptions in securities markets. The market for some of the investment securities held in our portfolio has become extremely volatile over the past two years. Volatile market conditions may detrimentally affect the value of these securities, such as through reduced valuations due to the perception of heightened credit and liquidity risks. There can be no assurance that the declines in market value associated with these disruptions will not result in other-than-temporary impairments of these assets, which could lead to write-downs of the carrying value of these assets that could have a material adverse effect on our net income and capital levels.

Geographic distance between our operations increases operating costs and makes efforts to standardize operations more difficult.We operate banking offices in California, Florida, 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, among others: (a) familiarizing personnel with our business environment, banking practices and customer requirements at geographically dispersed locations; (b) providing administrative support, including accounting, human resources, credit administration, loan s ervicing, internal audit and credit review at significant distances; and (c) establishing and monitoring compliance with our corporate policies and procedures in different areas.

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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 profile, our net interest income has been and could be negatively affected by a further decline in interest rates, as further discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations ¾Interest Rate Risk Management.”

Our interest rate risk hedging activities may not effectively reduce 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, or GAAP, 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 certai n 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 ¾Interest 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 securit ies 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 undergone 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 to absorb such capital expenditures than we may have available. As such, we may be at a competitive disadvantage in our ability to retain existing customers and compete for new customers in the marketplace.

We operate in a highly regulated environment.  Recently enacted, proposed and future legislation and regulations may increase our cost of doing business. We 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 Sarbanes-Oxley, the Patriot Act, the EESA and the ARRA, 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 change s could reduce our ability to compete in certain markets, as further discussed under “Business ¾Supervision and Regulation.”

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

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

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The Company is subject to claims and litigation pertaining to fiduciary responsibility. From time to time, customers make claims and take legal action pertaining to the performance of our fiduciary responsibilities. Whether customer claims and legal action related to the performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand for our products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our fin ancial condition, results of operations and cash flows.

The Company is exposed to risk of environmental liabilities with respect to properties to which we take title. In the course of our business, we may own or foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, as the owner or former owner of a contaminated site, we may be subject to common law or contractual claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition, cash flows, liquidity and results of operations could be materially and adversely affected.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

We own our officebuilding, 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 1,791 square feet is currently leased to others. Of our other 208 offices and four operations and administrative facilities at December 31, 2009, 113 are located in buildings that we own and 99 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.

Item 3.  Legal Proceedings

The information required by this item is set forth in Item 8 under Note 24, Contingent Liabilities, to our consolidated financial statements appearing elsewhere in this report and is incorporated herein by reference. In the ordinary course of business, we and our subsidiaries become involved in legal proceedings. It is not uncommon for collection efforts to lead to so-called “lender liability” suits in which borrowers may assert various claims against us. Our management, in consultation with legal counsel, believes the ultimate resolution of these existing proceedings is not reasonably likely to have a material adverse effect on our business, financial condition or results of operations.

On March 24, 2010, the Company, SFC and First Bank entered into an Agreement with the FRB, as further described under “Item 1. Business —Recent Developments – Regulatory Matters” and “—Supervision and Regulation – Regulatory Matters” and in Note 1 to our consolidated financial statements.

Item 4.  (Reserved)

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information. There is no established public trading market for our common stock. Various trusts, which were established 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.  We have not paid any dividends on our Common Stock.

On August 10, 2009, we announced the suspension of the payment of cash dividends on our outstanding Class A Convertible Adjustable Rate Preferred Stock and our Class B Non-Convertible Adjustable Rate Preferred Stock beginning with the scheduled dividend payments that would have otherwise been made in September 2009. Prior to this time, we have paid minimal dividends on our Class A Convertible Adjustable Rate Preferred Stock and our Class B Non-Convertible Adjustable Rate Preferred Stock.

On August 10, 2009, we also announced the deferral of dividend payments on our Class C Preferred Stock and Class D Preferred Stock beginning with the regularly scheduled quarterly dividend payments that would otherwise have been made in August 2009, however, we continue to record the declaration of such dividends and the related additional cumulative dividends on our deferred dividend payments in our consolidated financial statements. In February 2009 and May 2009, we paid the regularly scheduled quarterly dividends on our Class C Preferred Stock and Class D Preferred Stock, which were pre-approved and authorized for payment by the MDOF and the FRB.

Our ability to pay dividends is limited by regulatory requirements and by the receipt of dividend payments from First Bank, which is also subject to regulatory requirements. First Bank has agreed not to declare or pay any dividends or make certain other payments to us without the prior consent of the MDOF and the FRB, as previously discussed under “—Supervision and Regulation – Regulatory Matters.” The dividend limitations are further described in Note 18 and Note 22 to our consolidated financial statements appearing elsewhere in this report.

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Item 6.  Selected Financial Data.  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)
	2009			2008			2007			2006			2005
	(dollars expressed in thousands, except share and per share data)
Income Statement Data:
Interest income	$	414,275			551,417			658,583			619,741			486,816
Interest expense		128,382			196,172			242,513			207,505			132,805
Net interest income		285,893			355,245			416,070			412,236			354,011
Provision for loan losses		390,000			368,000			65,056			12,000			(4,000	)
Net interest (loss) income after provision for loan losses		(104,107	)		(12,755	)		351,014			400,236			358,011
Noninterest income		74,163			65,773			58,528			82,609			72,952
Noninterest expense		366,653			268,134			273,164			256,133			236,312
(Loss) income from continuing operations before provision for income taxes		(396,597	)		(215,116	)		136,378			226,712			194,651
Provision for income taxes		2,393			18,323			37,278			78,926			70,860
(Loss) income from continuing operations, net of tax		(398,990	)		(233,439	)		99,100			147,786			123,791
Loss from discontinued operations, net of tax		(49,946	)		(54,874	)		(49,562	)		(41,556	)		(29,769	)
Net (loss) income		(448,936	)		(288,313	)		49,538			106,230			94,022
Net (loss) income attributable to noncontrolling interest in subsidiaries		(21,315	)		(1,158	)		78			(587	)		(1,287	)
Net (loss) income attributable to First Banks, Inc.	$	(427,621	)		(287,155	)		49,460			106,817			95,309
Dividends Declared and Undeclared:
Preferred stock	$	16,536			786			786			786			786
Common stock		—			—			—			—			—
Ratio of total dividends declared to net (loss) income		(3.87	)%		(0.27	)%		1.59	%		0.74	%		0.82	%
Per Share Data:
Basic (loss) earnings per common share – continuing operations	$	(16,800.20	)		(9,850.28	)		4,151.82			6,237.53			5,253.02
Basic loss per common share – discontinued operations		(2,110.90	)		(2,319.18	)		(2,094.98	)		(1,756.30	)		(1,258.14	)
Diluted (loss) earnings per common share – continuing operations		(16,800.20	)		(9,850.28	)		4,115.77			6,149.32			5,170.57
Diluted loss per common share – discontinued operations		(2,110.90	)		(2,319.18	)		(2,060.35	)		(1,722.49	)		(1,230.78	)
Weighted average shares of common stock outstanding		23,661			23,661			23,661			23,661			23,661
Balance Sheet Data:
Investment securities	$	541,557			575,094			978,676			1,428,895			1,306,355
Loans, net of unearned discount		6,608,293			8,592,975			8,886,184			7,671,768			7,025,587
Assets of discontinued operations		518,056			—			—			—			—
Total assets		10,581,996			10,783,154			10,902,470			10,162,803			9,173,678
Total deposits		7,063,973			8,741,520			9,149,193			8,443,086			7,541,831
Other borrowings		767,494			575,133			409,616			398,639			558,184
Notes payable		—			—			39,000			65,000			100,000
Subordinated debentures		353,905			353,828			353,752			297,369			212,345
Liabilities of discontinued operations		1,730,264			—			—			—			—
Common stockholders’ equity		210,618			687,892			834,558			775,176			659,150
Total stockholders’ equity		522,380			996,355			847,621			788,239			672,213
Earnings Ratios:
Return on average assets		(4.04	)%		(2.66	)%		0.48	%		1.11	%		1.08	%
Return on average stockholders’ equity		(51.82	)		(32.78	)		6.07			14.92			15.20
Net interest margin (2)		3.10			3.82			4.58			4.78			4.39
Noninterest expense to average assets		3.46			2.48			2.64			2.66			2.68
Tangible noninterest expense to average assets (3)		2.71			2.42			2.58			2.63			2.65
Efficiency ratio (4)		101.83			63.69			57.56			51.76			55.35
Tangible efficiency ratio (4)		79.62			62.18			56.25			51.01			54.75
Asset Quality Ratios:
Allowance for loan losses to loans		4.03	%		2.56	%		1.89	%		1.90	%		1.93	%
Nonperforming loans to loans (5)		11.13			5.15			2.28			0.64			1.38
Allowance for loan losses to nonperforming loans (5)		36.23			49.77			83.27			299.05			139.23
Nonperforming assets to loans and other real estate (6)		12.78			6.15			2.40			0.72			1.41
Net loan charge-offs to average loans		4.49			3.73			0.74			0.09			0.21
Capital Ratios:
Average stockholders’ equity to average assets		7.79	%		8.11	%		7.89	%		7.45	%		7.11	%
Total risk-based capital ratio		9.78			12.11			9.84			10.04			9.97
Tier 1 risk-based capital ratio		4.89			8.87			7.92			8.44			8.72
Leverage ratio		3.52			8.04			7.99			7.89			7.98

_____________________________

(1) The comparability of the selected data, presented on a continuing basis, is affected by the acquisitions of banks and/or branch offices during the five-year period ended December 31, 2009. 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) Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-earning assets.

(3) Tangible noninterest expense to average assets is the ratio of noninterest expense (excluding goodwill impairment and amortization of intangible assets) to average assets.

(4) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income. Tangible efficiency ratio is the ratio of noninterest expense (excluding goodwill impairment and amortization of intangible assets) to the sum of net interest income and noninterest income.

(5) Nonperforming loans consist of nonaccrual loans and certain loans with restructured terms.

(6) Nonperforming assets consist of nonperforming loans and other real estate.

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 appearing 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 cont emplated 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 and Factors that Could Affect Future Results” appearing at the beginning of this report and “Item 1A ─ Risk Factors,” appearing elsewhere in this report.

RESULTS OF OPERATIONS

Overview

All financial information in this Annual Report on Form 10-K is reported on a continuing operations basis, unless otherwise noted. See Note 2 to our accompanying consolidated financial statements appearing elsewhere in this report for further discussion regarding our discontinued operations.

We recorded a net loss, including discontinued operations, of $427.6 million and $287.2 million for the years ended December 31, 2009 and 2008, respectively, compared to net income of $49.5 million for the year ended December 31, 2007. Our results of operations levels reflect the following:

Ø A provision for loan losses of $390.0 million for the year ended December 31, 2009, compared to $368.0 million for the year ended December 31, 2008 and $65.1 million for the year ended December 31, 2007;

Ø Net interest income of $285.9 million for the year ended December 31, 2009, compared to $355.2 million in 2008 and $416.1 million in 2007, which contributed to a decline in our net interest margin to 3.10% for the year ended December 31, 2009, compared to 3.82% in 2008 and 4.58% in 2007;

Ø Noninterest income of $74.2 million for the year ended December 31, 2009, compared to $65.8 million in 2008 and $58.5 million in 2007;

Ø Noninterest expense of $366.7 million for the year ended December 31, 2009, compared to $268.1 million in 2008 and $273.2 million in 2007;

Ø A provision for income taxes of $2.4 million for the year ended December 31, 2009, compared to $18.3 million in 2008 and $37.3 million in 2007;

Ø A loss from discontinued operations, net of tax, of $49.9 million for the year ended December 31, 2009, compared to $54.9 million in 2008 and $49.6 million in 2007. See Note 2 to our consolidated financial statements for further discussion of discontinued operations; and

Ø Net losses attributable to noncontrolling interest in subsidiaries of $21.3 million and $1.2 million for the years ended December 31, 2009 and 2008, respectively, compared to net income of $78,000 in 2007.

The increase in the provision for loan losses in 2009 and 2008 was primarily driven by increased net loan charge-offs and declining asset quality trends throughout our loan portfolio primarily resulting from continued weak economic conditions and significant declines in real estate values in virtually all market segments, as further discussed under “—Provision for Loan Losses” and “—Loans and Allowance for Loan Losses.”

The decline in our net interest income and net interest margin in 2009 and 2008 was primarily attributable to increases in nonaccrual loans of $273.3 million and $215.6 million during 2009 and 2008, respectively, and a 500 basis point aggregate decrease in the prime lending rate, from September 2007 through December 2008, coupled with a significant decline in the London Interbank Offered Rate, or LIBOR, during the periods, partially offset by a decrease in deposit and other interest-bearing liability costs. Our net interest income and net interest margin in 2009 was further negatively impacted by a higher average balance of lower-yielding short-term investments, as further discussed under “—Financial Condition and Average Balances.” We are currently in an asset-sensitive balance sheet position and, as such, int erest rate cuts by the Federal Reserve have an immediate short-term negative effect on our net interest income and net interest margin until we can fully re-price our deposits to reflect current market interest rates, as further discussed under “—Net Interest Income.”

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The increase in our noninterest income in 2009, as compared to 2008, was primarily attributable to an increase in the net gain on investment securities, higher gains on the sale of mortgage loans, lower declines in the fair value of servicing rights and higher service charges on deposit accounts and customer service fees; partially offset by losses incurred on the sale of certain asset based lending and restaurant franchise loans in the fourth quarter of 2009, decreased bank-owned life insurance investment income, net losses on derivative financial instruments and a pre-tax gain on the extinguishment of a term repurchase agreement in 2008, as further discussed under “—Noninterest Income.” The increase in our noninterest income in 2008, as compared to 2007, primarily resulted from increased gains on loans sold a nd held for sale, service charges on deposit accounts and customer service fees and a gain on the extinguishment of a term repurchase agreement, partially offset by an increase in net losses on investment securities and a decrease in the fair value of servicing rights.

The increase in our noninterest expense in 2009, as compared to 2008, primarily resulted from a goodwill impairment charge of $75.0 million, an increase in FDIC insurance assessment premiums and an increase in write-downs and expenses on other real estate properties, partially offset by reductions in salaries and employee benefits expense, occupancy and furniture and equipment expenses, information technology fees, advertising and business development and other expenses, as further discussed under “¾Noninterest Expense.” The overall decrease in the level of noninterest expense in 2008, as compared to 2007, reflects reductions in salaries and employee benefits expense attributable to decreased staffing levels in our mortgage banking division and the compl etion of certain other staff reductions in 2007 and 2008, as well as reduced charitable contributions expense and other profit improvement initiatives that were implemented in order to reduce our noninterest expense levels, partially offset by increases in occupancy and furniture and equipment expenses, legal, examination and professional fees, expenses on other real estate properties and FDIC insurance assessment premiums. We have made substantial progress in reducing our noninterest expense levels over the last two years and we will continue to pursue future opportunities to further control our noninterest expenses. While certain noninterest expense levels are expected to remain at elevated levels or to continue to increase, including FDIC insurance, other real estate expenses and professional fees related to asset quality matters, we are focused on reducing other expense categories through our continued profit improvement initiatives described herein.

The provision for income taxes in 2009 primarily reflects our consolidated net operating loss due to existing federal and state net operating loss carryforwards on which the realization of the related tax benefits is not “more likely than not,” as further discussed under “¾Provision for Income Taxes,” and in Note 13 to our consolidated financial statements. The provision for income taxes in 2008 reflects the recognition of a net deferred tax asset valuation allowance of approximately $136.8 million against our deferred tax assets during 2008, which had the effect of increasing our provision for income taxes by $123.2 million during 2008.

Financial Condition and Average Balances

Our average total assets were $10.59 billion for the year ended December 31, 2009, compared to $10.81 billion and $10.34 billion for the years ended December 31, 2008 and 2007, respectively. Our total assets were $10.58 billion at December 31, 2009, compared to $10.78 billion and $10.90 billion at December 31, 2008 and 2007, respectively. We attribute the decrease in our total assets in 2009 to decreases in our loan portfolio, goodwill and other intangible assets, bank premises and equipment, bank-owned life insurance and other assets, partially offset by increases in cash and cash equivalents, other real estate owned, assets held for sale and assets of discontinued operations. We attribute the decrease in our total assets in 2008 to decreases in our loan and investment securities portfolios, deferred income taxes and accrued in terest receivable, partially offset by increases in cash and short-term investments, other real estate owned and refundable income taxes.

Our interest-earning assets averaged $9.24 billion for the year ended December 31, 2009, compared to $9.35 billion and $9.13 billion for the years ended December 31, 2008 and 2007, respectively. Our interest-bearing liabilities averaged $6.75 billion for the year ended December 31, 2009, compared to $6.98 billion and $6.41 billion for the years ended December 31, 2008 and 2007, respectively. Funds available from decreased average loan balances, as well as maturities, calls and sales of investment securities were primarily utilized to fund increases in average short-term investments in 2009. In 2008, funds available from increased average deposits and other borrowings, as well as maturities, calls and sales of investment securities were primarily used to fund an increase in average loans.

Average loans, net of unearned discount, were $7.55 billion, $8.47 billion and $7.73 billion for the years ended December 31, 2009, 2008 and 2007, respectively. The decrease in average loans in 2009 primarily reflects a decrease in internal loan growth, loan charge-offs of $352.7 million, transfers of loans to other real estate of $143.6 million and, to a lesser extent, sales of approximately $101.5 million, $64.4 million and $141.3 million of asset based lending loans, restaurant franchise loans and premium finance loans in December 2009, as further discussed under “—Loans and Allowance for Loan Losses.” The increase in average loans in 2008 primarily reflects internal loan growth and our acquisition of Coast Bank completed in 2007, which provided total loans, net of unearned discount, of $518.0 million. The i ncrease in average loans during 2008 was partially offset by loan charge-offs of $331.0 million, in addition to sales of approximately $10.8 million of small business loans in March 2008 and approximately $24.0 million of residential mortgage loans in April 2008, as well as the 2007 securitization and subsequent sale of certain residential mortgage loans held in portfolio, and sales and/or payoffs of certain nonperforming and other loans in our residential mortgage loan and commercial real estate loan portfolios in 2007. Loans, net of unearned discount, decreased $1.98 billion to $6.61 billion at December 31, 2009, from $8.59 billion at December 31, 2008. The decrease reflects the reclassification of $416.2 million of certain of our Chicago and Texas Region loans to assets of discontinued operations, the reclassification of $14.4 million of loans associated with the sale of our Lawrenceville branch office to assets held for sale at December 31, 2009, loan charge-offs of $352.7 million, the aggregate commerci al loan sales of approximately $307.2 million previously discussed, transfers to other real estate of $143.6 million and other loan activity, including principal repayments and overall reduced loan demand, as further discussed under “—Loans and Allowance for Loan Losses.”

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Investment securities averaged $637.2 million for the year ended December 31, 2009, compared to $743.1 million and $1.24 billion for the years ended December 31, 2008 and 2007, respectively. The reduction in our average investment securities during 2009 reflects the utilization of funds provided by maturities and sales of investment securities to increase our average short-term investments. The reduction in our average investment securities during 2008 reflects the utilization of funds provided by maturities and sales of investment securities to fund the increase in our average loan portfolio. Our investment securities were $541.6 million and $575.1 million at December 31, 2009 and 2008, respectively.

FHLB and FRB stock averaged $57.5 million for the year ended December 31, 2009, compared to $51.5 million and $37.7 million for the years ended December 31, 2008 and 2007, respectively. The increases during 2009 and 2008 were primarily attributable to additional investments in FHLB stock commensurate with our increased FHLB borrowing levels. FHLB and FRB stock was $65.1 million and $47.8 million at December 31, 2009 and 2008, respectively.

Average short-term investments were $995.2 million for the year ended December 31, 2009, compared to $83.2 million and $130.3 million for 2008 and 2007, respectively. The increase in the average balance of short-term investments was primarily due to a higher level of liquidity in 2009 as compared to 2008 resulting from the decrease in average loans, partially offset by a decrease in average deposits. Our short-term investments were $2.37 billion at December 31, 2009, compared to $676.2 million at December 31, 2008. During 2009, we increased our short-term investments in anticipation of future significant cash outflows associated with the sale of our Chicago Region on February 19, 2010 and the announced sale of our Texas Region that we expect to complete during the second quarter of 2010. The majority of funds in our short-term i nvestments at December 31, 2009 and during 2009 were maintained in our correspondent bank account with the FRB. See further discussion under “—Liquidity.”

Nonearning assets averaged $622.2 million, $825.3 million and $697.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. The decrease during 2009 was attributable to decreases in: average bank premises and equipment attributable to reduced expenditures associated with certain of our profit improvement initiatives; average bank-owned life insurance resulting from the termination of our largest insurance policy in June 2009; average deferred income and refundable income taxes; average intangible assets; and the average fair value of certain of our derivative financial instruments during the periods; partially offset by increases in average other real estate owned attributable to higher foreclosure activity. The increase during 2008 was attributable to increases in: average bank premises and equipment largel y attributable to our acquisitions and capital expenditures associated with de novo branch offices; average deferred and refundable income taxes; average other real estate owned; and the average fair value of certain of our derivative financial instruments during the periods, reflective of changes in the fair value of these instruments and the maturity and/or termination of certain of our interest rate swap agreements.

Bank premises and equipment, net decreased $58.2 million to $178.3 million at December 31, 2009 compared to $236.5 million at December 31, 2008. The decrease is primarily due to the reclassification of $45.0 million of bank premises and equipment related to Chicago and Texas to discontinued operations at December 31, 2009 in addition to the sale of bank and premises equipment associated with UPAC of $4.5 million and reduced capital expenditures associated with certain of our profit improvement initiatives.

Goodwill and other intangible assets decreased $162.4 million to $144.4 million at December 31, 2009 compared to $306.8 million at December 31, 2008. The decrease is due to (a) the recognition of goodwill impairment of $75.0 million; (b) the reclassification of $46.2 million of goodwill and other intangible assets to discontinued operations at December 31, 2009; (c) the sales of ANB and certain assets and liabilities of UPAC on September 30, 2009 and December 31, 2009, respectively, which resulted in decreases of goodwill and other intangible assets of $13.0 million and $20.0 million, respectively; (d) the reclassification of $1.0 million of goodwill to assets held for sale at December 31, 2009; (e) the sale of our Springfield branch office which resulted in an allocation of goodwill of $1.0 million; and (f) amortization of $5.0 million, partially offset by goodwill acquired during the year of $2.9 million attributable to additional earn-out consideration associated with the acquisition of ANB in March 2006.

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Bank-owned life insurance decreased $92.5 million to $26.4 million at December 31, 2009 compared to $118.8 million at December 31, 2008. We terminated our largest insurance policy in 2009, resulting in a reduction in the carrying value of bank-owned life insurance of approximately $93.1 million. We received an initial cash payment of $90.6 million from the liquidation of the underlying assets associated with the terminated insurance policy.

Other real estate increased $33.7 million to $125.2 million at December 31, 2009 compared to $91.5 million at December 31, 2008 reflecting substantially higher foreclosure activity, primarily related to real estate construction and development loans, partially offset by write-downs of $37.4 million.

Other assets decreased $71.4 million to $83.2 million at December 31, 2009 compared to $154.6 million at December 31, 2008. The decrease is primarily attributable to a refund of approximately $62.0 million of federal income taxes received in the second quarter of 2009, which was classified as an income tax receivable within other assets in our consolidated balance sheets at December 31, 2008. The refund resulted from the filing of amended federal income tax returns to recover income taxes paid in previous years through the application of the loss carryback rules and regulations.

Assets of discontinued operations averaged $724.3 million, $635.8 million and $513.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. Assets of discontinued operations and assets held for sale were $518.1 million and $17.0 million, respectively, at December 31, 2009. There were no assets of discontinued operations or assets held for sale at December 31, 2008. See Note 2 to our consolidated financial statements for further discussion of discontinued operations and assets held for sale.

Deposits averaged $6.99 billion, $7.07 billion and $6.72 billion for the years ended December 31, 2009, 2008 and 2007, respectively. The decrease in average deposits in 2009 was primarily attributable to anticipated run-off of higher rate certificates of deposits, partially offset by organic growth through deposit development programs. The mix of our deposit portfolio volumes during 2009 reflects a shift from time deposits to noninterest-bearing demand and savings and money market deposits. The increase in average deposits in 2008 was attributable to organic growth through deposit development programs, including marketing campaigns and enhanced product and service offerings. The increase was also attributable to our acquisition of Coast Bank completed in 2007, which provided aggregate deposits of $628.1 million, partially offset by anticipated run-off of higher rate certificates of deposit. Average demand and savings deposits were $4.34 billion, $4.21 billion and $3.97 billion for the years ended December 31, 2009, 2008 and 2007, respectively. Average time deposits were $2.65 billion, $2.86 billion and $2.75 billion for the years ended December 31, 2009, 2008 and 2007, respectively. Our deposits were $7.06 billion, $8.74 billion and $9.15 billion at December 31, 2009, 2008 and 2007, respectively, reflecting decreases of $1.68 billion and $407.7 million, respectively. The decrease in deposits in 2009 reflects: the reclassification of $1.72 billion in aggregate deposits associated with our Chicago and Texas Regions to liabilities of discontinued operations and the reclassification of $24.3 million of deposits associated with our Lawrenceville branch office to liabilities held for sale at December 31, 2009, as further discussed in Note 2 to our consolidated financial statements; the sale of approximately $20.1 million of deposits of o ur Springfield branch office in November 2009; and a decrease of $85.4 million of deposits in the Certificate of Deposit Account Registry Service, or CDARS program, as discussed below, to $31.6 million at December 31, 2009 compared to $117.0 million at December 31, 2008; partially offset by organic growth through deposit development programs. The decrease in 2008 was primarily attributable to a decrease in time deposits of $406.0 million, including time deposits in our Florida region, which was anticipated as part of our planned post-acquisition strategy to improve the net interest margin in this region. These time deposits carried substantially higher interest rates than those throughout our other markets. This decrease in deposits in 2008 was partially offset by an increase in time deposits in the CDARS program, which increased to $117.0 million at December 31, 2008. We did not have any deposits in the CDARS program at December 31, 2007. We previously placed deposits into the CDARS program and received fee income; however, beginning in the third quarter of 2008, we elected to receive deposits placed into the CDARS program on a reciprocal basis, thereby increasing our time deposits and further enhancing our overall liquidity position during this time period.

Other borrowings, which are comprised of term and daily securities sold under agreements to repurchase, FHLB advances, FRB borrowings and federal funds purchased, averaged $566.0 million, $575.6 million and $371.6 million for the years ended December 31, 2009, 2008 and 2007, respectively. The decrease in average other borrowings in 2009 reflects reductions in FRB borrowings, federal funds purchased, and daily repurchase agreements (in connection with cash management activities of our commercial deposit customers), partially offset by an increase in FHLB advances. The increase in average other borrowings in 2008 reflects an increase in FHLB advances, FRB borrowings and an increase in our term repurchase agreement of $20.0 million, partially offset by a decrease in daily repurchase agreements. See further discussion regarding acti vity in other borrowings in Note 10 to our consolidated financial statements and under “—Liquidity.” Other borrowings were $767.5 million at December 31, 2009, compared to $575.1 million at December 31, 2008, reflecting an increase in FHLB advances of $399.3 million, partially offset by a decrease in FRB borrowings of $100.0 million and a decrease in daily repurchase agreements of $106.9 million. Other borrowings at December 31, 2009 also reflect the reclassification of $9.5 million of daily repurchase agreements associated with our Chicago and Texas Regions to liabilities of discontinued operations.

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Our notes payable averaged zero, $21.6 million and $34.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. The decrease in our average notes payable during the periods was attributable to contractual payments and additional prepayments made on our outstanding notes payable. Specifically, during the second quarter of 2008, we borrowed $30.0 million under a new secured revolving line of credit with an affiliated entity and utilized the proceeds of the advance to terminate and repay in full all of the obligations under our former secured credit facility with a group of unaffiliated financial institutions. During the third quarter of 2008, we repaid in full the outstanding balance on our new secured revolving line of credit. Subsequent to that time, we did not borrow any additional funds on the new secured line of credit, which matured on June 30, 2009, as further discussed in Note 11 to our consolidated financial statements.

Subordinated debentures issued to our affiliated statutory and business trusts averaged $353.9 million, $353.8 million and $320.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. Our subordinated debentures were $353.9 million and $353.8 million at December 31, 2009 and 2008, respectively. During 2007, we issued a total of $77.3 million of variable rate subordinated debentures in private placements through four newly-formed statutory trusts and assumed $4.1 million of subordinated debentures in conjunction with a bank acquisition, as further described in Note 12 to our consolidated financial statements, and we repaid in full $82.7 million of variable rate subordinated debentures in conjunction with the redemption of cumulative variable rate trust preferred securities issued by two statutory trusts.

Noninterest-bearing liabilities averaged $1.25 billion, $1.12 billion and $1.14 billion for the years ended December 31, 2009, 2008 and 2007, respectively. Average demand deposits were $1.16 billion, $1.05 billion and $1.04 billion for the years ended December 31, 2009, 2008 and 2007, respectively. Average other liabilities were $98.3 million, $74.3 million and $99.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. Noninterest-bearing demand deposits were $1.27 billion and $1.24 billion at December 31, 2009 and 2008, respectively. Our accrued expenses and other liabilities increased $16.3 million to $87.0 million at December 31, 2009 compared to $70.8 million at December 31, 2008, primarily attributable to the purchase of an investment security that settled on December 31, 2009 but the cash transferred on January 4, 2010, resulting in an increase in our other liabilities of $25.9 million at December 31, 2009.

Liabilities of discontinued operations averaged $1.76 billion, $1.83 billion and $1.98 billion for the years ended December 31, 2009, 2008 and 2007, respectively. Liabilities of discontinued operations and liabilities held for sale were $1.73 billion and $24.4 million, respectively, at December 31, 2009. There were no liabilities of discontinued operations or liabilities held for sale at December 31, 2008. See Note 2 to our consolidated financial statements for further discussion of discontinued operations and liabilities held for sale.

Stockholders’ equity, including noncontrolling interest in subsidiaries, averaged $825.2 million, $875.9 million and $815.4 million for the years ended December 31, 2009, 2008 and 2007, respectively. Our stockholders’ equity was $522.4 million and $996.4 million at December 31, 2009 and 2008, respectively. The decrease for 2009 reflects:

Ø A net loss, including discontinued operations, of $427.6 million;

Ø Dividends declared of $328,000 on our Class A and Class B preferred stock;

Ø Dividends declared of $14.2 million on our Class C Preferred Stock and Class D Preferred Stock;

Ø A decrease of $8.7 million in accumulated other comprehensive loss primarily due to changes in unrealized gains and losses on derivative financial instruments and available-for-sale investment securities;

Ø A decrease in noncontrolling interest in subsidiaries of $26.0 million, reflecting a decrease of $21.3 million associated with net losses in FB Holdings and SBLS LLC, in addition to a decrease of $4.7 million associated with First Bank’s purchase of FCA’s noncontrolling interest in SBLS LLC; and

Ø An increase of $2.8 million in additional paid-in capital as a result of First Bank’s purchase of FCA’s noncontrolling interest in SBLS LLC, as further described in Note 1 and Note 19 to our consolidated financial statements.

The increase for 2008 reflects:

Ø The issuance of $295.4 million of preferred stock to the U.S. Treasury on December 31, 2008, as further discussed in Note 18 to our consolidated financial statements;

Ø An increase in noncontrolling interest in subsidiaries of $123.8 million, primarily reflecting FCA’s contribution of cash of $125.0 million into FB Holdings during 2008, as further described in Note 19 to our consolidated financial statements, partially offset by a decrease of $1.2 million associated with net losses in FB Holdings and SBLS LLC;

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Ø An increase of $11.1 million in accumulated other comprehensive income primarily associated with changes in unrealized gains and losses on available-for-sale investment securities and derivative financial instruments;

Ø A $6.3 million cumulative effect adjustment, net of tax, of a change in accounting principle recorded in conjunction with our election to measure servicing rights at fair value as permitted by Statement of Financial Accounting Standards Board, or SFAS, No. 156 – Accounting for Servicing of Financial Assets, which was subsequently incorporated into ASC Topic 860, “Transfers and Servicing,” as further discussed in Note 1 and Note 6 to our consolidated financial statements;

Ø A net loss, including discontinued operations, of $287.2 million; and

Ø Dividends declared of $786,000 on our Class A and Class B preferred stock.

The following table sets forth, on a tax-equivalent basis, certain information on a continuing basis 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 years ended December 31, 2009, 2008 and 2007.

	Years Ended December 31,
	2009							2008							2007
			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	$	7,529,210		383,859		5.10	%	$	8,439,748		510,464		6.05	%	$	7,695,916		586,977		7.63	%
Tax-exempt (4)		22,364		1,060		4.74			27,670		1,731		6.26			29,681		2,340		7.88
Investment securities:
Taxable		616,141		23,828		3.87			711,992		34,164		4.80			1,195,682		59,618		4.99
Tax-exempt (4)		21,107		1,414		6.70			31,089		2,022		6.50			39,707		2,468		6.22
FHLB and FRB stock		57,505		2,155		3.75			51,466		2,508		4.87			37,706		2,164		5.75
Short-term investments		995,214		2,825		0.28			83,221		1,842		2.21			130,283		6,699		5.14
Total interest-earning assets		9,241,541		415,141		4.49			9,345,186		552,731		5.91			9,128,975		660,266		7.23
Nonearning assets		622,239							825,274							697,803
Assets of discontinued operations		724,259							635,832							513,137
Total assets	$	10,588,039						$	10,806,292						$	10,339,915
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand	$	873,747		1,618		0.19	%	$	869,710		4,742		0.55	%	$	845,857		7,114		0.84	%
Savings and money market		2,311,600		24,227		1.05			2,292,470		47,143		2.06			2,085,753		62,152		2.98
Time		2,647,986		76,970		2.91			2,862,973		107,885		3.77			2,752,781		129,949		4.72
Total interest-bearing deposits		5,833,333		102,815		1.76			6,025,153		159,770		2.65			5,684,391		199,215		3.50
Other borrowings		565,961		10,032		1.77			575,563		14,016		2.44			371,600		15,761		4.24
Notes payable (5)		—		37		—			21,591		1,328		6.15			34,932		2,426		6.94
Subordinated debentures (3)		353,867		15,498		4.38			353,790		21,058		5.95			320,840		25,111		7.83
Total interest-bearing liabilities		6,753,161		128,382		1.90			6,976,097		196,172		2.81			6,411,763		242,513		3.78
Noninterest-bearing liabilities:
Demand deposits		1,155,045							1,045,264							1,037,514
Other liabilities		98,284							74,261							99,128
Liabilities of discontinued operations		1,756,371							1,834,724							1,976,138
Total liabilities		9,762,861							9,930,346							9,524,543
Stockholders’ equity		825,178							875,946							815,372
Total liabilities and stockholders’ equity	$	10,588,039						$	10,806,292						$	10,339,915
Net interest income				286,759							356,559							417,753
Interest rate spread						2.59							3.10							3.45
Net interest margin (6)						3.10	%						3.82	%						4.58	%

________________________

(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 $866,000, $1.3 million and $1.7 million for the years ended December 31, 2009, 2008 and 2007, respectively.

(5) Interest expense on our notes payable includes commitment, arrangement and renewal fees. Exclusive of these fees, the interest rates paid were 4.42% and 6.41% for the years ended December 31, 2008 and 2007, respectively.

(6) Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-earning assets.

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The following table indicates, on a tax-equivalent basis, the changes in interest income and interest expense on a continuing basis 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:
	2009 Compared to 2008									2008 Compared to 2007
							Net									Net
	Volume			Rate			Change			Volume			Rate			Change
	(dollars expressed in thousands)
Interest earned on:
Loans: (1) (2) (3)
Taxable	$	(51,561	)		(75,044	)		(126,605	)		33,534			(110,047	)		(76,513	)
Tax-exempt (4)		(296	)		(375	)		(671	)		(151	)		(458	)		(609	)
Investment securities:
Taxable		(4,237	)		(6,099	)		(10,336	)		(23,264	)		(2,190	)		(25,454	)
Tax-exempt (4)		(640	)		32			(608	)		(507	)		61			(446	)
FHLB and FRB stock		172			(525	)		(353	)		590			(246	)		344
Short-term investments		3,136			(2,153	)		983			(1,884	)		(2,973	)		(4,857	)
Total interest income		(53,426	)		(84,164	)		(137,590	)		8,318			(115,853	)		(107,535	)
Interest paid on:
Interest-bearing demand deposits		11			(3,135	)		(3,124	)		98			(2,470	)		(2,372	)
Savings and money market deposits		196			(23,112	)		(22,916	)		3,328			(18,337	)		(15,009	)
Time deposits		(7,656	)		(23,259	)		(30,915	)		2,829			(24,893	)		(22,064	)
Other borrowings		(228	)		(3,756	)		(3,984	)		4,658			(6,403	)		(1,745	)
Notes payable (5)		—			(1,291	)		(1,291	)		(846	)		(252	)		(1,098	)
Subordinated debentures (3)		2			(5,562	)		(5,560	)		1,489			(5,542	)		(4,053	)
Total interest expense		(7,675	)		(60,115	)		(67,790	)		11,556			(57,897	)		(46,341	)
Net interest income	$	(45,751	)		(24,049	)		(69,800	)		(3,238	)		(57,956	)		(61,194	)

________________________

(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%.

(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 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.

Net interest income, expressed on a tax-equivalent basis, was $286.8 million for the year ended December 31, 2009, compared to $356.6 million and $417.8 million for the years ended December 31, 2008 and 2007, respectively. Our net interest margin was 3.10% for the year ended December 31, 2009, compared to 3.82% and 4.58% for the years ended December 31, 2008 and 2007, respectively. We attribute the decrease in net interest margin and net interest income in 2009 and 2008 to an increase in the average amount of our nonperforming loans and significant reversals of interest accrued on loans placed on nonaccrual status, in addition to significant declines in the prime lending rate that began in the latter part of 2007 and continued throughout 2008 to historically low levels and the significant decline in the LIBOR rate throughout 200 8 and 2009, as further discussed below. Our net interest margin and net interest income for 2009 have also been negatively impacted by higher levels of average lower-yielding short-term investments. Our net interest income for 2009 and 2008 was positively impacted by an increase in earnings on our interest rate swap agreements that were entered into in conjunction with our interest rate risk management program, as further discussed below. Our balance sheet is presently asset sensitive, and as such, our net interest margin is negatively impacted with each interest rate cut as our loan portfolio re-prices on an immediate basis; whereas we are unable to immediately re-price our deposit portfolio to current market interest rates, thereby resulting in a compression of our net interest margin. The average yield earned on our interest-earning assets decreased 142 and 132 basis points to 4.49% and 5.91% for the years ended December 31, 2009 and 2008, respectively, compared to 7.23% in 2007, while the average rate pa id on our interest-bearing liabilities decreased only 91 and 97 basis points to 1.90% and 2.81% for the years ended December 31, 2009 and 2008, respectively, compared to 3.78% in 2007.

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Derivative financial instruments that were entered into in conjunction with our interest rate risk management program to mitigate the effects of decreasing interest rates increased our net interest income by $12.5 million and $11.5 million in 2009 and 2008, respectively, and reduced our net interest income by $3.1 million in 2007. The earnings on our interest rate swap agreements increased our net interest margin by approximately 13 basis points and 12 basis points in 2009 and 2008, respectively, and reduced our net interest margin by approximately three basis points in 2007. In late 2006, we expanded our utilization of derivative financial instruments to reduce our exposure to falling interest rates, as further described in Note 5 to our consolidated financial statements, and implemented various methods to reduce the effect of decreasing interest rates on our net interest income, including the funding of investment security purchases through the issuance of term repurchase agreements. In December 2008, we terminated certain of our interest rate swap agreements designated as cash flow hedges, as further discussed under “—Interest Rate Risk Management” and in Note 5 to our consolidated financial statements. At the date of termination, these interest rate swap agreements had a fair value of $20.8 million, which is being amortized from other comprehensive loss to interest and fees on loans over the remaining terms of the interest rate swap agreements.

Interest income on our loan portfolio, expressed on a tax-equivalent basis, was $384.9 million, $512.2 million and $589.3 million for the years ended December 31, 2009, 2008 and 2007, respectively. The yield on our loan portfolio was 5.10%, 6.05% and 7.63% for the years ended December 31, 2009, 2008 and 2007, respectively. The yield on our loan portfolio decreased 95 basis points during 2009 as compared to 2008, and decreased 158 basis points during 2008 as compared to 2007. The yield on our loan portfolio continues to be adversely impacted by the decrease in the prime lending rate that began in the latter part of 2007 and continued throughout 2008 to historically low levels and the significant decline in the LIBOR rate throughout 2008 and 2009, as a significant portion of our loan portfolio is priced to the prime lending and LI BOR rate indices. The decrease in the prime lending rate began in September 2007, decreasing 100 basis points to 7.25% at December 31, 2007, and decreasing an additional 400 basis points during 2008 to 3.25% at December 31, 2008 and 2009. Furthermore, the yield on our loan portfolio continues to be adversely impacted by the significant increase in the average level of our nonaccrual loans, as further discussed under “—Loans and Allowance for Loan Losses.” Our nonaccrual loans decreased our average yield on loans by approximately 47 basis points, 30 basis points and 12 basis points in 2009, 2008 and 2007, respectively. Interest income on our loan portfolio also reflects interest income associated with our interest rate swap agreements of $13.7 million and $11.7 million in 2009 and 2008, respectively, compared to a reduction of interest income associated with our interest rate swap agreements of $3.1 million in 2007.

Interest income on our investment securities, expressed on a tax-equivalent basis, was $25.2 million, $36.2 million and $62.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. The yield on our investment securities was 3.96%, 4.87% and 5.03% for the years ended December 31, 2009, 2008 and 2007, respectively, reflecting the decline in short-term interest rates that began in the latter half of 2007 and continued through 2009. The lower yield in 2009 also reflects the sale of certain higher-yielding investment securities resulting in pre-tax gains of $7.7 million in conjunction with the repositioning of our investment securities portfolio.

Dividends on our FHLB and FRB stock were $2.2 million, $2.5 million and $2.2 million for the years ended December 31, 2009, 2008 and 2007, respectively. The yield earned on our FHLB and FRB stock was 3.75%, 4.87% and 5.75% for the years ended December 31, 2009, 2008 and 2007, respectively, and reflects the decline in short-term interest rates during the periods.

Interest income on our short-term investments was $2.8 million, $1.8 million and $6.7 million for the years ended December 31, 2009, 2008 and 2007, respectively. The yield on our short-term investments was 0.28%, 2.21% and 5.14% for the years ended December 31, 2009, 2008 and 2007, respectively, reflecting the significant decline in short-term interest rates, most significantly the federal funds rate, that began in the latter half of 2007 and continued throughout 2008 and 2009 to historically low levels. We increased our short-term investments during 2009 as a result of the anticipated significant cash outflows associated with the sale of our Chicago and Texas Regions as well as the sale of our Springfield and Lawrenceville branch offices, as further discussed in Note 2 and Note 25 to our consolidated financial statements, and u nder “—Liquidity.” The majority of funds in our short-term investments during 2009 were maintained in our correspondent bank account with the FRB, which currently earns 0.25%.

Interest expense on interest-bearing deposits was $102.8 million, $159.8 million and $199.2 million for the years ended December 31, 2009, 2008 and 2007, respectively. For the years ended December 31, 2009, 2008 and 2007, the aggregate weighted average rate paid on our interest-bearing deposit portfolio was 1.76%, 2.65% and 3.50%, respectively. The decreases in interest expense and the weighted average rate paid on our deposit portfolio in 2009 and 2008 is primarily reflective of the declining interest rate environment, an anticipated run-off of higher rate certificates of deposit and our efforts to reduce deposit costs across our deposit portfolio. The weighted average rate paid on our time deposit portfolio declined to 2.91% in 2009 from 3.77% in 2008 and 4.72% in 2007; the weighted average rate paid on our savings and money m arket deposit portfolio declined to 1.05% in 2009 from 2.06% in 2008 and 2.98% in 2007; and the weighted average rate paid on our interest-bearing demand deposits declined to 0.19% in 2009 from 0.55% in 2008 and 0.84% in 2007. We anticipate continued reductions in our deposit costs as certain of our certificates of deposit and money market accounts re-price from promotional rates to current market interest rates.

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Interest expense on our other borrowings was $10.0 million, $14.0 million and $15.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. The aggregate weighted average rate paid on our other borrowings was 1.77% for the year ended December 31, 2009, compared to 2.44% and 4.24% for the years ended December 31, 2008 and 2007, respectively, reflecting the reduction in short-term interest rates during the periods.

Interest expense on our notes payable was $37,000 for the year ended December 31, 2009, consisting entirely of commitment fees as we did not have any balances outstanding under our notes payable during 2009. Interest expense on our notes payable was $1.3 million and $2.4 million for the years ended December 31, 2008 and 2007, respectively. The aggregate weighted average rate paid on our notes payable was 6.15% and 6.94% for the years ended December 31, 2008 and 2007, respectively. The aggregate weighted average rates paid reflect changing market interest rates during the periods, and unused commitment, arrangement and renewal fees paid in conjunction with the respective financing arrangement. Exclusive of these fees, the aggregate weighted average rate paid on our notes payable was 4.42% and 6.41% for the years ended December 31 , 2008 and 2007, respectively.

Interest expense on our subordinated debentures was $15.5 million, $21.1 million and $25.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. The aggregate weighted average rate paid on our subordinated debentures was 4.38%, 5.95% and 7.83% for the years ended December 31, 2009, 2008 and 2007, respectively. The aggregate weighted average rates and the level of interest expense reflect:

Ø The reduction in LIBOR rates and the impact to the related spreads to LIBOR during the periods, as $282.5 million, or 79.4%, of our subordinated debentures are variable rate;

Ø The entrance into four interest rate swap agreements with a notional amount of $125.0 million in aggregate during March 2008 that effectively converted the interest payments on certain of our subordinated debentures from a variable rate to a fixed rate. In August 2009, we discontinued hedge accounting on these interest rate swap agreements due to the deferral of interest payments on our trust preferred securities. Therefore, the net interest recorded on the interest rate swap agreements was recorded as noninterest income effective August 2009, as further described under “—Interest Rate Risk Management” and in Note 5 and Note 12 to our consolidated financial statements. Interest expense on our subordinated debentures includes interest expense associated with our interest rate swap agreements of $1.3 million and $124,000 for the years ended December 31, 2009 and 2008, respectively; and

Ø The issuance of $77.3 million of variable rate subordinated debentures during 2007 through four newly formed statutory trusts, partially offset by the repayment of $25.8 million of variable rate subordinated debentures on April 22, 2007.

Comparison of Results of Operations for 2009 and 2008

Net Income. We recorded a net loss, including discontinued operations, of $427.6 million for the year ended December 31, 2009, compared to net loss of $287.2 million for 2008.The net losses reflect the following:

Ø An increase in the provision for loan losses to $390.0 million for the year ended December 31, 2009, compared to $368.0 million in 2008;

Ø A decline in net interest income to $285.9 million for the year ended December 31, 2009, compared to $355.2 million in 2008, which contributed to a decline in our net interest margin to 3.10% for the year ended December 31, 2009, compared to 3.82% in 2008;

Ø An increase in our noninterest income to $74.2 million for the year ended December 31, 2009, compared to $65.8 million in 2008;

Ø An increase in our noninterest expense to $366.7 million for the year ended December 31, 2009, compared to $268.1 million in 2008;

Ø A provision for income taxes of $2.4 million for the year ended December 31, 2009, compared to $18.3 million in 2008; and

Ø A loss from discontinued operations, net of tax, of $49.9 million for the year ended December 31, 2009, compared to $54.9 million in 2008. See note 2 to our consolidated financial statement for further discussion of discontinued operations.

The increase in the provision for loan losses was primarily driven by increased net loan charge-offs and declining asset quality trends throughout certain segments of our loan portfolio resulting from continued weak economic conditions and significant declines in real estate values, as further discussed under “—Provision for Loan Losses.”

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The decline in our net interest income and our net interest margin was primarily attributable to a significant increase in nonaccrual loans during 2009 and a 400 basis point decrease, in aggregate, in the prime lending rate in 2008 coupled with a significant decline in LIBOR rates during 2008 and 2009, and a higher average balance of lower-yielding short-term investments, partially offset by a decrease in deposit and other interest-bearing liability costs. We are currently in an asset-sensitive balance sheet position, and as such, interest rate cuts by the Federal Reserve have an immediate short-term negative effect on our net interest income and net interest margin until we can fully re-price our deposits to reflect current market interest rates, as further discussed under “—Net Interest Income.”

The increase in our noninterest income in 2009, as compared to 2008, was primarily attributable to an increase in the net gain on investment securities, higher gains on the sale of mortgage loans, lower declines in the fair value of servicing rights and higher service charges on deposit accounts and customer service fees, partially offset by losses incurred on the sale of certain asset based lending and restaurant franchise loans in the fourth quarter of 2009, decreased bank-owned life insurance investment income, increased net losses on derivative financial instruments and a pre-tax gain on the extinguishment of a term repurchase agreement in 2008, as further discussed under “—Noninterest Income.”

The increase in our noninterest expense in 2009, as compared to 2008, was primarily attributable to a goodwill impairment charge of $75.0 million, an increase in FDIC insurance premium assessments and an increase in write-downs and expenses on other real estate properties, partially offset by reductions in salaries and employee benefits expense, occupancy and furniture and equipment expenses, information technology fees, advertising and business development and other expenses, as further discussed under “¾Noninterest Expense.”

The provision for income taxes in 2009 primarily reflects the consolidated net operating loss due to existing federal and state net operating loss carryforwards on which the realization of the related tax benefits is not “more likely than not,” as further discussed under “¾Provision for Income Taxes,” and in Note 13 to our consolidated financial statements. The provision for income taxes in 2008 reflects the recognition of a net deferred tax asset valuation allowance of approximately $136.8 million against our deferred tax assets during 2008, which had the effect of increasing our provision for income taxes by $123.2 million during 2008.

Provision for Loan Losses.  We recorded a provision for loan losses of $390.0 million for the year ended December 31, 2009, compared to $368.0 million for the year ended December 31, 2008. The increase in the provision for loan losses was primarily driven by increased net loan charge-offs and declining asset quality trends throughout certain segments of our loan portfolio resulting from continued weak economic conditions and significant declines in real estate values, as further discussed under “—Loans and Allowance for Loan Losses.” We recorded a provision for loan losses of $63.0 million for the three months ended December 31, 2009 compared to $139.0 million for the comparable period in 2008. The decrease in our provision fo r loan losses for the three months ended December 31, 2009 was primarily driven by a decrease in net loan charge-offs in addition to less severe asset migration to classified asset categories than the migration levels experienced during the fourth quarter of 2008.

Our nonperforming loans were $735.5 million at December 31, 2009, compared to $664.2 million at September 30, 2009 and $442.4 million at December 31, 2008. The increase in the overall level of nonperforming loans during 2009 was primarily driven by increases in our real estate construction and development, one-to-four family residential mortgage and commercial real estate loan portfolios, as further discussed under “—Loans and Allowance for Loan Losses.”

Our net loan charge-offs increased to $339.0 million for the year ended December 31, 2009, compared to $316.2 million for the year ended December 31, 2008. Our net loan charge-offs for 2009 were 4.49% of average loans, compared to 3.73% in 2008. Loan charge-offs were $352.7 million for 2009, compared to $331.0 million in 2008, and loan recoveries were $13.7 million for 2009, compared to $14.8 million in 2008. Net loan charge-offs were $82.6 million for the three months ended December 31, 2009, compared to $129.8 million for the comparable period in 2008.

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

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Noninterest Income and Expense.  The following table summarizes noninterest income and noninterest expense for the years ended December 31, 2009 and 2008:

	December 31,						Increase (Decrease)
	2009			2008			Amount			%
	(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees	$	46,715			45,228			1,487			3.3	%
Gain on loans sold and held for sale		4,112			4,391			(279	)		(6.4	)
Net gain (loss) on investment securities		7,697			(8,760	)		16,457			187.9
Bank-owned life insurance investment income		733			2,808			(2,075	)		(73.9	)
Net (loss) gain on derivative instruments		(4,874	)		1,730			(6,604	)		(381.7	)
Change in fair value of servicing rights		(2,896	)		(11,825	)		8,929			75.5
Loan servicing fees		8,842			8,776			66			0.8
Gain on extinguishment of term repurchase agreement		―			5,000			(5,000	)		(100.0	)
Other		13,834			18,425			(4,591	)		(24.9	)
Total noninterest income	$	74,163			65,773			8,390			12.8
Noninterest expense:
Salaries and employee benefits	$	93,831			110,226			(16,395	)		(14.9	)%
Occupancy, net of rental income		28,549			29,492			(943	)		(3.2	)
Furniture and equipment		16,288			18,052			(1,764	)		(9.8	)
Postage, printing and supplies		4,400			5,457			(1,057	)		(19.4	)
Information technology fees		30,915			35,447			(4,532	)		(12.8	)
Legal, examination and professional fees		11,974			11,274			700			6.2
Goodwill impairment		75,000			―			75,000			100.0
Amortization of intangible assets		4,991			6,346			(1,355	)		(21.4	)
Advertising and business development		1,874			4,774			(2,900	)		(60.7	)
FDIC insurance		22,246			6,023			16,223			269.4
Write-downs and expenses on other real estate		48,488			8,242			40,246			488.3
Other		28,097			32,801			(4,704	)		(14.3	)
Total noninterest expense	$	366,653			268,134			98,519			36.7

Noninterest Income.  Noninterest income was $74.2 million for the year ended December 31, 2009, in comparison to $65.8 million for 2008. Noninterest income consists primarily of service charges on deposit accounts and customer service fees, mortgage-banking revenues, net gains (losses) on investment securities and derivative instruments, changes in the fair value of servicing rights, loan servicing fees and other income.

Service charges on deposit accounts and customer service fees increased $1.5 million, or 3.3%, to $46.7 million from $45.2 million for the years ended December 31, 2009 and 2008, respectively. The increase in service charges and customer service fees is primarily attributable to an increase of $1.4 million, or 16.1%, in commercial service charges to $9.8 million in 2009 compared to $8.5 million in 2008, primarily resulting from our efforts to control fee waivers and a decrease in the earnings credit rate due to the decline in short-term interest rates throughout 2008 and 2009.

We recorded gains on loans sold and held for sale of $4.1 million and $4.4 million for the years ended December 31, 2009 and 2008, respectively. The decrease in gains on loans sold and held for sale in 2009 as compared to 2008 reflects the following:

Ø Net losses on the sale of certain asset based lending loans and restaurant franchise loans of $6.1 million and $1.1 million, respectively, during the fourth quarter of 2009 as further discussed under “—Loans and Allowance for Loan Losses;” and

Ø A decrease in the gain on sale of SBA loans of $227,000 to $2.1 million during 2009 as compared to $2.3 million during 2008, primarily due to lower sales volumes; partially offset by

Ø An increase in the gain on the sale of mortgage loans of $7.6 million to $9.4 million during 2009 as compared to $1.8 million during 2008, due primarily to an increase in the volume of mortgage loans originated and subsequently sold in the secondary market resulting from increased levels of refinancing of one-to-four family residential real estate loans in light of declining mortgage interest rates experienced during 2009. For the years ended December 31, 2009 and 2008, we originated residential mortgage loans held for sale and held for portfolio totaling $541.0 million and $221.8 million, respectively, and sold residential mortgage loans totaling $522.6 million and $210.6 million, respectively.

We recorded net gains on investment securities of $7.7 million for the year ended December 31, 2009, compared to net losses on investment securities of $8.8 million for the year ended December 31, 2008. During 2009, we sold $521.8 million of available-for-sale investment securities that carried relatively high risk-weightings for regulatory capital purposes and repositioned a portion of our investment securities portfolio to lower risk-weighted investments. The net gains from these sales were partially offset by other-than-temporary impairment of $1.2 million recorded during the fourth quarter of 2009 on equity investments in the common stock of two companies in the financial services industry, which management considers to have been primarily caused by economic events impacting the financial services industry as a whole. The ne t loss for 2008 was primarily attributable to the recognition of other-than-temporary impairment of $10.4 million on the same equity investments. These equity securities were carried at fair value at December 31, 2009 and 2008. We also recognized other-than-temporary impairment of $1.0 million on a preferred stock investment during 2008, which represented the full amount of the investment and was necessitated by bankruptcy proceedings of the underlying financial services company. The other-than-temporary impairment in 2008 of $11.4 million, in aggregate, was partially offset by a pre-tax gain of approximately $867,000 recognized on the sale of $81.5 million of available-for-sale investment securities in March 2008 and a pre-tax gain of approximately $1.0 million recognized on the sale of $64.7 million of available-for-sale investment securities in December 2008.

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Bank-owned life insurance investment income was $733,000 and $2.8 million for the years ended December 31, 2009 and 2008, respectively. The decrease reflects the performance of the underlying investments associated with the insurance contracts, which is directly correlated to the portfolio mix of investments, the crediting rate associated with the embedded stable value protection program and overall market conditions. Furthermore, in June 2009, we terminated our largest insurance policy resulting in a reduction in the carrying value of our bank-owned life insurance investment of approximately $93.1 million. We did not record any gain or loss for the year ended December 31, 2009 as a result of the termination of this insurance policy. In January 2010, we terminated an additional insurance policy which had a carrying value of $19. 8 million at December 31, 2009.

We recorded net losses on derivative instruments of $4.9 million for the year ended December 31, 2009, compared to net gains on derivative instruments of $1.7 million in 2008. The net losses in 2009 were primarily attributable to a cumulative fair value adjustment of $4.6 million on our interest rate swap agreements designated as cash flow hedges on our subordinated debentures that was reclassified from accumulated other comprehensive loss to loss on derivative instruments as a result of the discontinuation of hedge accounting treatment following the announcement of the deferral of interest payments on the underlying trust preferred securities in August 2009. In conjunction with the discontinuation of hedge accounting, the net interest differential on these interest rate swap agreements was recorded as a reduction of noninterest income effective August 2009. These losses were partially offset by income of $711,000 generated from the issuance of customer interest rate swap agreements throughout 2009. The net gains in 2008 were primarily attributable to the net increase in the fair value of our interest rate floor agreements as a result of the decline in forward rates resulting from the Federal Reserve interest rate cuts. In May 2008, we terminated our $300.0 million interest rate floor agreements to modify our overall hedge position in accordance with our interest rate risk management program, as further described under “—Interest Rate Risk Management” and in Note 5 to our consolidated financial statements. We did not incur any gains or losses in conjunction with the termination of our interest rate floor agreements.

We recorded net losses from changes in the fair value of mortgage and SBA servicing rights of $2.9 million and $11.8 million for the years ended December 31, 2009 and 2008, respectively. The changes in the fair value of mortgage and SBA servicing rights during the periods reflect changes in mortgage interest rates and the related changes in estimated prepayment speeds. The change also reflects changes in cash flow assumptions on the underlying SBA loans in the serviced portfolio.

Loan servicing fees were $8.8 million for the years ended December 31, 2009 and 2008, and are primarily attributable to fee income generated for the servicing of real estate mortgage loans owned by investors and originated by our mortgage banking division, as well as SBA loans to small business concerns. The level of fees is primarily impacted by the balance of loans serviced and interest shortfall on serviced residential mortgage loans. Interest shortfall represents the difference between the interest collected from a loan servicing customer upon prepayment of the loan and the full month of interest that is required to be remitted to the security owner. The $66,000 increase in loan servicing fees in 2009 was primarily due to a higher average balance of mortgage loans serviced for others, partially offset by a higher level of in terest shortfall as a result of the refinance environment.

In March 2008, we restructured our $100.0 million term repurchase agreement, which included the following primary modifications: (a) increased the borrowing amount to $120.0 million; (b) extended the maturity date from October 12, 2010 to April 12, 2012; (c) convert the interest rate from a variable rate to a fixed rate of 3.36%; and (d) terminate the embedded interest rate floor agreements contained within the term repurchase agreement. These modifications resulted in the recognition of the pre-tax gain of $5.0 million on the extinguishment of our term repurchase agreement in the first quarter of 2008, as further discussed in Note 10 to our consolidated financial statements.

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Other income was $13.8 million and $18.4 million for the years ended December 31, 2009 and 2008, respectively. We primarily attribute the decline in other income to:

Ø A decrease in recoveries of certain loan principal balances that had been previously charged off by the financial institutions prior to their acquisition by First Banks of $1.6 million to $173,000 for 2009, compared to $1.7 million in 2008;

Ø Income of $1.8 million recognized on the sale of various state tax credits in the second quarter of 2008; and

Ø A gain recognized in the first quarter of 2008 on the Visa, Inc., or Visa, initial public offering, or IPO, of $743,000, representing the cash payment received in exchange for a portion of our membership interest in Visa as a result of Visa’s IPO; partially offset by

Ø A gain of $309,000 recognized in the fourth quarter of 2009 on the sale of our Springfield branch office, as further described in Note 2 to our consolidated financial statements.

Noninterest Expense.Noninterest expense was $366.7 million for the year ended December 31, 2009, in comparison to $268.1 million for 2008. The increase in noninterest expense was primarily attributable to a goodwill impairment charge of $75.0 million and an increase in other real estate and FDIC insurance expenses, partially offset by certain profit improvement initiatives that we implemented throughout 2008 and 2009.

Salaries and employee benefits decreased $16.4 million, or 14.9%, to $93.8 million for the year ended December 31, 2009, in comparison to $110.2 million in 2008. The overall decrease in salaries and employee benefits expense is primarily attributable to the completion of certain staff reductions in 2008 and 2009. Our total full-time equivalent employees (FTEs), excluding discontinued operations, decreased to 1,679 at December 31, 2009, from 1,794 at December 31, 2008, representing a decrease of approximately 6.4%. The decrease in salaries and employee benefits expense is also reflective of reduced incentive compensation expense commensurate with our earnings performance and a decline in other benefits expenses, including medical and prescription expenses and our 401(k) matching contribution, which we eliminated on April 1, 2009. The decrease was partially offset by increased employee benefit expense associated with our nonqualified deferred compensation program resulting from market value increases in the employee investment accounts underlying this program.

Occupancy, net of rental income, and furniture and equipment expense decreased $2.7 million, or 5.7%, to $44.8 million for the year ended December 31, 2009, in comparison to $47.5 million in 2008. The decrease in 2009 reflects reduced furniture, fixtures and technology equipment expenditures associated with prior expansion and branch renovation activities and certain branch closures in conjunction with profit improvement initiatives.

Postage, printing and supplies expense decreased $1.1 million, or 19.4%, to $4.4 million for the year ended December 31, 2009, in comparison to $5.5 million in 2008, reflecting a decrease in office supplies and check printing expenses as a result of profit improvement initiatives.

Information technology fees decreased $4.5 million, or 12.8%, to $30.9 million for the year ended December 31, 2009, in comparison to $35.4 million in 2008. The decrease in information technology fees is primarily due to the implementation of certain profit improvement initiatives and negotiated fee reductions with First Services, L.P. 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, trust and small business lending divisions, and other subsidiaries.

Legal, examination and professional fees increased $700,000, or 6.2%, to $12.0 million for the year ended December 31, 2009, in comparison to $11.3 million in 2008. The increase in legal, examination and professional fees primarily reflects higher legal expenses associated with our divestiture activities and related to collection and foreclosure efforts associated with the significant increase in nonperforming assets, partially offset by expenses incurred in 2008 related to internal investigations, including the investigation commissioned by our Audit Committee regarding certain matters associated with the mortgage banking division and the resulting restatement of our consolidated financial statements, and ongoing litigation matters, including those assumed through the acquisition of CFHI. We anticipate legal, examination and pr ofessional fees to remain at higher than historical levels until economic conditions stabilize primarily as a result of higher legal and professional fees associated with foreclosure efforts on problem loans, other collection efforts and ongoing litigation matters.

We recorded a goodwill impairment charge of $75.0 million in the fourth quarter of 2009. As further described in Note 8 to our consolidated financial statements, the goodwill impairment charge was necessitated by a decline in the fair value of our single reporting unit, First Bank. The goodwill impairment charge was a direct result of continued deterioration in the real estate markets and economic conditions which decreased the fair value of First Bank. The primary factor contributing to the impairment recognition was further deterioration in the actual and projected financial performance of First Bank, as evidenced by the increases in the provision for loan losses, net loan charge-offs and nonperforming loans and the decline in the net interest margin and net interest income, as further described in Note 8 to our consolidated f inancial statements.

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Amortization of intangible assets decreased $1.4 million, or 21.4%, to $5.0 million for the year ended December 31, 2009, in comparison to $6.3 million in 2008, attributable to the completion of the amortization period of certain core deposit and other intangible assets, as well as the reduction of our intangible assets levels associated with our discontinued operations.

Advertising and business development expense decreased $2.9 million, or 60.7%, to $1.9 million for the year ended December 31, 2009, in comparison to $4.8 million in 2008. The decrease in 2009 reflects certain profit improvement initiatives and management’s efforts to reduce these expenditures in light of the current economic environment.

FDIC insurance expense increased $16.2 million to $22.2 million for the year ended December 31, 2009, in comparison to $6.0 million in 2008. We had built up several million dollars of credits through previous acquisitions that were utilized to offset FDIC insurance premiums and were depleted in 2008. Furthermore, our premium rates increased significantly during 2009 and are expected to continue to increase in the future based on our risk assessment rating in addition to further developments within the banking industry, including the failure of other financial institutions. We also recorded additional FDIC insurance expense of $4.8 million in the second quarter of 2009 related to a special assessment paid on September 30, 2009 of five basis points on each FDIC-insured depository institution’s assets minus its Tier 1 capital as of June 30, 2009, as further discussed under “Item 1. Business —Deposit Insurance.”

Write-downs and expenses on other real estate increased $40.2 million to $48.5 million for the year ended December 31, 2009, in comparison to $8.2 million in 2008. The increase in other real estate expenses is primarily attributable to an increase in write-downs of $34.6 million related to the revaluation of certain properties, which increased to $37.4 million in 2009 as compared to $2.8 million in 2008. Throughout the fourth quarter of 2009, we obtained new appraisals on several other real estate properties whereby the prior appraisal had been completed within the last 12 to 18 months and recorded write-downs to the extent the current market value less applicable selling costs was less than the carrying value. The increase is also due to an increase in expenses associated with increased foreclosure activity, including current a nd delinquent real estate taxes paid on other real estate properties as well as other property preservation related expenses. The balance of our other real estate properties increased to $125.2 million at December 31, 2009, from $91.5 million at December 31, 2008, primarily driven by foreclosures of real estate construction and development loans throughout 2009. We expect the level of write-downs and expenses on our other real estate properties to remain at elevated levels in the near term as a result of the continued increase in our other real estate balances and the expected future transfer of certain of our nonperforming loans into our other real estate portfolio.

Other expense decreased $4.7 million, or 14.3%, to $28.1 million for the year ended December 31, 2009, in comparison to $32.8 million in 2008. Other expense encompasses numerous general and administrative expenses including communications, insurance, freight and courier services, correspondent bank charges, loan expenses, miscellaneous losses and recoveries, memberships and subscriptions, transfer agent fees, sales taxes and travel, meals and entertainment, and overdraft losses. The decrease in other expense was primarily attributable to:

Ø Profit improvement initiatives and management’s efforts to reduce overall expense levels;

Ø A decrease in overdraft losses, net of recoveries, of $85,000 to $2.1 million for the year ended December 31, 2009, from $2.1 million in 2008; and

Ø A litigation settlement of $750,000 during the third quarter of 2008 pertaining to a matter initially brought against CFHI prior to our acquisition; partially offset by

Ø An increase in loan expenses of $125,000 to $5.6 million for the year ended December 31, 2009, from $5.5 million in 2008, attributable to collection efforts related to asset quality matters.

Provision for Income Taxes.  The provision for income taxes was $2.4 million for the year ended December 31, 2009, compared to $18.3 million for the year ended December 31, 2008. The provision for income taxes during 2009 reflects the establishment of a full deferred tax asset valuation allowance during 2008 and the resulting inability to record tax benefits on our net loss due to existing federal and state net operating loss carryforwards on which the realization of the related tax benefits is not “more likely than not,” as further described in Note 13 to our consolidated financial statements. The provision for income taxes during 2008 reflects the recognition of a deferred tax asset valuation allowance of $158.9 million against ou r deferred tax assets during the fourth quarter of 2008, which had the effect of increasing our provision for income taxes by $144.8 million during the fourth quarter of 2008. The deferred tax asset valuation allowance was primarily established as a result of our three-year cumulative operating loss for the years ended December 31, 2008, 2007 and 2006, after considering all available objective evidence and potential tax planning strategies related to the amount of the deferred tax assets that are more likely than not to be realized.

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The level of our provision for income taxes and the deferred tax asset valuation allowance are more fully described in Note 13 to our consolidated financial statements.

Net Loss Attributable to Noncontrolling Interest in Subsidiaries.We recorded a net loss attributable to noncontrolling interest in subsidiaries of $21.3 million and $1.2 million for the years ended December 31, 2009 and 2008, respectively, associated with the noncontrolling interest in the net losses in FB Holdings and SBLS LLC. The increase in the net loss attributable to noncontrolling interest in subsidiaries during 2009 was primarily attributable to write-downs and expenses on other real estate properties in FB Holdings. Noncontrolling interest in our subsidiaries is more fully described in Note 1 and Note 19 to our consolidated financial statements.

Loss from Discontinued Operations, Net of Tax.We recorded a loss from discontinued operations, net of tax, of $49.9 million for the year ended December 31, 2009, compared to a loss of $54.9 million in 2008. The decrease in the net loss from discontinued operations in 2009 reflects declines in the net loss attributable to Chicago and Texas of $16.1 million and $5.8 million, respectively, partially offset by a loss of $13.1 million on the sale of assets of UPAC on December 31, 2009. See Note 2 to our consolidated financial statements for further discussion of discontinued operations.

Comparison of Results of Operations for 2008 and 2007

Net Income.  We recorded a net loss, including discontinued operations, of $287.2 million for the year ended December 31, 2008, compared to net income of $49.5 million for 2007. Our return on average assets and our return on average stockholders’ equity were (2.66%) and (32.78%), respectively, for the year ended December 31, 2008, compared to 0.48% and 6.07%, respectively, for 2007. The net loss for 2008 compared to the net income for 2007 reflects the following:

Ø An increase in the provision for loan losses to $368.0 million for the year ended December 31, 2008, compared to $65.1 million in 2007;

Ø A decline in net interest income to $355.2 million for the year ended December 31, 2008, compared to $416.1 million in 2007, which contributed to a decline in our net interest margin to 3.82% for the year ended December 31, 2008, compared to 4.58% in 2007;

Ø Noninterest income of $65.8 million for the year ended December 31, 2008, compared to $58.5 million in 2007;

Ø A decrease in our noninterest expense to $268.1 million for the year ended December 31, 2008, compared to $273.2 million in 2007;

Ø A provision for income taxes of $18.3 million for the year ended December 31, 2008, compared to $37.3 million in 2007; and

Ø A loss from discontinued operations, net of tax, of $54.9 million for the year ended December 31, 2008, compared to a net loss of $49.6 million in 2007. See Note 2 to our consolidated financial statement for further discussion of discontinued operations.

The increase in the provision for loan losses was primarily driven by increased net loan charge-offs, an increase in nonperforming loans and higher levels of problem loans in our one-to-four family residential mortgage and real estate construction and development loan portfolios, as further discussed under “—Provision for Loan Losses.”

The decline in our net interest income and our net interest margin was primarily attributable to an increase in nonaccrual loans of $215.6 million during 2008 and a 500 basis point decrease, in aggregate, in the prime lending rate from the third quarter of 2007 through December 31, 2008 as well as a substantial decline in average LIBOR rates throughout 2008, as further discussed under “—Net Interest Income.”

The increase in our noninterest income primarily resulted from an increase in gains on loans held for sale, service charges on deposit accounts and customer service fees and a gain on the extinguishment of a term repurchase agreement, partially offset by an increase in net losses on investment securities associated with other-than-temporary impairment on equity investments in two financial institutions, and a decrease in the fair value of servicing rights, as further discussed under “—Noninterest Income.”

The overall decrease in the level of noninterest expense for 2008 reflects reductions in salaries and employee benefits expense attributable to decreased staffing levels in our mortgage banking division and the completion of certain other staff reductions in 2007 and 2008, as well as reduced charitable contributions expense and other profit improvement initiatives that were implemented in order to reduce our noninterest expense levels. These decreases were partially offset by increases in occupancy and furniture and equipment expenses, legal, examination and professional fees, expenses on other real estate properties and FDIC insurance assessment premiums, as further discussed under “¾Noninterest Expense.”

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The change in the provision for income taxes in 2008 reflects our decreased earnings and the recognition of a net deferred tax asset valuation allowance of approximately $136.8 million against our deferred tax assets during 2008, which had the effect of increasing our provision for income taxes, including discontinued operations, by $123.2 million during 2008, as further discussed under “¾Provision for Income Taxes.”

Provision for Loan Losses.   We recorded a provision for loan losses of $368.0 million for the year ended December 31, 2008, compared to $65.1 million for the year ended December 31, 2007. The increase in the provision for loan losses was primarily driven by increased net loan charge-offs and declining asset quality associated with our one-to-four family residential mortgage and land acquisition, development and construction loan portfolios, as further discussed under “—Loans and Allowance for Loan Losses.” Throughout 2008, we encountered considerable distress and declining conditions within our one-to-four family residential loan portfolio as a result of current market conditions and the overall deterioration of Alt A an d sub-prime residential mortgage loan products experienced throughout the mortgage banking industry. We also experienced declining market conditions in our real estate construction and development loan portfolio, particularly in California, as a result of continued weak economic conditions and significant declines in real estate values. We recorded a provision for loan losses of $139.0 million for the three months ended December 31, 2008 compared to $44.6 million for the comparable period in 2007. The increase in our provision for loan losses for the three months ended December 31, 2008 was primarily driven by increased net loan charge-offs and continued declining market conditions in our one-to-four family residential mortgage portfolio and certain sectors of our land acquisition, development and construction loan portfolio, as discussed above.

Our nonperforming loans were $442.4 million at December 31, 2008, compared to $202.2 million at December 31, 2007. The increase in the overall level of nonperforming loans during 2008 was primarily driven by a decline in asset quality related to our one-to-four family residential mortgage and land acquisition, development and construction loan portfolios, as further discussed under “—Loans and Allowance for Loan Losses.”

Our net loan charge-offs increased to $316.2 million for the year ended December 31, 2008, compared to $56.8 million for the year ended December 31, 2007. Our net loan charge-offs for 2008 were 3.73% of average loans, compared to 0.74% in 2007. Loan charge-offs were $331.0 million for 2008, compared to $65.5 million in 2007, and loan recoveries were $14.8 million for 2008, compared to $8.7 million in 2007. Net loan charge-offs were $129.8 million for the three months ended December 31, 2008, compared to $27.9 million for the comparable period in 2007.

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

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Noninterest Income and Expense.  The following table summarizes noninterest income and noninterest expense for the years ended December 31, 2008 and 2007:

	December 31,						Increase (Decrease)
	2008			2007			Amount			%
	(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees	$	45,228			38,193			7,035			18.4	%
Gain (loss) on loans sold and held for sale		4,391			(4,792	)		9,183			191.6
Net loss on investment securities		(8,760	)		(3,077	)		(5,683	)		(184.7	)
Bank-owned life insurance investment income		2,808			3,841			(1,033	)		(26.9	)
Net gain on derivative instruments		1,730			1,233			497			40.3
Change in fair value of servicing rights		(11,825	)		(5,445	)		(6,380	)		(117.2	)
Loan servicing fees		8,776			8,123			653			8.0
Gain on extinguishment of term repurchase agreement		5,000			―			5,000			100.0
Other		18,425			20,452			(2,027	)		(9.9	)
Total noninterest income	$	65,773			58,528			7,245			12.4
Noninterest expense:
Salaries and employee benefits	$	110,226			129,774			(19,548	)		(15.1	)%
Occupancy, net of rental income		29,492			26,135			3,357			12.8
Furniture and equipment		18,052			16,531			1,521			9.2
Postage, printing and supplies		5,457			5,695			(238	)		(4.2	)
Information technology fees		35,447			36,018			(571	)		(1.6	)
Legal, examination and professional fees		11,274			5,994			5,280			88.1
Amortization of intangible assets		6,346			6,179			167			2.7
Advertising and business development		4,774			5,889			(1,115	)		(18.9	)
FDIC insurance		6,023			810			5,213			643.6
Write-downs and expenses on other real estate		8,242			859			7,383			859.5
Other		32,801			39,280			(6,479	)		(16.5	)
Total noninterest expense	$	268,134			273,164			(5,030	)		(1.8	)

Noninterest Income.  Noninterest income was $65.8 million for the year ended December 31, 2008, in comparison to $58.5 million for 2007. Noninterest income consists primarily of service charges on deposit accounts and customer service fees, mortgage-banking revenues, net gains (losses) on investment securities and derivative instruments, changes in the fair value of servicing rights, loan servicing fees and other income.

Service charges on deposit accounts and customer service fees increased $7.0 million, or 18.4%, to $45.2 million from $38.2 million for the years ended December 31, 2008 and 2007, respectively. The increase in service charges and customer service fees is primarily attributable to: an increase in retail NSF fees primarily as a result of an increase in the fee charged for overdrafts and further expansion of our overdraft privilege program; an increase in cardholder interchange income, primarily due to an increase in debit card usage by our customer base; and an increase in commercial service charges, primarily resulting from our efforts to control fee waivers and a decrease in the earnings credit rate as a result of the decline in short-term interest rates throughout 2008.

We recorded a gain on loans sold and held for sale of $4.4 million for the year ended December 31, 2008, compared to a loss of $4.8 million for the year ended December 31, 2007. The gain in 2008 compared to the loss in 2007 is primarily attributable to the following:

Ø The recognition of $11.4 million of losses in 2007 related to repurchase obligations on mortgage loans sold with recourse. We were obligated to repurchase mortgage loans with a principal balance of approximately $31.4 million based on the terms of the underlying sales contracts. Our primary recourse risk, attributable to early payment default on sub-prime residential mortgage loan products that we previously sold in the secondary market, generally expired throughout the first quarter of 2008;

Ø A pre-tax gain of $504,000 recognized in March 2008 on the sale of approximately $10.8 million of our small business loans; partially offset by

Ø A decrease in the volume of mortgage loans originated and subsequently sold in the secondary market. For the years ended December 31, 2008 and 2007, we originated residential mortgage loans held for sale totaling $221.8 million and $548.0 million, respectively, and we sold residential mortgage loans totaling $210.6 million and $512.5 million, respectively; and

Ø A pre-tax loss of $804,000 recognized in April 2008 on the sale of approximately $24.0 million of residential real estate mortgage loans, and a pre-tax gain of $851,000 recognized in April 2007 on the sale of approximately $13.4 million of certain repurchased and other residential mortgage loans.

We recorded net losses on investment securities of $8.8 million and $3.1 million for the years ended December 31, 2008 and 2007, respectively. The net loss for 2008 is primarily attributable to the recognition of other-than-temporary impairment of $10.4 million on equity investments in the common stock of two financial institutions. The other-than-temporary impairment was primarily caused by economic events impacting the financial services industry as a whole, and represented the difference between our cost basis and the fair value of the equity securities. The equity securities were carried at fair value at December 31, 2008. In addition, in the third quarter of 2008, we recognized other-than-temporary impairment of $1.0 million on a preferred stock investment, which represented the full amount of the investment and was necessi tated by bankruptcy proceedings of the underlying financial services company. The other-than-temporary impairment of $11.4 million, in aggregate, was partially offset by a pre-tax gain of approximately $867,000 recognized on the sale of $81.5 million of available-for-sale investment securities in March 2008 and a pre-tax gain of approximately $1.0 million recognized on the sale of $64.7 million of available-for-sale investment securities in December 2008. The net loss for 2007 primarily resulted from a net decline of $1.5 million in the fair value of securities held in our trading portfolio, prior to our liquidation of the trading portfolio in July 2007, in addition to other-than-temporary impairment recognized on an investment in the common stock of a financial institution of $1.4 million.

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Bank-owned life insurance investment income was $2.8 million and $3.8 million for the years ended December 31, 2008 and 2007, respectively, reflecting the performance of the underlying investments associated with the insurance contracts, which is directly correlated to the portfolio mix of investments, the crediting rate associated with the embedded stable value protection program, and overall market conditions.

We recorded net gains on derivative instruments of $1.7 million and $1.2 million for the years ended December 31, 2008 and 2007, respectively. The net gains in 2008 and 2007 are primarily attributable to the net increase in the fair value of our interest rate floor agreements as a result of the decline in forward rates resulting from the Federal Reserve interest rate cuts from September 2007 through April 2008. In May 2008, we terminated our $300.0 million interest rate floor agreements to modify our overall hedge position in accordance with our interest rate risk management program. We did not incur any gains or losses in conjunction with the termination of our interest rate floor agreements.

We recorded a net loss from changes in the fair value of mortgage and SBA servicing rights of $11.8 million and $5.4 million for the years ended December 31, 2008 and 2007, respectively. On January 1, 2008, we opted to measure our servicing rights at fair value, and as such, the fluctuations in 2008, as compared to 2007, reflect changes in the fair value of our servicing rights in comparison to amortization and impairment recognized in 2007. The decrease in fair value in 2008 is primarily due to the decrease in mortgage interest rates throughout 2008 and the related increase in prepayment speeds, as well as an increase in the discount rate.

Loan servicing fees were $8.8 million and $8.1 million for the years ended December 31, 2008 and 2007, respectively, and are primarily attributable to fee income generated for the servicing of real estate mortgage loans owned by investors and originated by our mortgage banking division, as well as SBA loans to small business concerns. The increase in 2008 is primarily due to an increase in the unpaid principal balance of serviced loans.

We recorded a gain of $5.0 million on the extinguishment of our term repurchase agreement in the first quarter of 2008. In March 2008, we restructured our $100.0 million term repurchase agreement, as further discussed in Note 10 to our consolidated financial statements. The primary modifications were to: (a) increase the borrowing amount to $120.0 million; (b) extend the maturity date from October 12, 2010 to April 12, 2012; (c) convert the interest rate from a variable rate to a fixed rate of 3.36%; and (d) terminate the embedded interest rate floor agreements contained within the term repurchase agreement. These modifications resulted in the recognition of the pre-tax gain of $5.0 million.

Other income was $18.4 million and $20.5 million for the years ended December 31, 2008 and 2007, respectively. We primarily attribute the decline in other income to a decrease in gains on sales of other assets.

Ø A decrease of $3.9 million in gains on sales of other assets, primarily attributable to a pre-tax gain of $2.6 million recognized on the sale and leaseback of a branch building in 2007; partially offset by

Ø A gain of $1.8 million recognized on the sale of various state tax credits in April 2008; and

Ø A gain recognized in March 2008 on the Visa IPO of $743,000, representing the cash payment received in exchange for a portion of our membership interest in Visa as a result of Visa’s IPO.

Noninterest Expense.Noninterest expense was $268.1 million for the year ended December 31, 2008, in comparison to $273.2 million for 2007. The decrease in noninterest expense was primarily attributable to certain profit improvement initiatives that we implemented throughout 2007 and 2008.

Salaries and employee benefits was $110.2 million for the year ended December 31, 2008, in comparison to $129.8 million in 2007. We attribute the overall decrease in salaries and employee benefits expense to reduced staff levels within our mortgage banking division and the completion of certain other staff reductions in 2007 and 2008. Our total FTEs, excluding discontinued operations, decreased to 1,794 at December 31, 2008, from 2,053 at December 31, 2007, representing a decrease of approximately 12.6%. We reduced our FTEs despite adding an aggregate of 26 additional branch offices through acquisitions in 2007 and an aggregate of 11 de novo branches that we opened in 2007 and 2008, inclusive of discontinued operations. The decrease in salaries and employee benefits expense is also reflective of reduced incentive compensation ex pense resulting from the significant decline in our financial performance and reduced employee benefit expense associated with our nonqualified deferred compensation program resulting from market value declines in the employee investment accounts underlying this program.

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Occupancy, net of rental income, and furniture and equipment expense was $47.5 million and $42.7 million for the years ended December 31, 2008 and 2007, respectively. The increase in 2008 reflects higher levels of expense resulting from our de novo activities and acquisitions in 2007 and 2008, as well as increased technology equipment expenditures, continued expansion and renovation of certain branch offices, increased expenses associated with the purchase and/or lease of properties that were expected to be utilized for future branch office locations, and depreciation expense associated with acquisitions and capital expenditures.

Information technology fees were $35.4 million and $36.0 million for the years ended December 31, 2008 and 2007, respectively. The decrease in information technology fees is primarily due to certain profit improvement initiatives in addition to reduced acquisition activity in 2008, partially offset by information technology conversion support in 2008 for an acquisition in late 2007 that expanded our branch network by 20 branch offices.

Legal, examination and professional fees were $11.3 million and $6.0 million for the years ended December 31, 2008 and 2007, respectively. The increase in legal, examination and professional fees is primarily attributable to: (a) approximately $1.4 million in professional fees incurred in 2008 resulting from internal investigations, including an investigation commissioned by our Audit Committee regarding certain matters associated with the mortgage banking division and the resulting restatement of our consolidated financial statements for the year ended December 31, 2007; (b) higher legal expenses related to collection and foreclosure efforts associated with certain problem loans; and (c) ongoing litigation matters, including those assumed through the acquisition of CFHI.

Amortization of intangible assets was $6.3 million and $6.2 million for the years ended December 31, 2008 and 2007, respectively, reflecting amortization expense on core deposit intangibles associated with our acquisition of Coast Bank completed in 2007.

Advertising and business development expense was $4.8 million and $5.9 million for the years ended December 31, 2008 and 2007, respectively. The decrease in 2008 is primarily a result of certain profit improvement initiatives and management’s increased efforts to reduce these expenditures.

FDIC insurance expense was $6.0 million and $810,000 for the years ended December 31, 2008 and 2007, respectively. We had built up several million dollars of credits through previous acquisitions that were utilized to offset FDIC insurance premiums and were depleted in 2008.

Write-downs and expenses on other real estate were $8.2 million and $859,000 for the years ended December 31, 2008 and 2007, respectively. The increase in other real estate expenses is primarily attributable to increased foreclosure activity and related property preservation related expenses. The balance of our other real estate properties increased to $91.5 million at December 31, 2008, from $11.2 million at December 31, 2007.

Other expense was $32.8 million and $39.3 million for the years ended December 31, 2008 and 2007, respectively. Other expense encompasses numerous general and administrative expenses including communications, insurance, freight and courier services, correspondent bank charges, miscellaneous losses and recoveries, memberships and subscriptions, transfer agent fees, sales taxes and travel, meals and entertainment. The decrease in other expense was primarily attributable to:

Ø A decrease in charitable contributions expense of $5.4 million to $541,000 in 2008 from $5.9 million in 2007, primarily reflecting a decrease in charitable contributions made to a charitable foundation established by our Chairman and members of his immediate family, as further described in Note 19 to our consolidated financial statements; and

Ø A decrease in fraud losses, net of recoveries, of $5.1 million to $1.7 million in 2008 from $6.8 million in 2007, primarily attributable to a single fraud loss of $5.0 million incurred in 2007; partially offset by

Ø A litigation settlement of $750,000 recorded during the third quarter of 2008 pertaining to a matter initially brought against CFHI prior to our acquisition;

Ø An increase in overdraft losses, net of recoveries, of $1.2 million to $2.1 million in 2008 compared to $960,000 in 2007, primarily resulting from our overdraft privilege program that we fully implemented in 2008; and

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Ø An increase in loan expenses of $2.3 million to $5.5 million in 2008 from $3.2 million in 2007, primarily associated with expenses related to our residential mortgage portfolio and attributable to declining asset quality throughout 2008.

Provision for Income Taxes.  The provision for income taxes was $18.3 million for the year ended December 31, 2008, compared to $37.3 million for the year ended December 31, 2007. The change in the provision for income taxes reflects the following:

Ø Our significantly reduced earnings in 2008, as compared to 2007;

Ø The recognition of a deferred tax asset valuation allowance of $158.9 million against our deferred tax assets during the fourth quarter of 2008, which had the effect of increasing our provision for income taxes by $144.8 million during the fourth quarter of 2008, as previously discussed;

Ø The reversal of a portion of our deferred tax asset valuation allowance which had the effect of reducing our provision for income taxes by $21.6 million during the third quarter of 2008; and

Ø The reversal of a portion of our deferred tax asset valuation allowance which had the effect of reducing the provision for income taxes by $10.7 million in 2007. This reversal was necessitated by a reduction in the allowance for loan losses allocated to certain loans acquired in 2004 as a result of final resolution of the loans through repayment, sale or other means.

Net Loss Attributable to Noncontrolling Interest in Subsidiaries.We recorded a net loss attributable to noncontrolling interest in subsidiaries of $1.2 million for the year ended December 31, 2009 associated with our noncontrolling interest in the net losses in FB Holdings and SBLS LLC, compared to net income of $78,000 in 2008 associated with net income in SBLS LLC. Noncontrolling interest in our subsidiaries is more fully described in Note 1 and Note 19 to our consolidated financial statements.

Loss from Discontinued Operations, Net of Tax.We recorded a loss from discontinued operations, net of tax, of $54.9 million for the year ended December 31, 2008, compared to a net loss of $49.6 million in 2008. The increase in the net loss in 2008 is primarily due to the establishment of a deferred tax asset valuation allowance as discussed above, which had the impact of increasing the income tax expense allocated to discontinued operations, partially offset by reductions in the pre-tax losses associated with Chicago and Texas in 2008. See Note 2 to our consolidated financial statement for further discussion of discontinued operations.

Interest Rate Risk Management

The maintenance of a satisfactory level of net interest income is a primary factor in our ability to achieve acceptable income levels. However, the maturity and repricing characteristics of our loan and investment portfolios may differ significantly from those within our deposit structure. The nature of the loan and deposit markets within which we operate, and our 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 the possibility of depositors withdrawing funds prior to stated maturity dates introduces divergent option characteristics that fluctuate as interest rates change. These factors cause various elements of our balance sheet to react in different manners and at different times relative to changes in intere st 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 our balance sheet, the effects on net interest income can be substantial. Consequently, it is critical that we establish effective control over our exposure to changes in interest rates. We strive to manage our interest rate risk by:

Ø Maintaining an Asset Liability Committee, or ALCO, responsible to our Board of Directors and Executive Management, to review the overall interest rate risk management activity and approve actions taken to reduce risk;

Ø Employing a financial simulation model to determine our exposure to changes in interest rates;

Ø Coordinating the lending, investing and deposit-generating functions to control the assumption of interest rate risk; and

Ø 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 Financial Officer, Chief Investment Officer, Chief Credit Officer, Executive Vice President of Retail Banking, Director of Risk Management and Audit and certain other senior 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.

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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 a ctual 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 50 basis points was projected to have a relatively minimal impact on our net interest income, an instantaneous parallel decline in the interest yield curve of 50 basis points indicates a pre-tax projected loss of approximately 6.8% of net interest income, based on assets and liabilities at December 31, 2009. At December 31, 2009, we remain in an asset-sensitive position and thus, remain subject to a higher level of risk in a declining interest rate environment. Although we do not anticipate that instantaneous shifts in the yie ld curve as projected in our simulation model are likely, these are indications of the effects that changes in interest rates would have over time. Our asset-sensitive position, coupled with the effect of significant declines in interest rates that began in late 2007 and continued throughout 2008 and 2009 to historically low levels, and the increased level of our nonperforming assets, has negatively impacted our net interest income and is expected to continue to impact the level of our net interest income throughout the near future.

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, 2009, adjusted to account for anticipated prepayments:

	Three Months or Less			Over Three through Six Months			Over Six through Twelve Months			Over One through Five Years		Over Five Years			Total
	(dollars expressed in thousands)
Interest-earning assets:
Loans (1)	$	4,228,356			391,698			626,341			1,299,450		62,448			6,608,293
Investment securities		45,938			34,135			67,562			249,391		144,531			541,557
FHLB and FRB stock		65,076			—			—			—		—			65,076
Short-term investments		2,372,520			—			—			—		—			2,372,520
Total interest-earning assets	$	6,711,890			425,833			693,903			1,548,841		206,979			9,587,446
Interest-bearing liabilities:
Interest-bearing demand deposits	$	338,187			210,225			137,103			100,542		127,963			914,020
Money market deposits		1,979,057			—			—			—		—			1,979,057
Savings deposits		47,908			39,454			33,817			47,908		112,725			281,812
Time deposits		612,123			502,177			811,798			692,521		189			2,618,808
Other borrowings		147,494			100,000			100,000			420,000		—			767,494
Subordinated debentures		282,481			—			—			—		71,424			353,905
Total interest-bearing liabilities		3,407,250			851,856			1,082,718			1,260,971		312,301			6,915,096
Effect of interest rate swap agreements		(125,000	)		—			—			125,000		—			—
Total interest-bearing liabilities after the effect of interest rate swap agreements	$	3,282,250			851,856			1,082,718			1,385,971		312,301			6,915,096
Interest-sensitivity gap:
Periodic	$	3,429,640			(426,023	)		(388,815	)		162,870		(105,322	)		2,672,350
Cumulative		3,429,640			3,003,617			2,614,802			2,777,672		2,672,350
Ratio of interest-sensitive assets to interest-sensitive liabilities:
Periodic		2.04			0.50			0.64			1.12		0.66			1.39
Cumulative		2.04			1.73			1.50			1.42		1.39

(1) Loans are presented net of unearned discount.

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Management made certain assumptions in preparing the foregoing table. These assumptions included:

Ø Loans will repay at projected repayment rates;

Ø Mortgage-backed securities, included in investment securities, will repay at projected repayment rates;

Ø Interest-bearing demand accounts and savings depositswill behave in a projected manner with regard to their interest rate sensitivity; and

Ø 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 foregoing table.

We were in an overall asset-sensitive position of $2.67 billion, or 25.3% of our total assets, and $832.0 million, or 7.72% of our total assets, at December 31, 2009 and 2008, respectively. We were in an overall asset-sensitive position on a cumulative basis through the twelve-month time horizon of $2.61 billion, or 24.7% of our total assets, at December 31, 2009, compared to an overall liability-sensitive position on a cumulative basis through the twelve-month time horizon of $120.4 million, or 1.12% of our total assets, at December 31, 2008.

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. We also sell interest rate swap agreement contracts to certain customers who wish to modify their interest rate sensitivity. We offset the interest rate risk of these swap agreements by simultaneously purchasing matching interest rate swap agreement contracts with offsetting pay/receive rates from other financial institutions. Because of the matching terms of the offsetting contracts, the net effect of the changes in the fair value of the paired swaps is minimal.

The derivative financial instruments that we held as of December 31, 2009 and 2008 are summarized as follows:

	December 31,
	2009				2008
	Notional Amount		Credit Exposure		Notional Amount		Credit Exposure
	(dollars expressed in thousands)
Cash flow hedges – subordinated debentures (1)	$	125,000		—		125,000		—
Customer interest rate swap contracts		80,194		683		16,000		85
Interest rate lock commitments		36,000		369		48,700		831
Forward commitments to sell mortgage-backed securities		61,000		647		40,300		—

_________________

(1) In August 2009, we discontinued hedge accounting following the announcement of the deferral of interest payments on the underlying trust preferred securities associated with our subordinated debentures.

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, 2009 and 2008, we realized net interest income of $12.5 million and $11.5 million, respectively, on our derivative financial instruments, whereas for the year ended December 31, 2007, we realized net interest expense of $3.1 million on our derivative financial instruments. The earnings associated with our derivative financial instruments reflect the interest rate environment during these periods as well as the overall level of our derivative instruments throughout these periods. In December 2008, we terminated certain of our interest rate swap agreements that were designated as cash flow hedges on certain of our loans, and recorded a pre-tax gain of $20.8 million, in aggregate, which is being amortized as an increase to interest and fees on loans in the consolidated statements of operations over the remaining terms of the respective interest rate swap agreements, which had contractual maturity dates of September 2009 and September 2010.

We recorded net losses on derivative instruments of $4.9 million for the year ended December 31, 2009, which are included in noninterest income in the consolidated statements of operations, in comparison to net gains on derivative instruments of $1.7 million and $1.2 million for the years ended December 31, 2008 and 2007, respectively. The net loss on derivative instruments in 2009 was primarily attributable to a cumulative fair value adjustment of $4.6 million on interest rate swap agreements designated as cash flow hedges on our subordinated debentures that was reclassified from accumulated other comprehensive loss to net gain (loss) on derivative instruments as a result of the discontinuation of hedge accounting treatment following the announcement of the deferral of interest payments on the underlying trust preferred securit ies in August 2009. In conjunction with the discontinuation of hedge accounting, the net interest differential on these interest rate swap agreements, which was recorded as interest expense on subordinated debentures in the consolidated statements of operations, was recorded as a reduction of noninterest income effective August 2009. The net loss in 2009 was partially offset by income generated from the issuance of our customer interest rate swap agreements. The net gains on derivative instruments in 2008 and 2007 reflect changes in the value of our interest rate floor agreements. In May 2008, we terminated our $300.0 million interest rate floor agreements to modify our overall hedge position in accordance with our interest rate risk management program.

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Our derivative financial instruments are more fully described in Note 5 to our consolidated financial statements.

Investment Securities

We classify the securities within our investment portfolio as available for sale or held to maturity. Our investment security portfolio consists primarily of securities designated as available for sale. Our investment security portfolio was $541.6 million at December 31, 2009, compared to $575.1 million and $978.7 million at December 31, 2008 and 2007, respectively.

The decrease in our investment securities portfolio in 2009 was primarily attributable to maturities and/or calls of investment securities of $671.5 million and sales of certain investment securities totaling $521.8 million. Throughout 2009, consistent with our Capital and Profit Improvement Plans, we sold certain available-for-sale securities that carried relatively high risk-weightings for regulatory capital purposes and repositioned a portion of our investment securities portfolio to lower risk-weighted investments. We reinvested funds available from the maturities and sales of investment securities of approximately $1.13 billion in other available-for-sale investment securities and the remaining funds were primarily utilized to increase our short-term investments in anticipation of future significant cash outflows, primarily associated with the sale of our Chicago and Texas Regions.

We attribute the decrease in our investment securities portfolio in 2008 to: sales of investment securities of $417.4 million, and maturities and/or calls of investment securities of $359.4 million; partially offset by the reinvestment of funds available from maturities and sales of investment securities of approximately $398.2 million in higher-yielding securities. The remaining funds provided by maturities and/or calls and sales of investment securities were primarily invested in cash and cash equivalents and utilized to fund internal loan growth.

Additional information regarding our investment securities portfolio is more fully described in Note 3 to our consolidated financial statements.

Loans and Allowance for Loan Losses

Loan Portfolio Composition. Interest earned on our loan portfolio represents the principal source of income for First Bank. Interest and fees on loans were 92.8%, 92.8% and 89.4% of total interest income for the years ended December 31, 2009, 2008 and 2007, 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 lo ans 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 that would warrant the resumption of interest accruals.

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Loans, net of unearned discount, represented 62.4% of our assets as of December 31, 2009, compared to 79.7% of our assets at December 31, 2008. Loans, net of unearned discount, decreased $1.98 billion to $6.61 billion at December 31, 2009 from $8.59 billion at December 31, 2008. 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,
	2009					2008					2007					2006					2005
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
	(dollars expressed in thousands)
Commercial, financial and agricultural	$	1,692,922		25.8	%	$	2,575,505		30.1	%	$	2,382,067		27.0	%	$	1,934,912		26.0	%	$	1,619,822		24.1	%
Real estate construction and development		1,052,922		16.0			1,572,212		18.4			2,141,234		24.3			1,832,504		24.6			1,564,255		23.3
Real estate mortgage:
One-to-four-family residential loans		1,279,166		19.5			1,553,366		18.1			1,602,575		18.2			1,270,158		17.0			1,214,121		18.1
Multi-family residential loans		223,044		3.4			220,404		2.6			177,246		2.0			141,341		1.9			143,663		2.2
Commercial real estate loans		2,269,372		34.6			2,562,598		30.0			2,431,464		27.5			2,203,649		29.5			2,112,004		31.5
Consumer and installment, net of unearned discount		48,183		0.7			70,170		0.8			85,519		1.0			72,877		1.0			56,588		0.8
Total loans, excluding loans held for sale		6,565,609		100.0	%		8,554,255		100.0	%		8,820,105		100.0	%		7,455,441		100.0	%		6,710,453		100.0	%
Loans held for sale		42,684					38,720					66,079					216,327					315,134
Total loans	$	6,608,293				$	8,592,975				$	8,886,184				$	7,671,768				$	7,025,587

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 secure d 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 geographic region and/or subsidiary at December 31, 2009 and December 31, 2008:

	2009		2008
	(dollars expressed in thousands)
Mortgage Division, excluding Florida	$	375,764		447,154
Florida		320,235		424,316
Northern California		844,526		1,048,154
Southern California		1,775,562		1,895,669
Chicago (1)		368,434		795,520
Missouri		1,365,168		1,694,690
Texas (1)		517,066		762,118
First Bank Business Capital, Inc. (2)		75,254		247,153
Northern and Southern Illinois		729,344		875,483
UPAC (2)		1,672		152,653
Other		235,268		250,065
Total	$	6,608,293		8,592,975

_______________

(1) The decreases during 2009 reflect the reclassification of $311.3 million and $103.4 million of our Chicago and Texas region loans, respectively, to discontinued operations at December 31, 2009, as further described below and in Note 2 to our consolidated financial statements.

(2) The decreases during 2009 reflect the sale of $101.5 million and $141.3 million of our FBBC and UPAC loans, respectively, during the fourth quarter of 2009, as further described below.

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Loans at December 31, 2009 mature as follows:

			Over One Year Through Five Years				Over Five Years
	One Year or Less		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Total
	(dollars expressed in thousands)
Commercial, financial and agricultural	$	1,020,139		229,191		281,196		59,070		103,326		1,692,922
Real estate construction and development		794,450		17,394		220,728		872		19,478		1,052,922
Real estate mortgage:
One-to-four family residential loans		79,938		136,591		34,617		113,529		914,491		1,279,166
Multi-family residential loans		97,708		54,564		33,736		19,194		17,842		223,044
Commercial real estate loans		611,024		743,459		321,451		319,430		274,008		2,269,372
Consumer and installment, net of unearned discount		15,982		27,306		2,923		1,699		273		48,183
Loans held for sale		42,684		—		—		—		—		42,684
Total loans	$	2,661,925		1,208,505		894,651		513,794		1,329,418		6,608,293

We seek to maintain a lending strategy that 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.

The following table summarizes the components of changes in our loan portfolio, net of unearned discount, for the five years ended December 31, 2009:

	Increase (Decrease) For the Year Ended December 31,
	2009			2008			2007			2006			2005
	(dollars expressed in thousands)
Internal loan volume (decrease) increase:
Commercial lending	$	(735,548	)		74,248			748,423			178,232			233,022
Residential real estate lending (1)		(138,086	)		14,690			8,428			413,960			485,041
Consumer lending, net of unearned discount		(19,664	)		(13,483	)		3,766			14,717			3,675
Loans provided by acquisitions		—			—			693,495			545,106			209,621
Loans and leases sold		(308,034	)		(37,643	)		(72,166	)		(344,687	)		(14,337	)
Loans transferred to assets held for sale		(14,382	)		—			—			—			—
Loans transferred to discontinued operations		(416,245	)		—			—			—			—
Loans charged-off		(352,723	)		(331,021	)		(65,494	)		(22,203	)		(33,123	)
Securitization of loans		—			—			(102,036	)		(138,944	)		—
Total (decrease) increase	$	(1,984,682	)		(293,209	)		1,214,416			646,181			883,899

_______________________

(1) Includes loans held for sale.

We attribute the net decrease in our loan portfolio in 2009 primarily to:

Ø A decrease of $882.6 million in our commercial, financial and agricultural portfolio, reflecting the reclassification of $77.6 million and $57.1 million of certain of our Chicago and Texas region loans, respectively, to assets of discontinued operations at December 31, 2009, sales of $141.3 million, $101.5 million and $64.4 million of loans in our premium finance subsidiary, asset based lending subsidiary and restaurant franchise loans, respectively, during the fourth quarter of 2009, loan charge-offs of $104.6 million, as further discussed below, and portfolio runoff associated with a decline in internal production and reduced loan demand within our markets;

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Ø A decrease of $519.3 million in our real estate construction and development portfolio primarily attributable to loan charge-offs of $122.3 million, transfers to other real estate and other loan activity, including transfers of loans from real estate construction and development to commercial and multi-family residential real estate upon completion of the construction of the underlying projects related to such loans. The following table summarizes the composition of our real estate construction and development portfolio by region as of December 31, 2009 and 2008:

	December 31,
	2009		2008
	(dollars expressed in thousands)
Northern California	$	100,543		234,942
Southern California		435,051		504,354
Chicago		115,141		185,054
Missouri		152,736		230,254
Texas		185,084		283,993
Florida		12,792		37,242
Other		51,575		96,373
Total	$	1,052,922		1,572,212

We have experienced significant asset quality deterioration within all geographic areas of our real estate construction and development portfolio, in particular Northern and Southern California, Chicago, Missouri and Florida. As a result of the asset quality deterioration, we focused on reducing our exposure to this portfolio segment and decreased the portfolio balance by $1.09 billion, or 50.8%, from $2.14 billion at December 31, 2007 to $1.05 billion at December 31, 2009. Of the remaining portfolio balance of $1.05 billion, $407.1 million, or 38.7%, of loans were in a nonperforming status as of December 31, 2009, as further discussed below;

Ø A decrease of $274.2 million in our one-to-four family residential real estate loan portfolio primarily attributable to charge-offs of $83.6 million, the reclassification of $6.8 million and $3.8 million of certain of our Chicago and Texas region loans, respectively, to assets of discontinued operations at December 31, 2009, transfers to other real estate and principal payments. The following table summarizes the composition of our one-to-four family residential real estate loan portfolio as of December 31, 2009 and 2008:

	December 31,
	2009		2008
	(dollars expressed in thousands)
One-to-four family residential real estate:
Non-Mortgage Division portfolio	$	332,653		455,545
Mortgage Division portfolio, excluding Florida		340,201		427,821
Florida portfolio		179,985		239,906
Home equity portfolio		426,327		430,094
Total	$	1,279,166		1,553,366

Our Non-Mortgage Division portfolio consists of prime mortgage loans originated to customers from our retail branch banking network. As of December 31, 2009, approximately $13.5 million, or 4.1%, of this portfolio is on nonaccrual status. The decrease in this portfolio of $122.9 million, or 27.0%, during 2009 is primarily attributable to prepayments associated with the mortgage refinance environment throughout 2009 and the reclassification of $6.8 million and $3.8 million of certain of our Chicago and Texas region loans, respectively, to assets of discontinued operations at December 31, 2009.

Our Mortgage Division portfolio, excluding Florida, consists of both prime mortgage loans and Alt A and sub-prime mortgage loans that were originated prior to our discontinuation of these loan products in 2007. We continue to experience significant distress within this portfolio of loans and recorded loan charge-offs of $41.1 million on this portfolio during 2009. As of December 31, 2009, approximately $81.3 million, or 23.9%, of this portfolio is considered nonperforming, consisting of restructured loans of $17.7 million and nonaccrual loans of $63.7 million.

Our Florida portfolio was acquired in the CFHI acquisition and consists primarily of prime and Alt A mortgage loans. We incurred net charge-offs of $27.5 million on this portfolio in 2009. As of December 31, 2009, approximately $38.7 million, or 21.5%, of this portfolio is considered nonperforming, consisting of restructured loans of $7.9 million and nonaccrual loans of $30.8 million.

Our home equity portfolio consists of prime loans originated to customers from our retail branch banking network. As of December 31, 2009, approximately 1.0% of this portfolio is on nonaccrual status;

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Ø A decrease of $293.2 million in our commercial real estate portfolio primarily attributable to the reclassification of $189.0 million and $36.0 million of certain of our Chicago and Texas region loans, respectively, to assets of discontinued operations at December 31, 2009, loan charge-offs of $40.3 million and our efforts to reduce our exposure to commercial real estate in the current economic environment, partially offset by transfers of loans from real estate construction and development to commercial real estate upon completion of the construction and development and to multi-family residential real estate upon completion of the construction of the underlying projects related to such loans; and

Ø A decrease of $22.0 million in our consumer and installment portfolio, net of unearned discount, reflecting the reclassification of $2.7 million and $615,000 of certain of our Chicago and Texas region loans, respectively, to assets of discontinued operations at December 31, 2009, loan charge-offs of $1.4 million, and portfolio runoff associated with a decline in internal production and reduced loan demand within our markets.

These decreases were partially offset by:

Ø An increase of $2.6 million in our multi-family residential real estate portfolio primarily attributable to transfers of loans from real estate construction and development to multi-family residential real estate upon completion of the construction of the underlying projects related to such loans, partially offset by the reclassification of $5.5 million and $1.1 million of certain of our Chicago and Texas region loans, respectively, to assets of discontinued operations at December 31, 2009; and

Ø An increase of $4.0 million in our loans held for sale portfolio primarily resulting from the timing of loan originations and subsequent sales in the secondary mortgage and small business markets.

We attribute the net decrease in our loan portfolio in 2008 primarily to:

Ø A decrease of $569.0 million in our real estate construction and development portfolio primarily attributable to loan charge-offs of $236.7 million, transfers to other real estate and payments;

Ø A decrease of $49.2 million in our one-to-four family residential real estate loan portfolio primarily attributable to charge-offs of $67.2 million, transfers to other real estate, payments and the sale of approximately $24.0 million of one-to-four family residential real estate loans in April 2008, partially offset by an increase in our home equity loan portfolio of $81.2 million; and

Ø A decrease of $27.4 million in our loans held for sale portfolio primarily resulting from the timing of loan originations and subsequent sales in the secondary mortgage market.

These decreases were partially offset by:

Ø An increase of $193.4 million in our commercial, financial and agricultural portfolio primarily attributable to internal loan production growth, consistent with our strategy of decreasing our exposure to real estate, specifically real estate construction and development, in the current economic environment, and focusing on expanding this segment of our loan portfolio;

Ø An increase of $43.2 million in our multi-family residential real estate portfolio attributable to internal loan production growth; and

Ø An increase of $131.1 million in our commercial real estate loan portfolio primarily due to internal loan production growth.

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Nonperforming Assets. 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,
	2009			2008			2007			2006			2005
	(dollars expressed in thousands)
Commercial, financial and agricultural:
Nonaccrual	$	41,408			40,647			5,916			9,879			4,948
Restructured terms		18,864			—			—			—			—
Real estate construction and development:
Nonaccrual		407,077			270,444			151,812			13,344			11,137
Real estate mortgage:
One-to-four family residential loans:
Nonaccrual		112,236			83,140			32,931			18,885			9,576
Restructured terms		25,558			24,641			7			9			10
Multi-family residential loans:
Nonaccrual		14,734			545			—			272			740
Commercial real estate loans:
Nonaccrual		115,312			23,009			11,294			6,260			70,625
Consumer and installment:
Nonaccrual		337			—			263			81			160
Total nonperforming loans		735,526			442,426			202,223			48,730			97,196
Other real estate		125,226			91,524			11,225			6,433			2,025
Total nonperforming assets	$	860,752			533,950			213,448			55,163			99,221
Loans, net of unearned discount	$	6,608,293			8,592,975			8,886,184			7,671,768			7,025,587
Loans past due 90 days or more and still accruing	$	3,807			7,094			26,753			5,653			5,576
Ratio of:
Allowance for loan losses to loans		4.03	%		2.56	%		1.89	%		1.90	%		1.93	%
Nonperforming loans to loans		11.13			5.15			2.28			0.64			1.38
Allowance for loan losses to nonperforming loans		36.23			49.77			83.27			299.05			139.23
Nonperforming assets to loans and other real estate		12.78			6.15			2.40			0.72			1.41

Nonperforming loans, consisting of loans on nonaccrual status and restructured loans, were $735.5 million, $442.4 million and $202.2 million at December 31, 2009, 2008 and 2007, respectively. Other real estate owned was $125.2 million, $91.5 million and $11.2 million at December 31, 2009, 2008 and 2007, respectively. Our nonperforming assets, consisting of nonperforming loans and other real estate owned, were $860.8 million, $534.0 million and $213.4 million at December 31, 2009, 2008 and 2007, respectively. Our nonperforming assets at December 31, 2009 included $12.7 million of nonaccrual loans and $43.6 million of other real estate owned, or $56.3 million of nonperforming assets, in aggregate, held by FB Holdings, a subsidiary of First Bank which is 46.77% owned by FCA, an affiliated entity. As such, FCA owned approximately 6. 5% of our nonperforming assets at December 31, 2009.

Nonperforming assets at December 31, 2009 increased $326.8 million, or 61.2%, from nonperforming assets at December 31, 2008. We attribute the $326.8 million net increase in our nonperforming assets during the year ended December 31, 2009 to the following:

Ø An increase in nonaccrual loans of $761,000 in our commercial, financial and agricultural portfolio. At December 31, 2009, approximately 2.4% of this portfolio is on nonaccrual status;

Ø An increase in commercial, financial and agricultural restructured loans to $18.9 million at December 31, 2009 due to a single credit relationship in our FBBC subsidiary that was considered a troubled debt restructuring. There were no restructured loans in this portfolio as of December 31, 2008;

Ø An increase in nonaccrual loans of $136.6 million in our real estate construction and development loan portfolio driven by asset quality deterioration within this portfolio, including loans with an aggregate balance of $116.9 million to a single borrower in addition to a single loan of $63.8 million to a separate borrower being placed on nonaccrual status in our Southern California region during 2009, partially offset by charge-offs of $122.3 million and transfers to other real estate. We continue to experience deterioration in our real estate construction and development portfolio as a result of weak economic conditions and significant declines in real estate values and we expect these trends to continue until market conditions stabilize, both on a nationwide basis and in our primary market areas;

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Ø An increase in nonaccrual loans of $29.1 million in our one-to-four family residential real estate loan portfolio primarily driven by current market conditions and the overall deterioration of Alt A and sub-prime residential mortgage loan products experienced throughout the mortgage banking industry. Our one-to-four family residential nonaccrual loans in our Mortgage Banking division, excluding Florida, increased $25.2 million, from $38.5 million at December 31, 2008 to $63.7 million at December 31, 2009. Our one-to-four family residential nonaccrual loans in our Florida region increased $109,000, from $30.7 million at December 31, 2008 to $30.8 million at December 31, 2009. The remaining increase of $3.8 million occurred in our Non-Mortgage division portfolio;

Ø An increase in one-to-four family restructured loans of $917,000 to $25.6 million at December 31, 2009, consisting of total restructured loans of $32.2 million, partially offset by $6.7 million of restructured loans classified as nonaccrual in the one-to-four family residential real estate loan category. Restructured loans (not classified as nonaccrual) within our Mortgage Banking division and Florida region were $17.7 million and $7.9 million, respectively, at December 31, 2009. Throughout 2008 and 2009, certain one-to-four family residential mortgage loans in our Florida region and Mortgage Banking division, primarily located in California, were restructured, whereby the contractual interest rate was reduced over a certain time period due to concentrated efforts to work with borrowers to facilitate appropriate loan terms in light of ongoing market conditions and individual borrower circumstances. As of December 31, 2009, we had total one-to-four family restructured loans of $32.2 million, of which $6.7 million, or 20.7%, were on nonaccrual status and $3.5 million, or 11.0%, were delinquent. As such, 31.7% of our restructured loans within this loan portfolio segment were delinquent or on nonaccrual status at December 31, 2009. As further described under “Business —Strategy,” we are also participating in HAMP where deemed economically advantageous to our borrowers and us. We expect the first modifications under HAMP to be completed in the first quarter of 2010 and accelerate throughout the remainder of 2010;

Ø An increase in nonaccrual loans of $14.2 million in our multi-family residential loan portfolio primarily driven by continued weak economic conditions and significant declines in real estate values. At December 31, 2009, approximately 6.6% of this portfolio is on nonaccrual status;

Ø An increase in nonaccrual loans of $92.3 million in our commercial real estate portfolio primarily driven by continued weak economic conditions and significant declines in real estate values. At December 31, 2009, approximately 5.1% of this portfolio is on nonaccrual status. Our commercial real estate portfolio of $2.27 billion is approximately 50.5% owner occupied and 49.5% non-owner occupied at December 31, 2009, and approximately 3.9% and 6.5% of our owner occupied and non-owner occupied commercial real estate portfolio, respectively, is on nonaccrual status at December 31, 2009; and

Ø An increase in other real estate of $33.7 million primarily driven by foreclosures of real estate construction and development loans throughout 2009, partially offset by write-downs of other real estate of $37.4 million during 2009 attributable to declining real estate values and sales of other real estate properties of $66.7 million.

We attribute the $320.5 million net increase in our nonperforming assets during the year ended December 31, 2008 to the following:

Ø An increase in nonaccrual loans of $118.6 million in our real estate construction and development loan portfolio primarily resulting from an overall increase in nonaccrual loans throughout our markets, as demonstrated in the table above, partially offset by net loan charge-offs of $236.7 million and transfers to other real estate;

Ø An increase in nonaccrual loans of $50.2 million in our one-to-four family residential real estate loan portfolio primarily driven by current market conditions and the overall deterioration of Alt A and sub-prime residential mortgage loan products experienced throughout the mortgage banking industry. Our one-to-four family residential nonaccrual loans in our mortgage banking division, excluding Florida, increased $18.1 million, from $20.3 million at December 31, 2007 to $38.5 million at December 31, 2008. Our one-to-four family residential nonaccrual loans in our Florida region increased $23.3 million, from $7.4 million at December 31, 2007 to $30.7 million at December 31, 2008. The remaining increase of $8.8 million occurred in our non-mortgage division portfolio;

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Ø An increase in one-to-four family restructured loans of $24.6 million, consisting of total restructured loans of $28.6 million, partially offset by $3.9 million of restructured loans classified as nonaccrual in the one-to-four family residential real estate loan category. At December 31, 2008, restructured loans in our mortgage banking division and Florida region were $17.7 million and $7.0 million, respectively. Throughout 2008, certain one-to-four family residential mortgage loans in our Florida region and mortgage banking division, primarily located in California, were restructured, whereby the contractual interest rate was reduced over a certain time period due to concentrated efforts to work with borrowers. At the time of the restructuring, the individual loans were in full compliance with the terms of the original loan contracts. As of December 31, 2008, we had total restructured loans of $28.6 mill ion, of which $3.9 million, or 13.7%, were nonaccrual and $3.9 million, or 13.7% were delinquent. As such, 27.4% of our restructured loans were delinquent or on nonaccrual status at December 31, 2008;

Ø An increase in nonaccrual loans of $34.7 million in our commercial, financial and agricultural portfolio primarily driven by a single credit in our FBBC subsidiary of $24.5 million; and

Ø An increase in other real estate of $80.3 million primarily driven by foreclosures of real estate construction and development loans.

We expect the declining and unstable market conditions associated with our one-to-four family residential mortgage portfolio, our real estate construction and development portfolio and our commercial real estate portfolio to continue, which will likely continue to impact the overall level of our nonperforming loans, loan charge-offs and provision for loan losses and other real estate balances associated with these segments of our loan portfolio.

The following table summarizes the composition of our nonperforming assets by region / business segment at December 31, 2009 and 2008:

	December 31,
	2009		2008
	(dollars expressed in thousands)
Mortgage Division, excluding Florida	$	88,435		67,592
Florida		68,667		81,303
Northern California		63,528		104,865
Southern California		265,794		81,767
Chicago		119,436		52,058
Missouri		112,837		62,604
Texas		78,389		37,844
First Bank Business Capital, Inc.		21,954		24,501
Northern and Southern Illinois		21,807		11,754
Other		19,905		9,662
Total nonperforming assets	$	860,752		533,950

The decrease in the Florida and Northern California regions is primarily due to charge-offs of real estate construction and development loans and sales and write-downs of other real estate throughout 2009. The increase in the Southern California region is primarily attributable to loans with an aggregate balance of $116.9 million to a single borrower in addition to a $63.8 million single loan to a separate borrower being placed on nonaccrual status during 2009. The increase in the Chicago and Missouri regions is primarily due to increases in nonaccrual real estate construction and development and commercial real estate loans throughout 2009. The increase in the Texas region is primarily due to increases in nonaccrual construction and development and commercial and industrial loans throughout 2009.

Loans past due 90 days or more and still accruing interest were $3.8 million and $7.1 million at December 31, 2009 and 2008, respectively. Under our loan policy, loans are placed on nonaccrual status once principal or interest payments become 90 days past due. However, individual loan officers may submit written requests for approval to continue the accrual of interest on loans that become 90 days past due. These requests may 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 then placed on nonaccrual status.

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Potential Problem Loans.As of December 31, 2009 and 2008, $323.7 million and $224.1 million, respectively, of loans not included in the nonperforming assets table above were identified by management as having potential credit problems, or potential problem loans. The following table presents the categories of potential problem loans as of December 31, 2009 and 2008:

	2009		2008
	(dollars expressed in thousands)
Commercial, financial and agricultural	$	98,841		67,164
Real estate construction and development		134,939		99,207
Real estate mortgage:
One-to-four family residential		2,699		1,398
Multi-family residential		11,085		12,810
Commercial real estate		76,160		43,473
Total potential problem loans	$	323,724		224,052

The increase in the level of potential problem loans during 2009 reflects continued weak economic conditions in the nationwide housing markets, increasing unemployment rates and ongoing significant declines in real estate values in all of our markets.

The following table summarizes the composition of our potential problem loans by region / business segment at December 31, 2009 and 2008:

	2009		2008
	(dollars expressed in thousands)
Florida	$	2,414		2,790
Northern California		62,002		36,450
Southern California		68,256		11,653
Chicago		21,197		11,757
Missouri		114,665		75,318
Texas		24,947		44,071
First Bank Business Capital, Inc.		—		7,914
Northern and Southern Illinois		20,094		28,436
Other		10,149		5,663
Total potential problem loans	$	323,724		224,052

We have experienced significant increases in potential problem loans in Northern and Southern California, Chicago and Missouri as a result of continued weak economic conditions in the nationwide housing markets, increasing unemployment rates and ongoing significant declines in real estate values in these markets. The decline in potential problem loans in Texas, FBBC and Northern and Southern Illinois is primarily due to migration to nonperforming status during 2009.

Our credit risk management policies and procedures, as further described under “—Allowance for Loan Losses,” focus on identifying potential problem loans. Potential problem loans may be identified by the assigned lender, the credit administration department or the internal credit review department. Specifically, the originating loan officers have primary responsibility for monitoring and overseeing their respective credit relationships, including, but not limited to: (a) periodic reviews of financial statements; (b) periodic site visits to inspect and evaluate loan collateral; (c) ongoing communication with primary borrower representatives; and (d) appropriately monitoring and adjusting the risk rating of the respective credit relationships should ongoing conditions or circumstances associated with the relation ship warrant such adjustments. In addition, in the current severely weakened economic environment, our credit administration department and our internal credit review department are reviewing all loans with credit exposure over certain thresholds in loan portfolio segments in which we, or other financial institutions, have experienced significant loan charge-offs, such as real estate construction and development and one-to-four family residential real estate loans, and on loan portfolio segments that appear to be most likely to generate additional loan charge-offs in the future, such as commercial real estate. We include adversely rated credits, including potential problem loans, on our monthly loan watch list. Loans on our watch list require regular detailed loan status reports prepared by the responsible officer which are discussed in formal meetings with internal credit review and credit administration staff members that are generally conducted on a quarterly basis. The primary purpose of these meetings i s to closely monitor these loan relationships and further develop, modify and oversee appropriate action plans with respect to the ultimate and timely resolution of the individual loan relationships.

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Each loan is assigned an FDIC collateral code at the time of origination which provides management with information regarding the nature and type of the underlying collateral supporting all individual loans, including potential problem loans. Upon identification of a potential problem loan, management makes a determination of the value of the underlying collateral via a third party appraisal and/or an assessment of value from our internal appraisal review department. The estimated value of the underlying collateral is a significant factor in the risk rating and allowance for loan losses allocation assigned to potential problem loans.

Potential problem loans are regularly evaluated for impaired loan status by lenders, the credit administration department and the internal credit review department. When management makes the determination that a loan should be considered impaired, an initial specific reserve is allocated to the impaired loan, if necessary, until the loan is charged down to the appraised value of the underlying collateral, typically within 30 to 90 days of becoming impaired. In the current economic environment, management typically utilizes appraisals performed no earlier than 180 days prior to the charge-off, and in most cases, appraisals utilized are dated within 60 days of the charge-off. As such, management typically addresses collateral shortfalls through charge-offs as opposed to recording specific reserves on individual loans. Once a loan is charged down to the appraised value of the underlying collateral, management regularly monitors the carrying value of the loan for any additional deterioration and records additional reserves or charge-offs as necessary. As a general guideline, management orders new appraisals on any impaired loan or other real estate property in which the most recent appraisal is more than 18 months old; however, management also orders new appraisals on impaired loans or other real estate properties in the event circumstances, such as a rapid change in market conditions in a particular region, change.

We continue our efforts to reduce nonperforming and potential problem loans and re-define our overall strategy and business plans with respect to our loan portfolio as deemed necessary in light of ongoing and dramatic changes in market conditions in the markets in which we operate.

Allowance for Loan Losses. Our allowance for loan losses as a percentage of loans, net of unearned discount, was 4.03%, 2.56% and 1.89% at December 31, 2009, 2008 and 2007, respectively. Our allowance for loan losses as a percentage of nonperforming loans was 36.23%, 49.77% and 83.27% at December 31, 2009, 2008 and 2007, respectively. Our allowance for loan losses increased to $266.4 million at December 31, 2009, compared to $220.2 million and $168.4 million at December 31, 2008 and 2007, respectively.

Our allowance for loan losses and allowance for loan losses as a percentage of loans, net of unearned discount, have increased throughout 2009. The increase in the allowance for loan losses and the allowance for loan losses as a percentage of loans, net of unearned discount, is primarily attributable to the following:

Ø The downward migration of performing loans to more severe risk ratings that carry a higher reserve allocation, including the risk rating for potential problem loans. The Company has adjusted the risk ratings on loans across all commercial loan types, resulting in higher allowance for loan losses allocations. Specifically, substantially all real estate construction and development loans have migrated downward in risk ratings resulting in increased allowance for loan losses allocations as a result of our charge-off levels within this portfolio segment and declining real estate values throughout our primary markets;

Ø An increase in historical loss ratios used to determine estimated credit losses by loan type as a result of an increase in recent charge-off experience;

Ø The increase in our nonperforming loans. Our nonperforming loans have significantly increased which has generally resulted in a higher allowance for loan losses being specifically applied to these loans; and

Ø An increase in the allowance for loan losses allocation related to our qualitative and environmental factors utilized in our allowance for loan losses calculation resulting from continued asset quality deterioration, declining real estate values, current economic conditions and other factors, including industry data.

During the same time period, our allowance for loan losses as a percentage of nonperforming loans has declined. We record charge-offs on nonperforming loans typically within 30 to 90 days of the credit relationship reaching nonperforming loan status. We measure impairment and the resulting charge-off amount based primarily on third party appraisals. As such, rather than carrying specific reserves on nonperforming loans, which would have the effect of increasing the allowance for loan losses as a percentage of nonperforming loans, we generally recognize a loan loss through a charge to the allowance for loan losses once the credit relationship reaches nonperforming loan status, which has the effect of reducing the allowance for loan losses as a percentage of nonperforming loans.

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The following table is a summary of the changes in the allowance for loan losses for the five years ended December 31, 2009:

	As of or For the Years Ended December 31,
	2009			2008			2007			2006			2005
	(dollars expressed in thousands)
Allowance for loan losses, beginning of year	$	220,214			168,391			145,729			135,330			150,707
Acquired allowances for loan losses		—			—			14,425			5,208			1,989
Allowance for loan losses allocated to loans sold		(4,725	)		—			—			—			—
		215,489			168,391			160,154			140,538			152,696
Loans charged-off:
Commercial, financial and agricultural		(104,648	)		(21,931	)		(13,212	)		(7,512	)		(10,991	)
Real estate construction and development		(122,303	)		(236,715	)		(15,203	)		(6,202	)		(7,838	)
Real estate mortgage:
One-to-four family residential loans		(83,646	)		(67,246	)		(31,849	)		(3,779	)		(3,399	)
Multi-family residential loans		(508	)		(19	)		(76	)		(241	)		—
Commercial real estate loans		(40,255	)		(3,244	)		(3,764	)		(3,635	)		(9,699	)
Consumer and installment		(1,363	)		(1,866	)		(1,390	)		(834	)		(1,196	)
Total		(352,723	)		(331,021	)		(65,494	)		(22,203	)		(33,123	)
Recoveries of loans previously charged-off:
Commercial, financial and agricultural		1,983			7,226			5,176			5,968			12,303
Real estate construction and development		2,065			5,705			307			1,661			1,963
Real estate mortgage:
One-to-four family residential loans		3,531			1,180			864			1,066			1,953
Multi-family residential loans		5			5			9			—			—
Commercial real estate loans		5,843			401			1,588			6,048			2,901
Consumer and installment		255			327			731			651			637
Total		13,682			14,844			8,675			15,394			19,757
Net loans charged-off		(339,041	)		(316,177	)		(56,819	)		(6,809	)		(13,366	)
Provision for loan losses		390,000			368,000			65,056			12,000			(4,000	)
Allowance for loan losses, end of year	$	266,448			220,214			168,391			145,729			135,330
Loans outstanding, net of unearned discount:
Average	$	7,551,574			8,467,418			7,725,597			7,273,017			6,374,178
End of year		6,608,293			8,592,975			8,886,184			7,671,768			7,025,587
End of year, excluding loans held for sale		6,565,609			8,554,255			8,820,105			7,455,441			6,710,453
Ratio of allowance for loan losses to loans outstanding:
Average		3.53	%		2.60	%		2.18	%		2.00	%		2.12	%
End of year		4.03			2.56			1.89			1.90			1.93
End of year, excluding loans held for sale		4.06			2.57			1.91			1.95			2.02
Ratio of net charge-offs to average loans outstanding		4.49			3.73			0.74			0.09			0.21
Ratio of current year recoveries to preceding year’s charge-offs		4.13			22.66			39.07			46.48			39.01

Our net loan charge-offs were $339.0 million, $316.2 million and $56.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. Our net loan charge-offs as a percentage of average loans were 4.49%, 3.73%, and 0.74% for the years ended December 31, 2009, 2008 and 2007, respectively.

We attribute the net increase in our net loan charge-offs in 2009 to the following:

Ø An increase in net loan charge-offs of $88.0 million associated with our commercial, financial and agricultural portfolio to $102.7 million in 2009, compared to $14.7 million in 2008, reflecting declining market conditions within certain sectors of this portfolio in 2009. Specifically in this portfolio, we recorded $18.5 million in aggregate loan charge-offs on a single credit in our FBBC subsidiary during 2009, as well as a $10.7 million loan charge-off on a single credit in our Northern California region that went on nonaccrual status during 2009, and $30.0 million in aggregate loan charge-offs on a single credit in our Southern California region that went on nonaccrual status during 2009;

Ø An increase in net loan charge-offs of $14.0 million associated with our one-to-four family residential loan portfolio to $80.1 million in 2009, compared to $66.1 million in 2008. These net loan charge-offs primarily consist of $41.1 million associated with our one-to-four family residential mortgage portfolio generated by our Mortgage Division, excluding Florida, compared to $43.0 million in 2008, and $27.5 million associated with our Florida one-to-four family residential portfolio, compared to $11.1 million in 2008; and

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Ø An increase in net loan charge-offs of $31.6 million associated with our commercial real estate portfolio to $34.4 million in 2009, compared to $2.8 million in 2008, reflecting declining market conditions in commercial real estate, in particular our non-owner occupied commercial real estate portfolio; partially offset by

Ø A decrease in net loan charge-offs of $110.8 million associated with our real estate construction and development portfolio to $120.2 million in 2009, compared to $231.0 million in 2008. While the volume of net charge-offs within this portfolio decreased during 2009, we continue to experience significant distress and drastically declining market conditions throughout our market areas, resulting in increased developer inventories, slower lot and home sales and significantly declining real estate values.

The following table summarizes the composition of our net loan charge-offs (recoveries) by region / business unit for the years ended December 31, 2009 and 2008:

	For the Years Ended
	December 31,
	2009		2008
	(dollars expressed in thousands)
Mortgage Division, excluding Florida	$	41,059		43,022
Florida		46,118		37,476
Northern California		47,833		126,742
Southern California		83,135		35,417
Chicago		52,238		23,360
Missouri		20,035		30,814
Texas		10,755		9,496
First Bank Business Capital, Inc.		21,519		(281	)
Northern and Southern Illinois		5,065		2,635
Other		11,284		7,496
Total net loan charge-offs	$	339,041		316,177

As shown in the preceding table, while our net loan charge-offs in our Northern California region have declined considerably in 2009 as compared to 2008, other regions / business units have experienced significantly higher net loan charge-offs, particularly Southern California, Chicago and FBBC.

We continue to closely monitor our loan portfolio and address the ongoing challenges posed by the severely weakened economic environment that has directly impacted and continues to impact many of our market segments. Specifically, we continue to focus on loan portfolio segments in which we have experienced significant loan charge-offs, such as real estate construction and development and one-to-four family residential, and on loan portfolio segments that could generate additional loan charge-offs in the future, such as commercial real estate and commercial and industrial. We consider these factors in our overall assessment of the adequacy of our allowance for loan losses.

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 the rating of all loans at the time they are originated or acquired, 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 the ratings of the homogeneous loans based on payment experience subsequent to their origination.

We include adversely rated credits, including loans requiring close monitoring that would not normally be considered classified credits by our 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. Loans may also be added to our watch list whenever any adverse circumstance is detected which might affect the borrower’s ability to comply with the contractual 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 t he 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.

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Each month, the credit administration department provides management with detailed lists of loans on the watch list and summaries of the entire loan portfolio by risk rating. These are coupled with analyses of changes in the risk profile of the portfolio, changes in past-due and nonperforming loans and changes in watch list and classified loans over time. In this manner, we continually monitor the overall increases or decreases in the level of risk in our loan portfolio. Factors are applied to the loan portfolio for each category of loan risk to determine acceptable levels of allowance for loan losses. Furthermore, management has implemented additional procedures to analyze concentrations in our real estate portfolio in light of current economic and market conditions. These procedures include enhanced reporting to track land, lo t, construction and finished inventory levels within our real estate construction and development portfolio. In addition, a quarterly evaluation of each lending unit is performed based on certain factors, such as lending personnel experience, recent credit reviews, loan concentrations and other factors. Based on this evaluation, changes to the allowance for loan losses may be required due to the perceived risk of particular portfolios. In addition, management exercises a certain degree of judgment in its analysis of the overall adequacy of the allowance for loan losses. In its analysis, management considers the changes in the portfolio, including growth, composition, the ratio of net loans to total assets, and the economic conditions of the regions in which we operate. Based on this quantitative and qualitative analysis, adjustments are made to the allowance for loan losses. Such adjustments are reflected in our consolidated statements of operations.

The allocation of the allowance for loan losses by loan category is a result of the application of our risk rating system augmented by historical loss data by loan type and other qualitative analysis. Consequently, the distribution of the allowance will change from period to period due to the following factors:

Ø Changes in the aggregate loan balances by loan category;

Ø Changes in the identified risk in individual loans in our loan 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;

Ø Changes in historical loss data as a result of recent charge-off experience by loan type; and

Ø Changes in qualitative factors such as changes in economic conditions, the volume of nonaccrual and potential problem loans by loan category and geographical location and changes in the value of the underlying collateral for collateral-dependent loans.

The following table is a summary of the allocation of the allowance for loan losses for the five years ended December 31, 2009:

	2009					2008					2007					2006					2005
	Amount		Percent of Category of Loans to Total Loans			Amount		Percent of Category of Loans to Total Loans			Amount		Percent of Category of Loans to Total Loans			Amount		Percent of Category of Loans to Total Loans			Amount		Percent of Category of Loans to TotalLoans
	(dollars expressed in thousands)
Commercial, financial and agricultural	$	42,533		25.62		$	56,592		29.97	%	$	41,513		26.81	%	$	48,060		25.22	%	$	39,560		23.05	%
Real estate construction and development		90,006		15.93			72,840		18.30			67,034		24.10			40,410		23.89			32,638		22.27
Real estate mortgage:
One-to-four family residential loans		78,593		19.36			37,742		18.08			16,312		18.03			13,308		16.56			10,526		17.28
Multi-family residential loans		5,108		3.38			4,243		2.56			2,983		2.00			95		1.84			67		2.04
Commercial real estate loans		49,189		34.34			47,663		29.82			39,634		27.36			41,833		28.72			51,199		30.06
Consumer and installment		1,019		0.73			342		0.82			835		0.96			1,035		0.95			757		0.81
Loans held for sale		—		0.64			792		0.45			80		0.74			988		2.82			583		4.49
Total	$	266,448		100.00	%	$	220,214		100.00	%	$	168,391		100.00	%	$	145,729		100.00	%	$	135,330		100.00	%

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A summary of the allowance for loan losses to loans by category as of December 31, 2009 and 2008 is as follows:

	December 31,
	2009			2008
Commercial, financial and agricultural		2.51	%		2.20	%
Real estate construction and development		8.55			4.63
Real estate mortgage:
One-to-four family residential loans		6.14			2.43
Multi-family residential loans		2.29			1.93
Commercial real estate loans		2.17			1.86
Consumer and installment		2.11			0.49
Loans held for sale		—			2.05
Total		4.03			2.56

As demonstrated in the above table, the allowance for loan losses as a percentage of loans by category has increased for all categories with the exception of loans held for sale. The significant increase in the allocation percentages for real estate construction and development and one-to-four family residential is primarily reflective of increases in historical loss data as a result of recent charge-off experience and changes in qualitative factors such as changes in economic conditions, the volume of nonaccrual and potential problem loans and changes in the value of the underlying collateral for collateral-dependent loans. The increase in the allocation percentages for commercial, financial and agricultural, multi-family residential, commercial real estate and consumer and installment is also reflective of increasing historica l loss data as a result of recent charge-off experience and changes in certain qualitative factors. The decrease in the allocation percentage for loans held for sale is primarily due to a change in the mix of the composition of loans held for sale. In previous periods, small business loans represented a larger percentage of the balance. At December 31, 2009, no allowance for loan losses allocation was needed due to all loans being carried at lower of cost or market.

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 ended December 31, 2009, 2008 and 2007, and the weighted average interest rates on each category of deposits:

	Year Ended December 31,
	2009								2008								2007
	Amount		Percent of Deposits			Rate			Amount		Percent of Deposits			Rate			Amount		Percent of Deposits			Rate
	(dollars expressed in thousands)
Noninterest-bearing demand deposits	$	1,155,045		16.5			—	%	$	1,045,264		14.8	%		—	%	$	1,037,514		15.4	%		—	%
Interest-bearing demand deposits		873,747		12.5			0.19			869,710		12.3			0.55			845,857		12.6			0.84
Savings and money market deposits		2,311,600		33.1			1.05			2,292,470		32.4			2.06			2,085,753		31.0			2.98
Time deposits		2,647,986		37.9			2.91			2,862,973		40.5			3.77			2,752,781		41.0			4.72
Total average deposits	$	6,988,378		100.0	%				$	7,070,417		100.0	%				$	6,721,905		100.0	%

Capital and Dividends

On December 31, 2008, First Banks issued: (a) 295,400 shares of Class C Fixed Rate Cumulative Perpetual Preferred Stock, par value $1.00 per share, and liquidation preference of $1,000.00 per share; and (b) 14,770 shares of Class D Fixed Rate Cumulative Perpetual Preferred Stock, par value $1.00 per share, and liquidation preference of $1,000.00 per share, to the U.S. Treasury pursuant to First Banks’ participation in the CPP program, as further described in “Item 1 —Business – Ownership Structure” and in Note 18 to our consolidated financial statements. The Class C and Class D cumulative perpetual preferred stock qualify as Tier 1 capital. Dividends on our Class C and Class D cumulative perpetual preferred stock, which currently carry annual dividend rates of 5.00% and 9.00%, respectively, were pay able quarterly, beginning in February 2009.

The redemption of any of our preferred stock requires the prior approval of the Federal Reserve. As previously discussed under “Item 1 —Supervision and Regulation – Regulatory Matters,” under the terms of an Agreement with the FRB, we have agreed, among other things, not to declare and pay any dividends on our common or preferred stock or to make any distributions of interest, or other sums, on our trust preferred securities without the prior approval of the FRB.

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On August 10, 2009, we announced the deferral of our regularly scheduled interest payments on our outstanding junior subordinated notes relating to First Banks’ $345.0 million of trust preferred securities beginning with the regularly scheduled quarterly interest payments that would otherwise have been made in September and October 2009, as further described in Note 18 to the consolidated financial statements. During the deferral period, we may not, among other things and with limited exceptions, pay cash dividends on or repurchase our common stock or preferred stock nor make any payment on outstanding debt obligations that rank equally with or junior to the junior subordinated notes. Accordingly, we also suspended the payment of cash dividends on our outstanding common stock and preferred stock beginning with the regularl y scheduled quarterly dividend payments on the preferred stock that would otherwise have been made in August and September 2009.

Prior to August 10, 2009, we declared and paid $6.0 million of dividend payments on our Class C and Class D Preferred Stock. We subsequently declared and deferred an additional $8.0 million of regularly scheduled dividend payments on our Class C and Class D Preferred Stock and, in conjunction with these deferred dividend payments, we also declared and accrued an additional $109,000 of cumulative dividends on our deferred dividend payments for the year ended December 31, 2009.

Effective August 10, 2009, we also suspended the declaration of dividends on our Class A Convertible, Adjustable Rate Preferred Stock and our Class B Adjustable Rate Preferred Stock. Prior to that time, we declared and paid relatively small dividends on our Class A and Class B preferred stock, totaling $328,000, $786,000 and $786,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

As of December 31, 2009, we were categorized as “undercapitalized,” and First Bank was categorized as “well capitalized,” as defined in regulations adopted pursuant to the FDIC Improvement Act of 1991. As of December 31, 2008, 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 further described in Note 21 to our consolidated financial statements, at December 31, 2009, First Bank’s Tier 1 capital ratio was 9.11%, or approximately $159.6 million over the minimum level required under the terms of the informal agreement with the MDOF. As previously discussed under “Item 1 ̵ 2;Business – Recent Developments,” we believe the successful completion of our Capital Plan, which was initiated in 2008 to, among other things, preserve our risk-based capital in the current and continuing economic downturn, would substantially improve our capital position; however, the successful completion of all or any portion of our Capital Plan is not assured, and no assurance can be made that we will be able to successfully complete all, or any portion of our Capital Plan, or that our Capital Plan will not be materially modified in the future.

As of December 31, 2009, we had 13 affiliated Delaware or Connecticut 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.

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, 2009, is as follows:

Name of Trust	Date of Trust Formation	Type of Offering	Interest Rate			Preferred Securities		Subordinated Debentures
First Preferred Capital Trust IV	January 2003	Publicly Underwritten		8.15	%	$	46,000,000	$	47,422,700
First Bank Statutory Trust	March 2003	Private Placement		8.10	%		25,000,000		25,774,000
First Bank Statutory Trust II	September 2004	Private Placement	Variable				20,000,000		20,619,000
Royal Oaks Capital Trust I	October 2004	Private Placement	Variable				4,000,000		4,124,000
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
First Bank Statutory Trust V	April 2006	Private Placement	Variable				20,000,000		20,619,000
First Bank Statutory Trust VI	June 2006	Private Placement	Variable				25,000,000		25,774,000
First Bank Statutory Trust VII	December 2006	Private Placement	Variable				50,000,000		51,547,000
First Bank Statutory Trust VIII	February 2007	Private Placement	Variable				25,000,000		25,774,000
First Bank Statutory Trust X	August 2007	Private Placement	Variable				15,000,000		15,464,000
First Bank Statutory Trust IX	September 2007	Private Placement	Variable				25,000,000		25,774,000
First Bank Statutory Trust XI	September 2007	Private Placement	Variable				10,000,000		10,310,000

For regulatory reporting purposes, the trust preferred securities are eligible for inclusion, subject to certain limitations, in our Tier 1 and Tier 2 capital. Because of these limitations, as of December 31, 2009, $204.5 million of trust preferred securities were not eligible for inclusion in our Tier 1 capital. All of the $204.5 million not eligible for inclusion in our Tier 1 capital was eligible for inclusion in our Tier 2 capital. Effective March 31, 2011, 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 specified core capital elements, as further described in Note 21 to our consolidated financial statements. As such, $263.8 million and $108.3 million of our trust preferred securities would not be eli gible for inclusion in our Tier 1 capital and Tier 2 capital, respectively, if the final rules effective in March 2011 were implemented as of December 31, 2009.

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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, including certificates issued through the CDARS program, borrowing federal funds, selling securities under agreements to repurchase and utilizing borrowings from the FHLB, the FRB and other borrowings. The aggregate funds acquired from these sources were $1.70 billion and $1.83 billion at December 31, 2009 and 2008, respectively.

The following table presents the maturity structure of these other sources of funds, which consist of certificates of deposit of $100,000 or more and other borrowings, at December 31, 2009:

	Certificates of Deposit of $100,000 or More		Other Borrowings		Total
	(dollars expressed in thousands)
Three months or less	$	216,135		47,494		263,629
Over three months through six months		186,478		100,000		286,478
Over six months through twelve months		287,088		100,000		387,088
Over twelve months		241,450		520,000		761,450
Total	$	931,151		767,494		1,698,645

In addition to these sources of funds, First Bank has established a borrowing relationship with the FRB. This borrowing relationship, which is secured primarily by commercial loans, provides an additional liquidity facility that may be utilized for contingency purposes. Advances drawn on First Bank’s established borrowing relationship require the prior approval of the FRB, and First Bank did not have any FRB borrowings outstanding at December 31, 2009. First Bank had FRB borrowings outstanding of $100.0 million at December 31, 2008, as further discussed below.

In addition, First Bank’s borrowing capacity through its relationship with the FHLB was approximately $353.1 million and $911.1 million at December 31, 2009 and 2008, respectively. The borrowing relationship is secured by one-to-four family residential, multi-family residential and commercial real estate loans. First Bank requests advances and/or repays advances from the FHLB based on its current and future projected liquidity needs. We had FHLB advances outstanding of $600.0 million and $200.7 million at December 31, 2009 and 2008, respectively. Standby letters of credit issued by the FHLB on First Bank’s behalf were $81.1 million and $127.1 million at December 31, 2009 and 2008, respectively.

During 2008, First Bank entered into four $100.0 million FHLB advances with maturities of November 2008, January 2009, February 2009 and July 2009 to increase our liquidity in light of uncertain market conditions and increased loan funding needs. In September 2008, we prepaid the $100.0 million FHLB advance that was scheduled to mature in November 2008 and incurred a prepayment penalty of $3,000. In November 2008, we prepaid the $100.0 million FHLB advance that was scheduled to mature in January 2009 and incurred a prepayment penalty of $117,000. We replaced this higher rate FHLB advance with a borrowing of $100.0 million from the FRB with a substantially lower interest rate.

During the first quarter of 2009, funds available from short-term investments were utilized to repay $200.0 million of FHLB advances and the $100.0 million FRB borrowing. In April 2009, we entered into two $100.0 million FHLB advances that mature in April 2010 and April 2011 at fixed interest rates of 1.69% and 1.77%, respectively. We entered into the following FHLB advances during the third quarter of 2009: two $100.0 million FHLB advances in July 2009 that mature in July 2010 and July 2011 at fixed interest rates of 0.85% and 1.49%, respectively; a $100.0 million FHLB advance in August 2009 that matures in August 2012 at a fixed interest rate of 2.20%; and a $100.0 million FHLB advance in September 2009 that matures in September 2016, with a variable interest rate of 0.20% in effect as of December 31, 2009.

First Banks had a borrowing relationship with its affiliated entity, Investors of America, LP, which provided for a $30.0 million secured revolving line of credit to be utilized for general working capital needs and capital investments in subsidiaries. This borrowing relationship matured on June 30, 2009, as further described in Note 11 and Note 19 to our consolidated financial statements. First Banks did not have any balances outstanding on this borrowing arrangement at maturity on June 30, 2009 or December 31, 2008. The Company is currently required to obtain prior approval from the FRB prior to incurring additional debt obligations, in accordance with the provisions of the informal agreements, as further described under “—Supervision and Review – Regulatory Matters.”

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Cash and cash equivalents increased $1.67 billion to $2.52 billion at December 31, 2009, compared to $842.3 million at December 31, 2008. Our loan-to-deposit ratio decreased to 93.5% at December 31, 2009 from 98.3% at December 31, 2008. We supplemented our overall liquidity position during 2009 in anticipation of the expected completion of certain transactions during the first and second quarters of 2010 associated with our Capital Plan, as further described under “—Business – Recent Developments.” These transactions required and will require significant cash outlays upon consummation. The actions we have taken to supplement our overall liquidity position during 2009 included, but were not limited to, the following:

Ø An increase in FHLB advances of $400.0 million as described above;

Ø The sale of certain loans in our asset based lending subsidiary, our premium finance subsidiary and our restaurant franchise loan portfolio in the fourth quarter of 2009, which resulted in cash inflows of approximately $93.2 million, $140.8 million and $62.6 million, respectively, or approximately $296.6 million in aggregate; and

Ø Significant payoffs of certain credit relationships in our loan portfolio.

The sale of our Lawrenceville branch office on January 22, 2010 and our Chicago Region on February 19, 2010 resulted in cash outlays of approximately $8.3 million and $832.5 million, respectively, or $840.8 million in aggregate. The announced sale of our Texas Region, which we expect to complete during the second quarter of 2010, is expected to result in a cash outlay of approximately $355.6 million. As such, approximately $1.20 billion of our short-term investments of $2.37 billion at December 31, 2009 have been or are expected to be utilized in conjunction with the completion of these sale transactions.

We continue to closely monitor our liquidity and implement actions deemed necessary to maintain an appropriate level of liquidity in light of unstable market conditions, changes in loan funding needs, operating and debt service requirements, current deposit trends and events that may occur in conjunction with our Capital Plan. We also continue to seek opportunities to improve our overall liquidity position, including the establishment of a Liquidity Management Committee and an expanded and more efficient collateral management process.

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, 2009 were as follows:

	Less Than 1 Year		1-3 Years		3-5 Years		Over 5 Years		Total (1)
	(dollars expressed in thousands)
Operating leases (2)	$	13,673		22,042		13,363		34,759		83,837
Certificates of deposit(3)		1,919,463		683,398		15,758		189		2,618,808
Other borrowings(3)		247,494		420,000		—		100,000		767,494
Subordinated debentures(4)		—		—		—		353,905		353,905
Preferred stock issued under the CPP (4) (5)		—		—		—		310,170		310,170
Other contractual obligations		786		377		152		5		1,320
Total	$	2,181,416		1,125,817		29,273		799,028		4,135,534

_________________________

(1) Amounts exclude ASC Topic 740 unrecognized tax liabilities of $3.4 million and related accrued interest expense of $1.2 million for which the timing of payment of such liabilities cannot be reasonably estimated as of December 31, 2009.

(2) Amounts exclude operating leases associated with discontinued operations of $2.4 million, $4.3 million, $3.3 million and $6.0 million for less than 1 year, 1-3 years, 3-5 years and over 5 years, respectively, or a total of $16.0 million.

(3) Amounts exclude the related interest expense accrued on these obligations as of December 31, 2009.

(4) Amounts exclude the accrued interest expense on subordinated debentures and the accrued dividends declared on preferred stock issued under the CPP of $6.6 million and $8.2 million, respectively, as of December 31, 2009. As further described under “¾Supervision and Review – Regulatory Matters,” we currently may not make any distributions of interest or other sums on our subordinated debentures and related underlying trust preferred securities without the prior approval of the FRB.

(5) Represents amounts payable upon redemption of the Class C and Class D Preferred Stock issued under the CPP of $295.4 million and $14.8 million, respectively.

We agreed, among other things, not to declare or pay any dividends on our common or preferred stock or make any distributions of interest or other sums on ourtrust preferred securities without the prior approval of the FRB, as previously discussed under “—Supervision and Regulation – Regulatory Matters.”

On August 10, 2009, we announced the deferral of our regularly scheduled interest payments on our outstanding junior subordinated notes relating to our $345.0 million of trust preferred securities beginning with the regularly scheduled quarterly interest payments that would otherwise have been made in September and October 2009. The terms of the junior subordinated notes and the related trust indentures allow us to defer such payments of interest for up to 20 consecutive quarterly periods without default or penalty. During the deferral period, we may not, among other things and with limited exceptions, pay cash dividends on or repurchase our common stock or preferred stock nor make any payment on outstanding debt obligations that rank equally with or junior to our junior subordinated notes. Accordingly, we also suspended the pay ment of cash dividends on our outstanding common stock and preferred stock beginning with the regularly scheduled quarterly dividend payments on our preferred stock that would otherwise have been made in August and September 2009, as further described in Note 18 to the consolidated financial statements.

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On November 12, 2009, the FDIC adopted an NPR that required certain insured institutions to prepay, on December 30, 2009, their estimated quarterly risk-based deposit insurance assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. The FDIC exempted First Bank from the prepayment requirement, as further described under “—Business – Deposit Insurance.” This action does not impact our regularly scheduled quarterly assessments, which will continue to be payable quarterly.

We believe we have sufficient liquidity to meet our current and future near-term liquidity needs; however, no assurance can be made that our liquidity position will not be materially, adversely affected in the future. In addition, our ability to receive future dividends from First Bank to assist us in meeting our operating requirements, both on a short-term and long-term basis, is subject to regulatory approval, as further described above and under “—Supervision and Regulation – Regulatory Matters.”

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 “¾Management’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. Any increases in our allowance for loan losses will result in a decrease in net income and capital, and may have a material adverse effect on our financial condition and results of operations. For further discussion, refer to “¾Loans and Allowance for Loan Losses,” “Item 1A ─ Risk Factors” 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 use d 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 in 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 affecte d derivative may not be offset by changes in the fair value of the underlying hedged asset or liability. For further discussion, refer to “—Effects of New Accounting Standards,” “¾Interest Rate Risk Management” and Note 5 to our consolidated financial statements appearing elsewhere in this report.

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Deferred Tax Assets.  We recognize deferred tax assets 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 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. For further discussion, refer to &# 8220;¾Effects of New Accounting Standards,” “¾Comparison of Results of Operations for 2009 and 2008 – Provision for Income Taxes,” “¾Comparison of Results of Operations for 2008 and 2007 – Provision for Income Taxes,” and Note 1 and Note 13 to our consolidated financial statements appearing elsewhere in this report.

Business Combinations / Goodwill and Other Intangible Assets. The determination of the fair value of the assets and liabilities acquired, 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 in our reported earnings. In addition, we may need to make additional adjustments to the recorded value of our intangible assets, which may impact our reported earnings and directly impacts our regulatory capital levels. For further discussion, refer to “¾Effects of New Accounting Standards” and Note 2, Note 8 and Note 21 to our consolidated financial statements appearing elsewhere in this report.

Our annual impairment testing date for goodwill and other intangible assets is December 31. In addition, a goodwill impairment assessment is performed if an event occurs or circumstances change that would make it more likely than not that the fair value of our single reporting unit is below its carrying value. The goodwill impairment test is a two-step process which requires us to make assumptions regarding fair value. Our policy allows management to make the determination of fair value using internal cash flow models or by engaging independent third parties. The first step consists of estimating the fair value of the reporting unit using a number of factors, including projected future operating results and business plans, economic projections, anticipated future cash flows, discount rates, and comparable marketplace fair value data from within a comparable industry grouping. We compare the estimated fair value of our reporting unit to the carrying value, which includes allocated goodwill. If the estimated fair value is less than the carrying value, the second step is completed to compute the impairment amount by determining the “implied fair value” of goodwill. This determination requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any remaining unallocated fair value represents the “implied fair value” of goodwill, which is compared to the corresponding carrying value to compute the goodwill impairment amount, if any. Although we believe our estimates of fair value are reasonable, many of the factors used in assessing fair value and the allocation of estimated fair value to the assets and liabilities of our reporting unit are outside the control of management, and it is reasonably likely that assumptions and estimates may change in f uture periods. These changes may result in future impairment that may materially affect the carrying value of our assets and our results of operations.

Due to the ongoing uncertainty regarding market conditions, which may continue to negatively impact the performance of our reporting unit, management will continue to monitor the goodwill impairment indicators and evaluate the carrying amount of our goodwill, if necessary. Events and circumstances that could trigger the need for interim impairment testing include:

Ø A significant change in legal factors or in the business climate;

Ø An adverse action or assessment by a regulator;

Ø Unanticipated competition;

Ø A loss of key personnel;

Ø A more-likely-than-not expectation that our reporting unit or a significant portion of our reporting unit will be sold or otherwise disposed of; and

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Ø The testing for recoverability of a significant asset group within a reporting unit.

For further discussion, refer to “Item 1A ─ Risk Factors,” “¾Comparison of Results of Operations for 2009 and 2008 – Noninterest Expense,” and Note 1 and Note 8 to our consolidated financial statements appearing elsewhere in this report.

Effects of New Accounting Standards

In December 2007, the Financial Accounting Standards Board, or FASB, issued SFAS No. 141(R) – Business Combinations, which was subsequently incorporated into ASC Topic 805, “Business Combinations,” which significantly changes how entities apply the acquisition method to business combinations. The most significant changes affecting how entities account for business combinations under ASC Topic 805 include: (a) the acquisition date is the date the acquirer obtains control; (b) all (and only) identifiable assets acquired, liabilities assumed, and noncontrolling interests in the acquiree are stated at fair value on the acquisition date; (c) assets or liabilities arising from noncontractual contingencies are measured at their acquisition date fair value only if it is more likely than not that they meet the definition of an asset or liability on the acquisition date; (d) adjustments subsequently made to the provisional amounts recorded on the acquisition date are made retroactively during a measurement period not to exceed one year; (e) acquisition-related restructuring costs that do not meet the criteria in SFAS No. 146 – Accounting for Costs Associated with Exit or Disposal Activities, which was subsequently incorporated into ASC Topic 420, “Exit or Disposal Cost Obligations,” are expensed as incurred; (f) transaction costs are expensed as incurred; (g) reversals of deferred income tax valuation allowances and income tax contingencies are recognized in earnings subsequent to the measurement period; and (h) the allowance for loan losses of an acquiree is not permitted to be rec ognized by the acquirer. Additionally, ASC Topic 805 requires new and modified disclosures surrounding subsequent changes to acquisition-related contingencies, contingent consideration, noncontrolling interests, acquisition-related transaction costs, fair values and cash flows not expected to be collected for acquired loans, and an enhanced goodwill rollforward. ASC Topic 805 is effective for all business combinations completed on or after January 1, 2009. For business combinations in which the acquisition date was before the effective date, the provisions of ASC Topic 805 apply to the subsequent accounting for deferred income tax valuation allowances and income tax contingencies and will require any changes in those amounts to be recorded in earnings. The adoption of ASC Topic 805 did not have a material impact on our financial condition, results of operations or the disclosures that are presented in our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160 – Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51, which was subsequently incorporated into ASC Topic 810, “Consolidation.” ASC Topic 810 establishes new accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. ASC Topic 810 requires entities to classify noncontrolling interests as a component of stockholders’ equity and requires subsequent changes in ownership interests in a subsidiary to be accounted for as an equity transaction. Additionally, ASC Topic 810 requires entities to recognize a gain or loss upon the loss of control of a subsidiar y and to remeasure any ownership interest retained at fair value on that date. ASC Topic 810 also requires expanded disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. ASC Topic 810 is effective on a prospective basis for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which are required to be applied retrospectively. We implemented ASC Topic 810 on January 1, 2009, which resulted in our noncontrolling interest in subsidiaries of $129.4 million at December 31, 2008 being reclassified from a liability to a component of our stockholders’ equity in our consolidated balance sheets.

In March 2008, the FASB issued SFAS No. 161 – Disclosures about Derivative Instruments and Hedging Activities, an Amendment of SFAS No. 133 – Accounting for Derivative Instruments and Hedging Activities, which was subsequently incorporated into ASC Topic 815, “Derivatives and Hedging.” ASC Topic 815 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC Topic 815 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, r esults of operations and cash flows. To meet those objectives, ASC Topic 815 requires (1) qualitative disclosures about objectives for using derivatives by primary underlying risk exposure and by purpose or strategy (fair value hedge, cash flow hedge, and non-hedges), (2) information about the volume of derivative activity in a flexible format that the preparer believes is the most relevant and practicable, (3) tabular disclosures about balance sheet location and gross fair value amounts of derivative instruments, income statement and other comprehensive income location of gain and loss amounts on derivative instruments by type of contract, and (4) disclosures about credit-risk related contingent features in derivative agreements. ASC Topic 815 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We implemented ASC Topic 815 on January 1, 2009 and the required disclosures are reported in Note 5 to our consolidated financial statements.

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In January 2009, the FASB issued FASB Staff Position, or FSP, SFAS 132(R)-1 – Employers’ Disclosures about Postretirement Benefit Plan Assets, which was subsequently incorporated into ASC Topic 715, “Compensation – Retirement Benefits.” This FSP amends ASC Topic 715 to require additional disclosures by employers about plan assets of a defined benefit pension or other postretirement plan, including more information about how investment allocation decisions are made, more information about major categories of plan assets, including concentrations of risk and fair value measurements, and the fair value techniques and inputs used to measure plan assets. The disclosure requirements under ASC Topic 715 are effective on a prospective basis for years ending after December 15, 2009. We implemented the new disclosures required under ASC Topic 715, which are reported in Note 17 to our consolidated financial statements.

In April 2009, the FASB issued FSP SFAS 157-4– Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, which was subsequently incorporated into ASC Topic 820, “Fair Value Measurements and Disclosures.” ASC Topic 820 affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction, and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the mar ket for that asset is not active. ASC Topic 820 requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence. ASC Topic 820 also amended existing accounting guidance to expand certain disclosure requirements. ASC Topic 820 is effective for interim and annual periods ending after June 15, 2009 and is applied prospectively. We adopted the provisions of ASC Topic 820 during 2009, which did not have a material impact on our consolidated financial statements or the disclosures presented in our consolidated financial statements.

In April 2009, the FASB issued FSP SFAS 115-2 and SFAS 124-2– Recognition and Presentation of Other-Than-Temporary Impairments, which was subsequently incorporated into ASC Topic 320, “Investments – Debt and Equity Securities.” The guidance (i) changes existing guidance for determining whether an impairment is other than temporary to debt securities and (ii) replaces the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. Under ASC Topic 320, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. The guidance is effective for interim and annual periods ending after June 15, 2009 and is applied prospectively. We adopted the provisions of ASC Topic 320 during 2009 which did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP SFAS 107-1 and Accounting Principles Board, or APB, Opinion 28-1 – Interim Disclosures about Fair Value of Financial Instruments, which were subsequently incorporated into ASC Topic 825, “Financial Instruments.” This ASC amends the existing guidance to require an entity to provide disclosures about fair value of financial instruments in interim financial information and to require those disclosures in summarized financial information at interim reporting periods. Under ASC Topic 825, a publicly traded company shall include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. In addition, entities must disclose, in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods, the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position, as required by ASC Topic 825. ASC Topic 825 is effective for interim periods ending after June 15, 2009 and is applied prospectively. The interim disclosures required by ASC Topic 825 were reported in the notes to our consolidated financial statements during the second quarter of 2009 and the annual disclosures required by ASC Topic 825 are reported in Note 16 to our consolidated financial statements appearing elsewhere in this report.

In May 2009, the FASB issued SFAS No. 165 – Subsequent Events, which was subsequently incorporated into ASC Topic 855, “Subsequent Events.” ASC Topic 855 incorporates accounting and disclosure requirements related to subsequent events into GAAP, making management directly responsible for subsequent-events accounting and disclosure. ASC Topic 855 sets forth: (a) the period after the balance sheet date during which management shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements; and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. The requirements for subsequent-events accounting and disclosure are not significantly different from those in auditing standards. ASC Topic 855 is effective for interim and annual periods ending after June 15, 2009. We adopted the provisions of ASC Topic 855 in 2009, which did not have a material impact on our consolidated financial statements or the disclosures that are presented in our consolidated financial statements.

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In June 2009, the FASB issued SFAS No. 166– Accounting for Transfers of Financial Assets, an Amendment of SFAS No. 140 – Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which was subsequently incorporated into ASC Topic 860, “Transfers and Servicing.” ASC Topic 860 requires more information about transfers of financial assets, including securitization transactions and where companies have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing fin ancial assets and requires additional disclosures. The guidance is effective for the annual period beginning after November 15, 2009 and for interim periods within the first annual reporting period, and must be applied to transfers occurring on or after the effective date. We are currently evaluating the requirements of ASC Topic 860, which are not expected to have a material impact on our consolidated financial statements or the disclosures presented in our consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167– Amendments to FASB Interpretation No. 46(R). SFAS No. 167 amends FIN 46(R) – Consolidation of Variable Interest Entities, which was subsequently incorporated into ASC Topic 810, “Consolidation,” to change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated, and requires additional disclosures about involvement with variable interest entities, any significant changes in risk exposure due to that involvement and how that involvement a ffects the company’s financial statements. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The guidance is effective for the annual period beginning after November 15, 2009 and for interim periods within the first annual reporting period. We are currently evaluating the requirements of ASC Topic 810, which are not expected to have a material impact our consolidated financial statements or the disclosures presented in our consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168 – The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles, a Replacement of SFAS No. 162 – The Hierarchy of Generally Accepted Accounting Principles, which was subsequently incorporated into ASC Topic 105, “Generally Accepted Accounting Principles.” ASC Topic 105 establishes the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securit ies laws, are also sources of authoritative GAAP for SEC registrants. ASC Topic 105 supersedes all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative. ASC Topic 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We adopted ASC Topic 105 during 2009, which did not have a material impact on our consolidated financial statements or the disclosures presented in our consolidated financial statements.

In August 2009, the FASB issued Accounting Standards Update, or ASU, No. 2009-05 – Fair Value Measurements and Disclosures (ASC Topic 820) – Measuring Liabilities at Fair Value. This ASU clarifies that the fair value of a liability may be determined using the perspective of an investor that holds the related obligation as an asset and addresses practice difficulties caused by the tension between fair-value measurements based on the price that would be paid to transfer a liability to a new obligor and contractual or legal requirements that prevent such transfers from taking place. The ASU is effective for interim and annual periods beginning after August 27, 2009 and applies to all fair-value measurements of liabilities required by GAAP. No new fair value measur ements are required by the ASU. We are currently evaluating the requirements of ASC Topic 820, which are not expected to have a material impact our consolidated financial statements or the disclosures presented in our consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06 – Fair Value Measurements and Disclosures (ASC Topic 820) – Improving Disclosures about Fair Value Measurements. This ASU amends certain disclosure requirements of Subtopic 820-10, providing additional disclosures for transfers in and out of Levels I and II and for activity in Level III and clarifies certain other existing disclosure requirements including the level of disaggregation and disclosures around inputs and valuation techniques. The final amendments of this ASU will be effective for annual or interim periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activity for purchases, sales, issuances, and settlements on a gross basis. This requirement will be effective fo r fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. The amended ASU does not require disclosures for earlier periods presented for comparative purposes at initial adoption. We are currently evaluating the requirements this ASU will have on our financial condition, results of operations and the disclosures presented in our consolidated financial statements.

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Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

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 44 through 47 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.

Item 8.     Financial Statements and Supplementary Data

The financial statements and supplementary data appear on pages 83 through 140 of this report.

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, including our President and Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were 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 su ch term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the President and Chief Executive Officer and the Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in acco rdance with GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and our directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in circumstances or that the degree of compliance with the policies and procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on that assessment, management concluded that, as of December 31, 2009, the Company’s internal control over financial reporting is effective based on the criteria established in COSO’s Internal Control – Integrated Framework.

This annual report does not include an attestation report of the Company’s Independent Registered Public Accounting Firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s Independent Registered Public Accounting Firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

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Item 9B.  Other Information

On March 24, 2010, the Company, SFC and First Bank entered into an Agreement with the FRB, as further described under “Item 1. Business —Recent Developments – Regulatory Matters” and “—Supervision and Regulation – Regulatory Matters” and in Note 1 to our consolidated financial statements, which descriptions are incorporated by reference herein.

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

Board of Directors and Committees of the Board

Our Board of Directors consists of six members. The Board determined that Messrs. Cooper, Steward and Yaeger are independent. Each of our directors identified in the following table was elected to serve a one-year term and until his successor has been duly qualified for office.

Name	Age	Director Since	Principal Occupation(s) During Last Five Years and Directorships of Public Companies
James F. Dierberg	72	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.
Terrance M. McCarthy	55	2003	President and Chief Executive Officer of First Banks, Inc. since April 2007; Senior Executive Vice President and Chief Operating Officer of First Banks, Inc. from August 2002 to March 2007; Chairman of the Board of Directors of First Bank since January 2003; President and Chief Executive Officer of First Bank from August 2002 to June 2007 and since April 22, 2009; Executive Vice President of First Bank from June 2007 to April 22, 2009. The Board and voting shareholders considered these qualifications in addition to his prior service as Chief Operating Officer of the Company and President of First Bank, and his current position and experience with the Company in making a determination that Mr. McCarthy should be a nominee for director of the Company.
Allen H. Blake	67	2008	Director of First Banks, Inc. since December 2008 and from 1988 to March 2007; Director of First Bank since December 2008; Prior to Mr. Blake’s announcement of his retirement and resignation of his positions at First Banks, Inc., effective March 31, 2007, Mr. Blake served in the following positions: President of First Banks, Inc. from October 1999 to March 2007; Chief Executive Officer of First Banks, Inc. from April 2003 to March 2007; and Chief Financial Officer of First Banks, Inc. from 1984 to September 1999 and from May 2001 to August 2005. The Board and voting shareholders considered these qualifications in addition to his significant financial and accounting expertise, prior service as Chief Executive Officer and Chief Financial Officer of the Company and experience with the Company and the banking industry in makin g a determination that Mr. Blake should be a nominee for director of the Company.
James A. Cooper (1)(2)	54	2008	Managing Partner of Thompson Street Capital Partners, a private equity firm with investments in middle-market manufacturing, service and distribution businesses, in St. Louis, Missouri, since 2000. The Board and voting shareholders considered these qualifications in addition to his investment management expertise, financial expertise and stature in the local community in making a determination that Mr. Cooper should be a nominee for director of the Company.

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David L. Steward (1)	58	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, since 1990; Director of Centene Corporation. The Board and voting shareholders considered these qualifications in addition to his significant management expertise and stature in the local community in making a determination that Mr. Steward should be a nominee for director of the Company.
Douglas H. Yaeger (1)(3)	61	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. The Board and voting shareholders considered these qualifications in addition to his financial expertise, public company managerial experience and stature in the local community in making a determination that Mr. Yaeger should be a nominee for director of the Company.

__________________________________

(1) Member of the Audit Committee and Compensation Committee.

(2) Mr. James A. Cooper serves as Chairman of the Compensation Committee.

(3) Mr. Douglas H. Yaeger serves as Chairman of the Audit Committee and the Audit Committee financial expert.

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. 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 25, 2010 were Mr. James A. Cooper, Mr. David L. Steward, and Mr. Douglas H. Yaeger, who serves as the Chairman of the Audit Committee and the Audit Committee Financial Expert.

In accordance with the requirements of the EESA, as amended by the ARRA, the Board of Directors appointed a Compensation Committee on July 23, 2009 comprised solely of directors determined to be independent. The Compensation Committee, governed by a written charter adopted by the Board of Directors, is comprised of Messrs. Cooper, Steward and Yaeger. Mr. Cooper serves as the Chairman of the Compensation Committee. The Compensation Committee oversees the compensation of the executive officers of the Company and reviews compensation and benefit packages and programs for the Company’s employees generally.

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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. 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 Public Company Accounting Oversight Board, or PCAOB, Rule 3526, Communication with Audit Committees Concerning Independence, 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 Independence 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, 2009 for filing with the SEC.

Audit Committee

Douglas H. Yaeger, Chairman of the Audit Committee

James A. Cooper

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 Credit Officer, the Chief Investment Officer, the Senior Vice President – Controller, the Senior Vice President – Director of Taxes, 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. First Banks intends to post on its website at www.fir stbanks.com any amendment to or waiver from any provision in the Code of Ethics for Principal Executive Officers and Financial Professionals that applies to the Chief Executive Officer, Chief Financial Officer, Controller or other person performing similar functions and that relate to any element of the standards enumerated in the SEC rules.

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.”

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Executive Officers

Our executive officers, each of whom was elected to the office(s) indicated by the Board of Directors, as of March 25, 2010, were as follows:

Name	Age	Current First Banks Office(s) Held	Principal Occupation(s) During Last Five Years
James F. Dierberg	72	Chairman of the Board of Directors.	See “Item 10 – Directors, Executive Officers and Corporate Governance – Board of Directors.”
Terrance M. McCarthy	55	President, Chief Executive Officer and Director; Chairman of the Board of Directors, President and Chief Executive Officer of First Bank.	See “Item 10 – Directors, Executive Officers and Corporate Governance – Board of Directors.”
F. Christopher McLaughlin	56	Executive Vice President and Director of Retail Banking; Executive Vice President, Director of Retail Banking and Director of First Bank.	Executive Vice President and Director of Retail Banking of First Banks, Inc. and First Bank since April 2007; Executive Vice President and Director of Sales, Marketing and Products of First Banks, Inc. and First Bank from September 2003 to March 2007; Director of First Bank since October 2004.
Steven H. Reynolds	50	Executive Vice President and Chief Credit Officer; Executive Vice President, Chief Credit Officer and Director of First Bank.	Executive Vice President and Chief Credit Officer of First Banks, Inc. since October 2008; Director of First Bank since January 2009; Executive Vice President and Chief Credit Officer of First Bank since November 2008; Senior Vice President and Acting Chief Credit Officer of First Bank since September 2008; Senior Vice President and Regional Credit Officer of First Bank since April 2008; Regional Senior Credit Officer of Marshall & Ilsley Bank N.A. in St. Louis, Missouri from April 2006 to April 2008; Chief Credit Officer of Missouri State Bank in St. Louis, Missouri from November 2002 to April 2006.
Lisa K. Vansickle	42	Senior Vice President and Chief Financial Officer; Senior Vice President, Secretary and Director of First Bank.	Senior Vice President and Chief Financial Officer of First Banks, Inc. since April 2007; Senior Vice President and Controller of First Banks, Inc. from January 2001 to April 2007; Vice President and Controller of First Banks, Inc. from April 1999 to January 2001; Vice President and Director of Internal Audit from December 1997 to March 1999; Senior Vice President, Secretary and Director of First Bank since July 2001.

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Item 11.  Executive Compensation

Compensation Discussion and Analysis.  The compensation program of First Banks and its affiliates (collectively referred to only in this Item 11 as the “Company”) is reflective of its ownership structure and its participation in the CPP under the EESA. As outlined in the stock ownership table included in “Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” all of our voting stock is owned by various trusts, established by and administered by and for the benefit of Mr. James F. Dierberg, our Chairman of the Board, and members of his immediate family. Therefore, we do not use equity awards in our compensation program. As a participant in the CPP, we are subject to certain corporate governance and executive compensation standards applicable to all CPP participants as required by the ARRA and rules adopted thereunder, as further described below.

Capital Purchase Program – Executive Compensation and Governance Requirements.  As a result of our participation in the CPP, we became subject to certain restrictions on executive compensation set forth in Section 111 of the EESA and the Purchase Agreement entered into by First Banks and the U.S. Treasury. Subsequently, the ARRA was signed into law and included a provision that amended Section 111 of the EESA and directed the U.S. Treasury to establish specified standards on executive compensation and corporate governance. On June 15, 2009, the U.S. Treasury published its Interim Final Rule on TARP Standards for Compensation and Corporate Governance (sometimes referred to as the Interim Final Rule). As amended, Section 111 of the EESA and the Interim Final Rule established the following standards which generally apply to all TARP recipients in the program under TARP, including specifically to First Banks as a result of its participation in the CPP (“CPP Rules”):

Ø A prohibition on paying bonuses, retention awards and incentive compensation, other than pursuant to certain preexisting employment contracts, to our named executive officers identified in Item 10, above (the “Senior Executive Officers” or “SEOs”), and the ten next most highly-compensated employees;

Ø A prohibition on the payment of “golden parachute payments” to our SEOs and the five next most highly compensated employees upon their termination of employment or a change in control of the Company;

Ø A requirement to “clawback” any bonus, retention award or incentive compensation paid to a SEO and any of the twenty (20) next most highly compensated employees if such bonus, retention award, or incentive compensation was based on statements of earnings, revenues, gains or other criteria later found to be materially inaccurate;

Ø A requirement to establish a policy on luxury or excessive expenditures;

Ø A prohibition on deducting more than $500,000 in annual compensation paid to each of the SEOs;

Ø A prohibition on tax gross-ups to the SEOs and the twenty (20) next most highly compensated employees;

Ø A requirement to disclose to the U.S. Treasury any perquisite with a total value for the year in excess of $25,000 paid or provided to a SEO or any of the twenty (20) next most highly compensated employees;

Ø A requirement to disclose to the U.S. Treasury whether the Company, Board or Compensation Committee has retained a compensation consultant and the types of services provided by the consultant and its affiliates, whether or not such services were compensation-related, during the past three (3) years;

Ø A requirement that the Compensation Committee evaluate and review with our senior risk officers at least every six (6) months the SEO compensation plans to limit any features in such plans that would encourage SEOs to take “unnecessary and excessive risks” that could threaten the value of First Banks;

Ø A requirement that the Compensation Committee review at least every six (6) months the Company’s employee compensation plans to identify and eliminate any provisions in such plans that encourage the manipulation of reported earnings to enhance the compensation of any employee;

Ø A requirement that the Compensation Committee evaluate and review with our senior risk officers at least every six (6) months the risks involved in the Company’s employee compensation plans and how to limit the risks posed to First Banks by such plans;

Ø A requirement that the Compensation Committee provide a certification that it has conducted the foregoing reviews; and

Ø A requirement that the Chief Executive Officer and the Chief Financial Officer provide written certifications of compliance with all of the foregoing requirements.

The SEOs for 2009 are the named executive officers identified in First Banks’ Form 10-K for the fiscal year ended December 31, 2008, and are Messrs. Terrance M. McCarthy, Russell L. Goldammer, Robert S. Holmes, Jr., and F. Christopher McLaughlin, and Ms. Lisa K. Vansickle. The SEOs for 2010 are the named executive officers identified in the above Item 10 of this Form 10-K for the fiscal year ended December 31, 2009. The CPP Rules apply during the period in which any of the capital securities issued to the U.S. Treasury remain outstanding.

Compensation Objective.  The objective of our executive compensation policies and practices is to attract and retain talented key executives that will contribute to the achievement of strategic goals and the growth and success of the Company in order to enhance the long-term value of First Banks. Compensation is based upon the achievement of corporate goals and objectives, as established by key corporate executives and reported to the Board of Directors. Rewards for performance are designed to motivate the continued strong performance of key executives on a long-term basis.

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Our executive compensation program is designed to reward the achievement of financial results in accordance with our corporate goals and objectives within the limits of our ownership structure and the CPP Rules. The current elements of our executive compensation program include a base salary and a benefits program including health insurance, 401(k) plan, time away benefits and life insurance which are offered to our employees. Our executive compensation programs are cash-based and do not include any other forms of non-cash compensation. We do not provide the named executive officers with employment contracts or severance agreements, and consequently, we are under no obligation to make additional payments to any of the named executive officers in the event of severance, change in control, retirement or resignation.

The Compensation Committee and management intend to monitor the Company’s overall compensation program to determine what actions may be necessary to continue to fulfill its compensation objectives while complying with the CPP Rules which have effectively eliminated performance based incentives for our SEOs and the ten next most highly compensated employees. Historically, the Company, as a family owned company, has compensated its executive officers conservatively while maintaining key talent without using extravagant compensation packages or perquisites to reward executive officers. The Compensation Committee intends to continue to apply these long-held philosophies in setting future compensation within the limits of the CPP Rules and any other applicable regulations.

Salary.  The base salaries of the executive officers are generally established in March of each year and are dependent upon the evaluation of certain factors and, in part, on subjective considerations. The level of base salaries of executive officers is designed to reward the officer’s performance based upon an evaluation of the following factors:  (i) the performance of the Company and the achievement of corporate goals and objectives, considering general business and industry conditions, among other factors, and the contributions of specific executives towards the overall performance; (ii) each executive officer’s areas of responsibility and the Company’s performance in those areas; and (iii) the level of compensation paid to compara ble executives by other financial institutions of comparable size in the market areas in which we operate to ensure we maintain a competitive compensation package. In 2009, we did not rely upon any peer group comparisons for purposes of establishing base salaries. Our corporate goals and objectives provide particular measurements to which the Board of Directors and executive management assign significance, such as net income, organic and external growth in target market areas, expense control, net interest margin, credit quality, and regulatory examination results. In 2009, these factors were taken into consideration by the Chairman of the Board who, without assigning a specific weight to any particular factor, evaluated the appropriate base salary and related annual salary increases of the President and Chief Executive Officer, and by the Chairman of the Board and certain senior officers, who evaluated the appropriate base salary and related annual salary increases of other executive officers and employees. Following the appointment of the Compensation Committee in July, 2009, such factors will be evaluated by the Compensation Committee. Base salaries of executive officers are reviewed on an ongoing basis and are generally adjusted on an annual basis, and may be further adjusted periodically as a result of significant changes in responsibility, employment market conditions, and other factors.

The challenge for management and the Board of Directors is to motivate, retain and reward key personnel through the current economic environment with compensation tools limited by the CPP Rules while recognizing the Company’s performance. In 2009, the salary of Mr. McCarthy was unchanged and has not been increased since April 2007. Mr. Dierberg ceased receiving a salary in 2008 but receives a fee of $144,000 for serving as Chairman of the Board of Directors. The base salaries of Ms. Vansickle, Mr. McLaughlin and Mr. Reynolds were increased by 17.12%, 4.0% and 8.7%, respectively, due to the significance of their responsibilities in the Company reaching certain goals.

Bonuses.  The CPP Rules now prohibit paying bonuses to the SEOs and the next ten (10) most highly compensated employees, and in compliance with this prohibition the compensation structure for the SEOs and the next ten (10) most highly compensated employees does not contemplate payment of bonuses to the SEOs. The SEOs have not received a bonus since 2007.

Deferred Compensation.  In 2009 and previous years we offered a Nonqualified Deferred Compensation Plan, or NQDC Plan, to the executive officers and other key employees to promote retention by providing a long-term savings opportunity on a tax-deferred basis. The NQDC Plan allows executives to defer payment of a portion of their base salary until a later date. Although the NQDC Plan allows the Company to credit the accounts of any participant with discretionary contributions, no such discretionary contributions have been made since the NQDC Plan’s inception. We have elected to suspend the availability of the NQDC Plan in 2010. If the NQDC Plan is made available in future plan years, the Company will not make any discretionary contributions to the accounts o f the SEOs and the next ten (10) most highly compensated employees during the period the Company is subject to the CPP Rules because such contributions are considered “bonus payments” and therefore prohibited under the CPP Rules.

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The Board of Directors and President and Chief Executive Officer periodically review the various components of our executive compensation programs. Salaries paid, annual bonuses awarded (prior to 2008) and deferred compensation balances for the named executives are further described in the “Summary Compensation Table” and “Nonqualified Deferred Compensation Table” below.

Executive Compensation.  The following table sets forth certain information regarding compensation earned by the named executive officers for the years ended December 31, 2009, 2008 and 2007:

SUMMARY COMPENSATION TABLE

Name and Principal Position(s)	Year	Salary (1)		Bonus (1)		All Other Compensation (2)			Total (1)
James F. Dierberg	2009	$	—		—		145,400	(3)		145,400
Chairman of the Board of Directors	2008		—		—		149,800	(3)		149,800
	2007		610,000		—		9,000			619,000
Terrance M. McCarthy (4)	2009		500,000		—		4,400			504,400
President and	2008		500,000		—		9,200			509,200
Chief Executive Officer	2007		478,000		374,800		9,000			861,800
Lisa K. Vansickle (5)	2009		214,800		—		10,200	(6)		225,000
Senior Vice President and	2008		183,400		—		16,000	(6)		199,400
Chief Financial Officer	2007		174,000		24,000		18,300	(6)		216,300
F. Christopher McLaughlin	2009		245,900		—		2,400			248,300
Executive Vice President and	2008		236,400		—		9,200			245,600
Director of Retail Banking
Steven H. Reynolds	2009		243,300		—		2,300			245,600
Executive Vice President and
Chief Credit Officer

____________________________________

(1) Salary and bonus reported for Mr. McCarthy include amounts deferred in our NQDC Plan, as further described below and in Note 17 to our consolidated financial statements, of $75,000. Salary reported for Ms. Vansickle and Messrs. Dierberg, McLaughlin and Reynolds did not include any amounts deferred in our NQDC Plan. Earnings by the named executives on their NQDC Plan balances did not include any above-market or preferential earnings.

(2) All other compensation reported reflects contributions to our 401(k) Plan, as further described in Note 17 to our consolidated financial statements, with the exception of the amounts reported for Mr. Dierberg and Ms. Vansickle, as further described below.

(3) All other compensation reported for Mr. Dierberg for 2009 and 2008 reflects non-employee director compensation of $144,000 and a contribution to our 401(k) Plan of $1,400 and $5,800, respectively.

(4) Mr. McCarthy became President and Chief Executive Officer of First Banks, Inc. on April 1, 2007.

(5) Ms. Vansickle became Chief Financial Officer of First Banks, Inc. on April 2, 2007.

(6) All other compensation reported for Ms. Vansickle for 2009, 2008 and 2007 reflects a contribution to our 401(k) Plan of $1,800, $5,700 and $8,300, respectively, and the payout of $8,400, $10,300 and $10,000, respectively, of an award previously granted under an incentive plan that Ms. Vansickle participated in prior to the time she became a named executive officer on April 2, 2007. Ms. Vansickle’s participation in that incentive plan terminated at the time she became a named executive officer.

Nonqualified Deferred Compensation. Officers that meet certain position and base salary criteria and non-employee directors are eligible to participate in our NQDC Plan. Participants are allowed to defer, on an annual basis, up to 25% of their salary and up to 100% of their bonus payments, and hypothetically invest in various investment options available in the NQDC Plan that are selected by the participant and may be changed by the participant at any time. These investment options mirror the investment options that we offer through our 401(k) plan and include various investment funds such as equity funds, international stock funds, capital appreciation funds, money market funds, bond funds, mid-cap value funds and growth funds. However, as discussed above, effective in 2010 we have suspended indefinitely the availability of deferrals to the NQDC Plan.

The NQDC Plan allows for us to credit the deferred compensation accounts of any participant with discretionary contributions, however, we have not made any such discretionary contributions under the NQDC Plan since its inception. Any such contributions, if made, would vest over a five-year period. Earnings or losses on participant account balances resulting from the participant’s investment choices are credited or charged to the participant accounts on a monthly basis. We recognize these earnings or losses in our consolidated statements of operations on a monthly basis. In the event of retirement, payment of the vested portion of the participant’s deferred compensation account balance is either made through a single lump sum payment or annual payments over five or ten years, subject to election by the participant. Pa yment of the vested portion of the participant’s deferred compensation account balance is made through a single lump sum payment in the event the participant terminates his or her employment for reasons other than retirement.

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The following table sets forth certain information regarding nonqualified deferred compensation earned by the named executive officers for the year ended December 31, 2009:

NONQUALIFIED DEFERRED COMPENSATION TABLE

Name and Principal Position(s)	Executive Contributions in Last Fiscal Year(1)		Aggregate Earnings in Last Fiscal Year		Aggregate Withdrawals / Distributions in Last Fiscal Year		Aggregate Balance at December 31, 2009
James F. Dierberg	$	—		4,600		—		421,000	(2)
Chairman of the Board of Directors
Terrance M. McCarthy		75,000		139,400		—		713,800	(3)
President and
Chief Executive Officer
Lisa K. Vansickle		—		7,900		—		40,500	(4)
Senior Vice President and
Chief Financial Officer
Steven H. Reynolds		—		1,500		—		14,100	(5)
Executive Vice President and
Chief Credit Officer

______________________

(1) All executive contributions represent the deferral of base salary and/or bonus payments reflected in the “Summary Compensation Table.” We did not make any discretionary contributions under the NQDC Plan as of and for the year ended December 31, 2009.

(2) Of this amount, $305,500 represents deferrals of cash consideration from prior years, all of which were previously reported as compensation in the Company’s previously filed Annual Reports on Form 10-K. The remaining balance represents the cumulative earnings on the original deferred amounts and the participant’s 2009 activity.

(3) Of this amount, $526,100 represents deferrals of cash consideration from prior years, all of which were previously reported as compensation in the Company’s previously filed Annual Reports on Form 10-K. The remaining balance represents the cumulative earnings on the original deferred amounts and the participant’s 2009 activity.

(4) Of this amount, $33,200 represents deferrals of cash consideration from years prior to the participant’s inclusion in the “Summary Compensation Table” in past Annual Reports on Form 10-K, the cumulative earnings on the original deferred amounts and the participant’s 2009 activity.

(5) Of this amount, $12,400 represents deferrals of cash consideration from years prior to the participant’s inclusion in the “Summary Compensation Table” in past Annual Reports on Form 10-K, the cumulative earnings on the original deferred amounts and the participant’s 2009 activity.

Potential Payments Upon Termination. Upon termination of employment, the executive officers will receive payments of their vested portion of the executive’s deferred compensation account balance under our NQDC Plan as described above.

Compensation of Directors. The following table sets forth compensation earned by the named non-employee directors for the year ended December 31, 2009:

DIRECTOR COMPENSATION TABLE

Name	Fees Earned or Paid in Cash		Total
James F. Dierberg	$	144,000		144,000
Allen H. Blake (1)		47,000		47,000
James A. Cooper (2)		41,000		41,000
Gordon A. Gundaker (3)		19,500		19,500
David L. Steward (4)		35,000		35,000
Douglas H. Yaeger(4)(5)		46,000		46,000

_______________________________________

(1) Mr. Blake received fees of $36,000 for First Banks board meetings attended and fees of $11,000 for First Bank board meetings attended.

(2) Mr. Cooper was elected to the Audit Committee effective January 30, 2009.

(3) Mr. Gundaker resigned his positions as a member of the Board of Directors and the Audit Committee, effective July 15, 2009.

(4) Fees paid for Messrs. Steward and Yaeger include payments deferred in our NQDC Plan of $35,000 and $46,000, respectively, or an aggregate of $81,000. Earnings by the directors on their NQDC Plan balances did not include any above-market or preferential earnings.

(5) Mr. Yaeger serves as Chairman of the Audit Committee and the Audit Committee Financial Expert.

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Our executive officers that are also directors do not receive remuneration other than salaries and bonuses for serving on our Board of Directors. Only those directors who are neither our employees nor employees of any of our subsidiaries receive cash remuneration for their services as directors. Mr. Dierberg received an annual fee of $144,000, paid semi-monthly, for his service as Chairman of the Board of Directors during 2009. All other such non-employee directors received a fee of $3,000 for each Board meeting attended and $1,000 for each Audit Committee meeting attended. Mr. Yaeger also received a fee of $1,250 per calendar quarter for his service as Chairman of the Audit Committee. Messrs. Yaeger, Blake, Cooper and Steward also received a fee of $3,750 per calendar quarter as a retainer for their service as members of the Bo ard of Directors. Mr. Blake, as a non-employee Director of First Bank, also received a fee of $1,000 for each monthly Board meeting attended.

Our non-employee directors are also eligible to participate in our NQDC Plan. Our directors do not receive any other compensation, and there are no arrangements for amounts to be paid to directors upon resignation or any other termination of such director or a change in control of the Company. The Audit Committee and the Compensation Committee are currently the only committees of our Board of Directors.

Compensation Committee Interlocks and Insider Participation.  Prior to the Board of Directors’ appointment of the Compensation Committee on July 23, 2009, the Board of Directors, in its entirety, served as the Compensation Committee. During such period, (i) Messrs. Dierberg and McCarthy served as officers and members of the Board of Directors; and (ii) Mr. Blake, a former officer, served as a member of the Board of Directors. In addition, Mr. Steven F. Schepman, a former officer and director, served as an officer and member of the Board of Directors until April 23, 2009.

Following the appointment of the Compensation Committee on July 23, 2009, comprised solely of independent directors, no members of the Compensation Committee were current or former officers or employees of the Company. See further information regarding transactions with related parties in Note 19 to our consolidated financial statements appearing on pages 132 through 134 of this report.

78

Compensation Committee Report.

The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed such with management. Based on such review and discussions, the Compensation Committee recommended the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2009 for filing with the SEC.

In addition, the Compensation Committee certifies that (i) it has reviewed with the Company’s senior risk officers the SEO compensation arrangements and has made all reasonable efforts to ensure that such arrangements do not encourage SEOs to take unnecessary and excessive risks that threaten the value of the Company; (ii) it has reviewed with senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to the Company; and (iii) it has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of the Company.

Review of Risk Associated with Compensation Plans.  Our senior risk officers conducted an assessment of our compensation plans in 2009 and reviewed and discussed the assessment and the compensation plans with the Compensation Committee in 2009. Any plans that were adopted subsequent to the assessment were reviewed at a meeting of the Compensation Committee in January 2010 and the assessment was updated, reviewed and discussed with the Compensation Committee at a meeting in March 2010. The senior risk officers recommended, and the Compensation Committee approved such recommendation, that the review of all compensation plans maintained by the Company focus on incentive based compensation plans. The senior risk officers, with the approval of the Compensation Committ ee, reviewed the Company’s non-incentive based compensation plans, such as the Company’s NQDC Plan, and broad-based welfare and benefit plans that do not discriminate in scope and terms of operation and determined that such plans do not present opportunities for employees to take excessive and unnecessary risks.

SEO Compensation Plans. The components of our executive compensation program are base salary, the NQDC Plan, and qualified benefit plans available to other employees of the Company. We previously maintained an Executive Incentive Compensation Plan that provided for the payment of annual bonuses to our SEOs determined by a mathematical formula based primarily on our weighted average return on equity multiplied by a weighting component and the SEO’s annual salary. Due to the Company’s performance, no bonuses were awarded under the plan in 2008. In light of the economic conditions and the compensation limitations under the CPP Rules, in March, 2009, the Board of Directors elected to terminate the Executive Incentive Compensation Plan which was the only incentive c ompensation plan in which any of the SEOs participated. Based on the assessment of the compensation plans and the termination of the Executive Incentive Compensation Plan, the Compensation Committee determined that our executive compensation program does not encourage the SEOs to take unnecessary and excessive risks that threaten the value of the Company.

Employee Compensation Plans.  The Company maintains and administers multiple compensation and bonus plans for employees of the Company. The bonus plans reward employees other than the SEOs and the next ten (10) most highly compensated employees for measurable performance throughout the Company. These bonus plans are reviewed on a regular basis and have terms and conditions that enable us to adjust potential payments based on management’s discretion and consideration of certain factors, including, but not limited to, credit quality. As a result of the compensation plan assessment, we have also implemented revised policies, procedures and plan provisions to further address specific risks identified in the assessment. Although the “clawback” requir ement under the CPP Rules, discussed above, affects only the SEOs and the twenty (20) next most highly compensated employees, we have amended all compensation plans to provide the Company a clawback right in the event incentive compensation is paid based upon incorrect or fraudulent information. We have also revised our approval process of any new compensation plan such that all plans are risk assessed and approved by our Risk Management Committee comprised of members of senior management. In addition to the above-mentioned revisions, to address the risk of potentially encouraging employees to focus on short-term results rather than long-term value creation, we are continuing to evaluate, and where practical, implement an extended payment schedule for our compensation plans.

Further, in light of the level of oversight and controls surrounding the Company’s compensation plans and incentive compensation plans, and the lack of any equity-based compensation plans, the Compensation Committee has determined that the compensation plans for all employees do not contain any features that would encourage the manipulation of reported earnings to enhance the compensation of any employee.

Compensation Committee

James A. Cooper, Chairman of the Compensation Committee

David L. Steward

Douglas H. Yaeger

79

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth, as of March 25, 2010, certain information with respect to the beneficial ownership of all classes of our 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:

Title of Class and Name of Owner	Number of Shares Owned			Percent of Class			Percent of Total Voting 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
($1.50par value)
James F. Dierberg, Trustee of the James F. Dierberg Living Trust (1)		160,505	(5)		100	%		19.4	%
Class C Fixed Rate Cumulative Perpetual Preferred Stock
($1.00 par value)
United States Department of the Treasury		295,400	(6)		100	%		0.0	%
Class D Fixed Rate Cumulative Perpetual Preferred Stock
($1.00 par value)
United States Department of the Treasury		14,770	(6)		100	%		0.0	%
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 and Michael J. Dierberg and 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, 2009 is 2,830, which shares are not included in the above table.

(5) Sole voting and investment power.

(6) Shares were issued to the U.S. Treasury on December 31, 2008 pursuant to the CPP. The holders of the Class C Preferred Stock and the Class D Preferred Stock have no voting rights except in certain limited circumstances. The address of the U.S. Treasury is 1500 Pennsylvania Avenue, NW, Room 2312, Washington, D.C. 20220.

80

The following table sets forth, as of March 25, 2010, certain information with respect to the beneficial ownership of all classes of the capital securities of our subsidiary, FB Holdings, by each of our directors and named executive officers:

Title of Class and Name of Owner	Percent of Membership Interests Owned
Membership Interests
First Bank (1)		53.23	%
First Capital America, Inc. (1)		46.77	%

____________________

(1) See further discussion of the membership interests of FB Holdings in Note 19 to our consolidated financial statements.

Item 13.  Certain Relationships and Related Transactions, and Director Independence

Review and Approval of Related Person Transactions. We review all relationships and transactions in which we and our directors and executive officers and their immediate family members and entities in which such persons have a significant interest are participants to determine whether such persons have a direct or indirect material interest. Our management collects information from the executive officers and the directors regarding the related person transactions and determines whether we or a related person has a direct or indirect material interest in the transaction. If we determine that a transaction is directly or indirectly material to us or a related person, then the transaction is disclosed in accordance with applicable requirements. In addition, the Audit Committee of our Board of Directors reviews and approves or ratifies any related person transaction that is required to be so disclosed. In the event that a member of the Audit Committee is a related person to such a transaction, such member may not participate in the discussion or vote regarding approval or ratification of the transaction.

Related Person Transactions. 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 and/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 collectability or present other unfavorable features. First Bank does not extend credit to our officersor 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 or entities 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 132 through 134 of this report, which descriptions are incorporated by reference herein.

Director Independence.  Our Board of Directors has determined that Messrs. James A. Cooper, David L. Steward and Douglas H. Yaeger have no material relationship with us and each is independent. Our Audit Committee of the Board of Directors and our Compensation Committee are composed only of independent directors. In order to be considered independent, our Board of Directors must determine that a director does not have any direct or indirect material relationship with us as provided under the rules of the NYSE. In making such a determination, the Board of Directors considers all relationships between us, or any of our subsidiaries, and the director, or any of his immediate family members, or any entity with which the director or any of his immediate family members is affiliated by reason of being a partner, officer or significant shareholder thereof. In assessing the independence of our directors, the Board of Directors considered all relationships between us and our directors based primarily upon responses of the directors to questions posed through a directors’ and officers’ questionnaire. The Board of Directors considered each of the related person transaction discussed above in making its independence determination.

81

First Banks has only preferred securities listed on the NYSE and, pursuant to the General Application section of NYSE Rule 303A, is not subject to NYSE Rule 303A.01 requiring a majority of independent directors. Messrs. Dierberg, Blake and McCarthy are not independent because they are each current or former executive officers of the company.

Item 14.  Principal Accounting Fees and Services

Fees of Independent Registered Public Accounting Firm

During 2009 and 2008, KPMG LLP served as our Independent Registered Public Accounting Firm and provided 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 2009 and 2008:

	2009		2008
Audit fees (1)	$	743,000		430,500
Audit related fees		—		—
Tax fees (2)		81,200		96,500
All other fees		—		—
Total	$	824,200		527,000

________________________

(1) For 2009 and 2008, audit fees include the audit of the consolidated financial statements of First Banks and SBLS LLC, 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. On an accrual basis, audit fees for 2009 and 2008 were $579,000 and $606,000, respectively.

(2) For 2009 and 2008, tax fees consist of tax filing, compliance and other advisory services.

Policy Regarding the Approval of Independent Auditor Provision of Audit and Non-Audit Services

Consistent with the SEC 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 our independent auditors. 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 SEC’s rules on auditor independence. The Audit Committee reviews the pre-approval requests and the fees paid for such services at their regula rly scheduled quarterly meetings or at special meetings.

PART IV

Item 15.  Exhibits, Financial Statement Schedules

(a)  1. Financial Statements and Supplementary Data – The financial statements and supplementary data filed as part of 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 144 of this Report.

(c)  Not Applicable.

82

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, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009. 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, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in note 1 to the consolidated financial statements, effective January 1, 2008, the Company elected to measure its servicing rights at fair value as permitted by Statement of Financial Accounting Standards No. 156 — Accounting for Servicing of Financial Assets, which was subsequently incorporated into Accounting Standards CodificationTM Topic 860, “Transfers and Servicing.”

As discussed in note 18 to the consolidated financial statements, effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards No. 160 – Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51, which was subsequently incorporated into Accounting Standards CodificationTM Topic 810, “Consolidation.”

St. Louis, Missouri

March 25, 2010

83

First Banks, Inc.

Consolidated Balance Sheets

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

	December 31,
	2009			2008
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	143,731			166,161
Short-term investments		2,372,520			676,155
Total cash and cash equivalents		2,516,251			842,316
Investment securities:
Available for sale		527,332			557,182
Held to maturity (fair value of $15,258 and $18,507, respectively)		14,225			17,912
Total investment securities		541,557			575,094
Loans:
Commercial, financial and agricultural		1,692,922			2,575,505
Real estate construction and development		1,052,922			1,572,212
Real estate mortgage		3,771,582			4,336,368
Consumer and installment		56,029			77,877
Loans held for sale		42,684			38,720
Total loans		6,616,139			8,600,682
Unearned discount		(7,846	)		(7,707	)
Allowance for loan losses		(266,448	)		(220,214	)
Net loans		6,341,845			8,372,761
Federal Reserve Bank and Federal Home Loan Bank stock, at cost		65,076			47,832
Bank premises and equipment, net		178,302			236,528
Goodwill and other intangible assets		144,439			306,800
Bank-owned life insurance		26,372			118,825
Deferred income taxes		24,700			36,851
Other real estate		125,226			91,524
Other assets		83,197			154,623
Assets held for sale		16,975			—
Assets of discontinued operations		518,056			—
Total assets	$	10,581,996			10,783,154
LIABILITIES
Deposits:
Noninterest-bearing demand	$	1,270,276			1,241,916
Interest-bearing demand		914,020			935,805
Savings and money market		2,260,869			2,777,285
Time deposits of $100 or more		931,151			1,254,652
Other time deposits		1,687,657			2,531,862
Total deposits		7,063,973			8,741,520
Other borrowings		767,494			575,133
Subordinated debentures		353,905			353,828
Deferred income taxes		32,572			45,565
Accrued expenses and other liabilities		87,027			70,753
Liabilities held for sale		24,381			—
Liabilities of discontinued operations		1,730,264			—
Total liabilities		10,059,616			9,786,799
STOCKHOLDERS’ EQUITY
First Banks, Inc. stockholders’ equity:
Preferred stock:
$1.00 par value, 4,689,830 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
Class C fixed rate, cumulative, perpetual, $1.00 par value, 295,400 shares authorized, issued and outstanding		281,356			278,057
Class D fixed rate, cumulative, perpetual, $1.00 par value, 14,770 shares authorized, issued and outstanding		17,343			17,343
Common stock, $250.00 par value, 25,000 shares authorized, 23,661 shares issued and outstanding		5,915			5,915
Additional paid-in capital		12,480			9,685
Retained earnings		91,271			536,714
Accumulated other comprehensive (loss) income		(2,464	)		6,195
Total First Banks, Inc. stockholders’ equity		418,964			866,972
Noncontrolling interest in subsidiaries		103,416			129,383
Total stockholders’ equity		522,380			996,355
Total liabilities and stockholders’ equity	$	10,581,996			10,783,154

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

84

First Banks, Inc.

Consolidated Statements of Operations

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

	Years Ended December 31,
	2009			2008			2007
Interest income:
Interest and fees on loans	$	384,548			511,589			588,498
Investment securities:
Taxable		23,828			34,164			59,618
Nontaxable		919			1,314			1,604
FHLB and Federal Reserve Bank stock		2,155			2,508			2,164
Short-term investments		2,825			1,842			6,699
Total interest income		414,275			551,417			658,583
Interest expense:
Deposits:
Interest-bearing demand		1,618			4,742			7,114
Savings and money market		24,227			47,143			62,152
Time deposits of $100 or more		26,393			38,860			53,058
Other time deposits		50,577			69,025			76,891
Other borrowings		10,032			14,016			15,761
Notes payable		37			1,328			2,426
Subordinated debentures		15,498			21,058			25,111
Total interest expense		128,382			196,172			242,513
Net interest income		285,893			355,245			416,070
Provision for loan losses		390,000			368,000			65,056
Net interest (loss) income after provision for loan losses		(104,107	)		(12,755	)		351,014
Noninterest income:
Service charges on deposit accounts and customer service fees		46,715			45,228			38,193
Gain (loss) on loans sold and held for sale		4,112			4,391			(4,792	)
Net gain (loss) on investment securities		7,697			(8,760	)		(3,077	)
Bank-owned life insurance investment income		733			2,808			3,841
Net (loss) gain on derivative instruments		(4,874	)		1,730			1,233
Decrease in fair value of servicing rights		(2,896	)		(11,825	)		(5,445	)
Loan servicing fees		8,842			8,776			8,123
Gain on extinguishment of term repurchase agreement		—			5,000			—
Other		13,834			18,425			20,452
Total noninterest income		74,163			65,773			58,528
Noninterest expense:
Salaries and employee benefits		93,831			110,226			129,774
Occupancy, net of rental income		28,549			29,492			26,135
Furniture and equipment		16,288			18,052			16,531
Postage, printing and supplies		4,400			5,457			5,695
Information technology fees		30,915			35,447			36,018
Legal, examination and professional fees		11,974			11,274			5,994
Goodwill impairment		75,000			—			—
Amortization of intangible assets		4,991			6,346			6,179
Advertising and business development		1,874			4,774			5,889
FDIC insurance		22,246			6,023			810
Write-downs and expenses on other real estate		48,488			8,242			859
Other		28,097			32,801			39,280
Total noninterest expense		366,653			268,134			273,164
(Loss) income from continuing operations, before provision for income taxes		(396,597	)		(215,116	)		136,378
Provision for income taxes		2,393			18,323			37,278
Net (loss) income from continuing operations, net of tax		(398,990	)		(233,439	)		99,100
Loss from discontinued operations, net of tax		(49,946	)		(54,874	)		(49,562	)
Net (loss) income		(448,936	)		(288,313	)		49,538
Less: net (loss) income attributable to noncontrolling interest in subsidiaries		(21,315	)		(1,158	)		78
Net (loss) income attributable to First Banks, Inc.		(427,621	)		(287,155	)		49,460
Preferred stock dividends declared and undeclared		16,536			786			786
Accretion of discount on preferred stock		3,299			—			—
Net (loss) income available to common stockholders	$	(447,456	)		(287,941	)		48,674
Basic (loss) earnings per common share from continuing operations	$	(16,800.20	)		(9,850.28	)		4,151.82
Basic loss per common share from discontinued operations		(2,110.90	)		(2,319.18	)		(2,094.68	)
Basic (loss) earnings per common share	$	(18,911.10	)		(12,169.46	)		2,057.14
Diluted (loss) earnings per common share from continuing operations	$	(16,800.20	)		(9,850.28	)		4,115.77
Diluted loss per common share from discontinued operations		(2,110.90	)		(2,319.18	)		(2,060.35	)
Diluted (loss) earnings per common share	$	(18,911.10	)		(12,169.46	)		2,055.42
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.

85

First Banks, Inc.

Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income (Loss)

Three Years Ended December 31, 2009

(dollars expressed in thousands, except per share data)

	First Banks, Inc. Stockholders’ Equity
	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings			Accu- mulated Other Compre- hensive Income (Loss)			Non- controlling Interest			Total Stock- holders’ Equity
Balance, January 1, 2007	$	13,063		5,915		9,685		767,199			(13,092	)		5,469			788,239
Comprehensive income:
Net income		—		—		—		49,460			—			78			49,538
Other comprehensive income (loss):
Unrealized losses on investment securities, net of tax		—		—		—		—			(205	)		—			(205	)
Reclassification adjustment for investment securities losses included in net loss, net of tax		—		—		—		—			122			—			122
Change in unrealized gains on derivative instruments, net of tax		—		—		—		—			9,148			—			9,148
Total comprehensive income																	58,603
Change in noncontrolling interest ownership		—		—		—		—			—			(3	)		(3	)
Impact of adoption of ASC Topic 715		—		—		—		—			(902	)		—			(902	)
Cumulative effect of change in accounting principle		—		—		—		2,470			—			—			2,470
Preferred stock dividends declared		—		—		—		(786	)		—			—			(786	)
Balance, December 31, 2007		13,063		5,915		9,685		818,343			(4,929	)		5,544			847,621
Comprehensive loss:
Net loss		—		—		—		(287,155	)		—			(1,158	)		(288,313	)
Other comprehensive income (loss):
Unrealized gains on investment securities, net of tax		—		—		—		—			6,043			—			6,043
Reclassification adjustment for investment securities losses included in net loss, net of tax		—		—		—		—			5,694			—			5,694
Change in unrealized gains on derivative instruments, net of tax		—		—		—		—			1,745			—			1,745
Reclassification adjustment for establishment of deferred tax asset valuation allowance on derivatives		—		—		—		—			(1,707	)		—			(1,707	)
Pension liability adjustment, net of tax		—		—		—		—			(651	)		—			(651	)
Total comprehensive loss																	(277,189	)
Change in noncontrolling interest ownership		—		—		—		—			—			124,997			124,997
Cumulative effect of change in accounting principle		—		—		—		6,312			—			—			6,312
Issuance of Class C Preferred Stock		278,057		—		—		—			—			—			278,057
Issuance of Class D Preferred Stock		17,343		—		—		—			—			—			17,343
Preferred stock dividends declared		—		—		—		(786	)		—			—			(786	)
Balance, December 31, 2008		308,463		5,915		9,685		536,714			6,195			129,383			996,355
Comprehensive loss:
Net loss		—		—		—		(427,621	)		—			(21,315	)		(448,936	)
Other comprehensive income (loss):
Unrealized gains on investment securities, net of tax		—		—		—		—			5,874			—			5,874
Reclassification adjustment for investment securities gains included in net loss, net of tax		—		—		—		—			(5,004	)		—			(5,004	)
Change in unrealized gains on derivative instruments, net of tax		—		—		—		—			(5,755	)		—			(5,755	)
Pension liability adjustment, net of tax		—		—		—		—			(664	)		—			(664	)
Reclassification adjustments for deferred tax asset valuation allowance		—		—		—		—			(3,110	)		—			(3,110	)
Total comprehensive loss																	(457,595	)
Purchase of noncontrolling interest in SBLS LLC		—		—		2,795		—			—			(4,652	)		(1,857	)
Accretion of discount on preferred stock		3,299		—		—		(3,299	)		—			—			—
Preferred stock dividends declared		—		—		—		(14,523	)		—			—			(14,523	)
Balance, December 31, 2009	$	311,762		5,915		12,480		91,271			(2,464	)		103,416			522,380

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

86

First Banks, Inc.

Consolidated Statements of Cash Flows

(dollars expressed in thousands)

	Years Ended December 31,
	2009			2008			2007
Cash flows from operating activities:
Net (loss) income attributable to First Banks, Inc.	$	(427,621	)		(287,155	)		49,460
Net (loss) income attributable to noncontrolling interest in subsidiaries		(21,315	)		(1,158	)		78
Less: net loss from discontinued operations		(49,946	)		(54,874	)		(49,562	)
Net (loss) income from continuing operations		(398,990	)		(233,439	)		99,100
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization of bank premises and equipment		19,014			20,947			18,061
Amortization of intangible assets		4,991			6,346			6,179
Goodwill impairment		75,000			—			—
Originations of loans held for sale		(568,966	)		(220,890	)		(508,391	)
Proceeds from sales of loans held for sale		573,764			281,557			650,920
Payments received on loans held for sale		3,283			13,768			16,038
Provision for loan losses		390,000			368,000			65,056
Provision (benefit) for current income taxes		76			(48,122	)		56,145
Benefit for deferred income taxes		(129,588	)		(44,700	)		(8,121	)
Increase (decrease) in deferred tax asset valuation allowance		131,905			111,145			(10,746	)
Decrease in accrued interest receivable		5,266			13,251			6,516
Decrease in accrued interest payable		(409	)		(2,177	)		(10,747	)
Decrease in current income taxes receivable		62,050			—			—
Proceeds from sales of trading securities		—			—			81,038
Maturities of trading securities		—			—			16,651
Purchases of trading securities		—			—			(17,939	)
(Gain) loss on loans sold and held for sale		(4,112	)		(4,391	)		4,792
Net (gain) loss on investment securities		(7,697	)		8,760			3,077
Net loss (gain) on derivative instruments		4,874			(1,730	)		(1,233	)
Decrease in fair value of servicing rights		2,896			11,825			5,445
Gain on extinguishment of term repurchase agreement		—			(5,000	)		—
Gain on sales of branches, net of expenses		—			—			(1,018	)
Write-downs and expenses on other real estate		48,488			8,242			859
Other operating activities, net		460			16,601			(23,480	)
Net cash provided by operating activities – continuing operations		212,305			299,993			448,202
Net cash provided by operating activities – discontinued operations		34,951			46,057			75,028
Net cash provided by operating activities		177,354			253,936			373,174
Cash flows from investing activities:
Cash received for acquired entities, net of cash and cash equivalents paid		—			—			2,058
Cash received for sales of subsidiary, net of cash and cash equivalents sold		11,316			—			—
Cash paid for sale of branches, net of cash and cash equivalents sold		(17,786	)		—			(48,926	)
Cash received for sale of certain assets and liabilities of UPAC, net of cash and cash equivalents sold		144,379			—			—
Cash paid for earn-out consideration to Adrian N. Baker & Company		(2,939	)		(2,920	)		(1,513	)
Proceeds from sales of investment securities available for sale		521,795			417,403			170,699
Maturities of investment securities available for sale		667,797			356,908			1,035,274
Maturities of investment securities held to maturity		3,667			2,498			5,271
Purchases of investment securities available for sale		(1,126,519	)		(396,678	)		(762,691	)
Purchases of investment securities held to maturity		—			(1,557	)		(133	)
Redemptions of FHLB and Federal Reserve Bank stock		6,422			19,342			5,416
Purchases of FHLB and Federal Reserve Bank stock		(23,666	)		(26,578	)		(7,154	)
Proceeds from sales of commercial loans held for sale		157,230			3,421			33,471
Net decrease (increase) in loans		777,455			(28,412	)		(744,253	)
Recoveries of loans previously charged-off		13,682			14,844			8,675
Purchases of bank premises and equipment		(6,778	)		(14,066	)		(65,477	)
Net proceeds from sales of other real estate owned		55,622			16,632			12,621
Net proceeds received from termination of derivative instruments		—			27,278			—
Proceeds from termination of bank-owned life insurance policy		90,578			—			—
Cash paid attributable to noncontrolling interest in SBLS LLC		(1,857	)		—			—
Cash received for noncontrolling interest in FB Holdings, LLC		—			125,000			—
Other investing activities, net		833			(2,009	)		(2,513	)
Net cash provided by (used in) investing activities – continuing operations		1,271,231			511,106			(359,175	)
Net cash provided by investing activities – discontinued operations		54,272			174,872			59,312
Net cash provided by (used in) investing activities		1,216,959			336,234			(418,487	)

87

First Banks, Inc.

Consolidated Statements of Cash Flows (Continued)

(dollars expressed in thousands)

	Years Ended December 31,
	2009			2008			2007
Cash flows from financing activities:
Increase in demand, savings and money market deposits		315,384			59,074			68,790
Decrease in time deposits		(171,722	)		(321,661	)		(258,827	)
(Decrease) increase in Federal Reserve Bank advances		(100,000	)		100,000			—
Advances drawn on Federal Home Loan Bank advances		600,000			890,000			135,000
Repayments of Federal Home Loan Bank advances		(200,710	)		(690,147	)		(171,368	)
(Decrease) increase in federal funds purchased		—			(76,500	)		76,500
Decrease in securities sold under agreements to repurchase		(97,189	)		(47,961	)		(68,285	)
Advances drawn on notes payable		—			55,000			35,000
Repayments of notes payable		—			(94,000	)		(61,000	)
Proceeds from issuance of subordinated debentures		—			—			77,322
Repayments of subordinated debentures		—			—			(82,681	)
Proceeds from issuance of preferred stock		—			295,400			—
Payment of preferred stock dividends		(6,365	)		(786	)		(786	)
Net cash provided by (used in) financing activities – continuing operations		339,398			168,419			(250,335	)
Net cash provided by (used in) financing activities – discontinued operations		59,776			147,948			(157,766	)
Net cash provided by (used in) financing activities		279,622			20,471			(92,569	)
Net increase (decrease) in cash and cash equivalents		1,673,935			610,641			(137,882	)
Cash and cash equivalents, beginning of year		842,316			231,675			369,557
Cash and cash equivalents, end of year	$	2,516,251			842,316			231,675
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest on liabilities	$	128,791			200,635			254,487
Income taxes		(62,317	)		(15,846	)		8,961
Noncash investing and financing activities:
Cumulative effect of change in accounting principle	$	—			6,312			2,470
Securitization and transfer of loans to investment securities		—			—			101,869
Loans held for sale transferred to loan portfolio		—			—			116,391
Loans transferred to other real estate		143,586			109,288			16,269
Business combinations:
Fair value of tangible assets acquired (noncash)	$	—			—			810,847
Goodwill and other intangible assets recorded with net assets acquired		2,939			2,920			33,304
Liabilities assumed		—			—			(844,696	)

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

88

First Banks, Inc.

Notes to Consolidated Financial Statements

Note 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, or GAAP, 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 GAAP. 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 noncontrolling interest in subsidiaries, as more fully described below and in Note 19 to the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications of 2008 and 2007 amounts have been made to conform to the 2009 presentation.

All financial information is reported on a continuing operations basis, unless otherwise noted. See Note 2 to the consolidated financial statements for a discussion regarding discontinued operations and certain assets and liabilities held for sale at December 31, 2009.

First Banks operates through its wholly owned subsidiary bank holding company, The San Francisco Company (SFC), headquartered in St. Louis, Missouri. Prior to First Banks’ acquisition of Coast Financial Holdings, Inc. (CFHI) in November 2007, First Bank, headquartered in St. Louis, Missouri, was a wholly owned banking subsidiary of SFC. In November 2007, First Banks completed its acquisition of CFHI, headquartered in Bradenton, Florida, and its wholly owned banking subsidiary, Coast Bank of Florida (Coast Bank). The issued and outstanding shares of common stock of Coast Bank were exchanged for the newly issued and outstanding shares of non-voting Series B common stock of First Bank, and Coast Bank was merged with and into First Bank. As a result, SFC was the owner of 100% of the voting Series A outstanding shares of common stock of First Bank and CFHI, a wholly owned subsidiary holding company of First Banks, was the owner of 100% of the non-voting Series B outstanding shares of common stock of First Bank. Thus, First Bank was 96.82% owned by SFC and 3.18% owned by CFHI at December 31, 2008. On December 31, 2009, CFHI was merged with and into SFC, and thus, First Bank was 100% owned by SFC at December 31, 2009.

First Bank operates through its branch banking offices and subsidiaries: First Bank Business Capital, Inc.; Missouri Valley Partners, Inc. (MVP); WIUS, Inc., formerly Universal Premium Acceptance Corporation and its wholly owned subsidiary, WIUS of California, Inc., formerly UPAC of California, Inc. (collectively, UPAC); FB Holdings, LLC (FB Holdings); Small Business Loan Source LLC (SBLS LLC); ILSIS, Inc. and FBIN, Inc. All of the subsidiaries are wholly owned as of December 31, 2009, except: (a) FB Holdings, which is 53.23% owned by First Bank and 46.77% owned by First Capital America, Inc. (FCA), a corporation owned and operated by First Banks’ Chairman of the Board and members of his immediate family, as further described in Note 19 to the consolidated financial statements. On April 30, 2009, First Bank and FCA entered into a Purchase Agreement providing for FCA to sell its 17.45% ownership interest in SBLS LLC to First Bank. As such, effective April 30, 2009, First Bank owned 100.0% of SBLS LLC, as further described in Note 19 to the consolidated financial statements. FB Holdings and SBLS LLC (prior to its acquisition by First Bank on April 30, 2009, as discussed above) are included in the consolidated financial statements with the noncontrolling ownership interest reported as a component of stockholders’ equity in the consolidated balance sheets as “noncontrolling interest in subsidiaries” and the earnings or loss, net of tax, attributable to the noncontrolling ownership interest, reported as “net (loss) income attributable to noncontrolling interest in subsidiaries” in the consolidated statements of operations.

Regulatory Matters. In connection with the most recent regulatory examination of the Company and First Bank by the Federal Reserve Bank of St. Louis (FRB), on March 24, 2010, the Company, SFC and First Bank entered into a Written Agreement (Agreement) with the FRB requiring the Company and First Bank to take certain steps intended to improve their overall financial condition. Under the Agreement, the Company must prepare and file with the FRB within specified timeframes a number of specific plans designed to strengthen and/or address the following matters: (i) board oversight over the management and operations of the Company and Bank; (ii) credit risk mana gement practices; (iii) lending and credit administration policies and procedures; (iv) asset improvement; (v) capital; (vi) earnings and overall financial condition; and (vii) liquidity and funds management. Many of these plans have been developed and certain related actions have already been implemented and previously provided to the FRB.

89

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The Agreement requires, among other things, that the Company and the Bank obtain prior approval from the FRB in order to pay dividends. In addition, the Company must obtain prior approval from the FRB to (i) take any other form of payment from First Bank representing a reduction in capital of First Bank; (ii) make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities; (iii) incur, increase or guarantee any debt; or (iv) purchase or redeem any shares of the Company’s stock. Pursuant to the terms of the Agreement, the Company and First Bank are also required, within 60 days of the date of the Agreement, to submit an acceptable written plan to the FRB to maintain sufficient capital at the Company, on a consolidated basis, and at First Bank, on a standalone basis. In ad dition, the Agreement also provides that the Company and First Bank must notify the FRB if the risk-based capital ratios of either entity fall below those set forth in the capital plans that are approved by the FRB. The Company must also notify the FRB before appointing any new directors or senior executive officers or changing the responsibilities of any senior executive officer position. The Agreement also requires the Company and First Bank to comply with certain restrictions regarding indemnification and severance payments.

The Company and First Bank must furnish periodic progress reports to the FRB regarding compliance with the Agreement. The Agreement will remain in effect until stayed, modified, terminated or suspended by the FRB.

The description of the Agreement above represents a summary and is qualified in its entirety by the full text of the Agreement which is filed herewith as Exhibit 10.19 to this Annual Report on Form 10-K.

Prior to entering into the Agreement on March 24, 2010, the Company and First Bank had entered into informal agreements with the FRB and the State of Missouri Division of Finance, or MDOF. Each of the agreements were characterized by regulatory authorities as informal actions that were neither published nor made publicly available by the agencies and are used when circumstances warrant a milder form of action than a formal supervisory action, such as a cease and desist order. The informal agreement with the MDOF is still in place and there have not been any modifications to the informal agreement with the MDOF since its inception in September 2008.

Under the terms of the prior informal agreement with the FRB, the Company agreed, among other things, to provide certain information to the FRB including, but not limited to, financial performance updates, notice of plans to materially change its fundamental business and notice to issue trust preferred securities or raise additional equity capital. In addition, the Company agreed not to declare any dividends on its common or preferred stock or make any distributions of interest or other sums on its trust preferred securities without the prior approval of the FRB.

First Bank, under its agreement with the MDOF and its prior informal agreement with the FRB, agreed to, among other things, prepare and submit plans and reports to the agencies regarding certain matters including, but not limited to, the performance of First Bank’s loan portfolio. In addition, First Bank agreed not to declare or pay any dividends or make certain other payments without the prior consent of the MDOF and the FRB and to maintain its Tier 1 capital ratio at no less than 7.00%. As further described in Note 21 to the consolidated financial statements, at December 31, 2009, First Bank’s Tier 1 capital ratio was 9.11%, or approximately $159.6 million over the minimum level required by the agreement.

The Company and First Bank were in full compliance with all provisions of the respective informal agreements as of December 31, 2009 and 2008.

On August 10, 2009, First Banks announced the deferral of its regularly scheduled interest payments on its outstanding junior subordinated notes relating to its $345.0 million of trust preferred securities beginning with the regularly scheduled quarterly interest payments that would otherwise have been made in September and October 2009, as further described in Note 12 to the consolidated financial statements. The terms of the junior subordinated notes and the related trust indentures allow First Banks to defer such payments of interest for up to 20 consecutive quarterly periods without default or penalty; however, First Banks continues to accrue interest on its subordinated debentures in its consolidated financial statements. During the deferral period, First Banks may not, among other things and with limited exceptions, pay ca sh dividends on or repurchase its common stock or preferred stock nor make any payment on outstanding debt obligations that rank equally with or junior to the junior subordinated notes. Accordingly, First Banks also suspended the payment of cash dividends on its outstanding common stock and preferred stock beginning with the regularly scheduled quarterly dividend payments on the preferred stock that would otherwise have been made in August and September 2009, as further described in Note 18 to the consolidated financial statements. In conjunction with this election, First Banks suspended the declaration of dividends on its Class A and Class B preferred stock, but continues to declare and accumulate dividends on its Class C and Class D preferred stock.

90

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Capital Plan. As further described in Note 2 to the consolidated financial statements and Item 1 —Business – Recent Developments,” on August 10, 2009, First Banks announced the adoption of a Capital Optimization Plan (Capital Plan) designed to improve its regulatory capital ratios and financial performance through certain divestiture activities, asset reductions and expense reductions. The Capital Plan was adopted in order to, among other things, preserve and enhance First Banks’ risk-based capital in the current and continuing economic downturn.

The successful completion of all or any portion of the Capital Plan is not assured, and no assurance can be made that the Capital Plan will not be materially modified in the future. The decision to implement the Capital Plan reflects the adverse affect that the severe downturn in the commercial and residential real estate markets has had on First Banks’ financial condition and results of operations. If First Banks is not able to complete a substantial portion of the Capital Plan, its business, financial condition, including regulatory capital ratios, and results of operations may be materially and adversely affected and its ability to withstand continued adverse economic conditions could be threatened.

Significant Accounting Changes.On January 1, 2009, First Banks implemented Statement of Financial Accounting Standards, or SFAS, No. 160 – Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51, which was subsequently incorporated into Accounting Standards CodificationTM, or ASC, Topic 810, “Consolidation.” ASC Topic 810 establishes new accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. ASC Topic 810 requires entities to classify noncontrolling interests as a component of stockholders’ equity and requires subsequent changes in ownership interests in a subsidiary to be accounted for as an equity transaction. Additionally, ASC Topic 810 requires entities to recognize a gain or loss upon the loss of control of a subsidiary and to remeasure any ownership interest retained at fair value on that date. ASC Topic 810 also requires expanded disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. ASC Topic 810 was effective on a prospective basis for fiscal years, and interim periods within those fiscal years, beginning on or after December 1 5, 2008, except for the presentation and disclosure requirements, which are required to be applied retrospectively. The implementation of ASC Topic 810 on January 1, 2009 resulted in the noncontrolling interest in subsidiaries of $129.4 million being reclassified from a liability to a component of stockholders’ equity in the consolidated balance sheets.

Significant Accounting Policies

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. Interest-bearing deposits were $2.37 billion and $673.9 million at December 31, 2009 and 2008, respectively, and federal funds sold were $120,000 and $2.2 million at December 31, 2009 and 2008, 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 $14.9 million and $23.2 million at December 31, 2009 and 2008, respectively.

Federal Reserve Bank and Federal Home Loan Bank Stock.  First Bank is a member of the FRB system and the Federal Home Loan Bank (FHLB) system and maintains investments in FRB and FHLB 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 Des Moines stock is maintained at an amount equal to 0.12% of First Bank’s total assets, up to a maximum of $10.0 million, plus 4.45% of advances. First Bank also holds an investment in stock of the FHLB of San Francisco as a nonmember. Investments in FRB, FHLB of Des Moines and FHLB of San Francisco stock were $27.6 million, $36.7 mill ion, and $791,000, respectively, at December 31, 2009, and $27.9 million, $19.0 million, and $791,000, respectively, at December 31, 2008. First Bank also held stock of the FHLB of Dallas, as a nonmember, of $207,000 at December 31, 2008.

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. 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 (loss). All previous fair value adjustments included in the separate component of accumulated other comprehensive income (loss) are reversed upon sale. Premiums and discounts incurred relative to the par value of securities purchased are amortized or accreted, respectively, on the level-yield method taking into consideration the level of current and anticipated prepaymen ts.

91

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

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 fair 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 the 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 and costs 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 that warrants 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 and restructured loans are considered to be impaired loans. When measuring impairment, the expected future cash flows of an impaired loan 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.

In accordance with Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3), acquired impaired loans are classified as nonaccrual loans and are initially measured at fair value with no allocated allowance for loan losses. An allowance for loan losses is recorded to the extent there is further credit deterioration subsequent to the acquisition date.

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 to achieve credit or loan concentration objectives. Effective July 2008, one-to-four family residential mortgage loans held for sale are carried at fair value on a recurring basis. The determination of fair value is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent tr ading activity and other relevant information. Other loans held for sale, primarily SBA loans, are carried at the lower of cost or market value, which is determined on an individual loan basis. 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 operations 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 basis and reflect the difference between the value received upon sale and the carrying value of the loans held for sale, including any recourse reserve established for potential repurchase obligations. Loans held for sale transferred to loans held for portfolio or available-for-sale investment securities are transferred at fair value.

92

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

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. These fees are net of federal agency guarantee fees and interest shortfall. 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 monthly 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. Adjustments are reflected in the consolidated statements 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 strategies 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 Bank also offers interest rate swap agreement contracts to certain customers who wish to modify their interest rate sensitivity positions. First Bank offsets the interest rate risk of these swap agreements by simultaneously purchasing matching interest rate swap agreement contracts with offsetting pay/receive rates from other financial institutions.

Derivative instruments are recorded in the consolidated balance sheets and measured at fair value. At inception of a non-customer 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 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 ass essed 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 longe r 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 derivative instruments and hedging activities is as follows:

Ø 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 (loss) and subsequently reclassified into interest income or interest expense 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 or ineffectiveness , the gain or loss on the cash flow hedge would continue to be reported as a component of other comprehensive income (loss) until the underlying transaction affects earnings.

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First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Ø 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 a re 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.

Ø Customer Interest Rate Swap Agreement Contracts.  Derivative instruments are offered to customers to assist in hedging their risks of adverse changes in interest rates. First Bank serves as an intermediary between its customers and the financial markets. Each contract between First Bank and its customers is offset by a contract between First Bank and various counterparties. These contracts do not qualify for hedge accounting. Customer interest rate swap agreement contracts are carried at fair value. Changes in the fair value are recognized in noninterest income on a monthly basis. Each customer contract is paired with an offsetting contract, and as such, there is no significant impact to net income (loss).

Ø 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.

Ø 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. Fair values are based upon quoted market prices and, in 2007 and prior years, fair value measurements exclude the value of loan servicing rights or other ancillary values. In accordance with new accounting guidance effective in January 2008, the value of loan servicing rights is incorporated into fair value measurements for mortgage loan commitments. Changes in the fair value are recognized in noninterest income on a monthly basis.

Ø 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 the term of the lease. Bank premises and improvements are depreciated over five to 40 years and equipment is depreciated over three to seven years.

Goodwill and Other Intangible Assets.Goodwill and other intangible assets primarily consist of goodwill, core deposit intangibles and customer list intangibles. Goodwill and intangible assets with indefinite useful lives are not amortized, but instead tested at least annually for impairment. Intangible assets with definite useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. First Banks amortizes, on a straight-line basis, its core deposit intangibles, customer list intangibles and other intangibles. Core deposit intangibles and customer list intangibles are amortized over the estimated periods to be benefited, which have been estimated at five to seven years, and seven to 16 years, respectively.

The goodwill impairment test is a two-step process which requires First Banks to make assumptions regarding fair value. First Banks’ policy allows management to make the determination of fair value using internal cash flow models or by engaging independent third parties. The first step consists of estimating the fair value of the reporting unit using a number of factors, including projected future operating results and business plans, economic projections, anticipated future cash flows, discount rates, and comparable marketplace fair value data from within a comparable industry grouping. First Banks compares the estimated fair value of its reporting unit to the carrying value, which includes allocated goodwill. If the estimated fair value is less than the carrying value, the second step is completed to compute the impairme nt amount by determining the “implied fair value” of goodwill. This determination requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any remaining unallocated fair value represents the “implied fair value” of goodwill, which is compared to the corresponding carrying value to compute the goodwill impairment amount, if any. Based on the results of the goodwill impairment analyses performed in 2009, First Bank recorded goodwill impairment of $75.0 million. Adverse changes in the economic environment, operations of the reporting unit, or other factors could result in a decline in the implied fair value which could result in future goodwill impairment.

94

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Servicing Rights.  First Banks has mortgage servicing rights and SBA servicing rights. On January 1, 2008, First Banks elected to measure servicing rights at fair value as permitted by ASC Topic 860 – Accounting for Servicing of Financial Assets, which resulted in the recognition of a cumulative change in accounting principle of $6.3 million, net of tax, which was recorded as an increase in retained earnings. As such, effective January 1, 2008, changes in the fair value of mortgage and SBA servicing rights are recognized in earnings in the period in which the change occurs and such changes are reflected in the change in fair value of servicing rights in other noninterest income in t he consolidated statements of operations. Servicing rights are valued based on valuation models that utilize assumptions based on the predominant risk characteristics of the underlying loans, including size, interest rate, weighted average life, cost to service and estimated prepayment speeds. The valuation models estimate the present value of estimated future net servicing income. Prior to January 1, 2008, mortgage and SBA servicing rights were amortized and impairment was recognized, when applicable, which is also reflected in the change in fair value of servicing rights in other noninterest income in the consolidated statements of operations.

Effective January 1, 2008, mortgage and SBA servicing rights are capitalized upon the sale of the underlying loan at estimated fair value. Prior to January 1, 2008, mortgage and SBA servicing rights were capitalized by allocating the cost of the loans to servicing rights and the loans (without the servicing rights) based on the relative fair values of the two components. The fair value of mortgage and SBA servicing rights fluctuates based on changes in interest rates and certain other assumptions utilized to value the mortgage and SBA servicing rights. The value is adversely affected when interest rates decline which normally causes loan prepayments to increase. The determination of the fair value of the mortgage and SBA servicing rights is performed monthly based upon an independent third party valuation. The valuation analysis is prepared using stratifications of the mortgage and SBA servicing rights based on the predominant risk characteristics of the underlying loans, including size, interest rate, weighted average original term, weighted average remaining term and estimated prepayment speeds.

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 noninterest expense as incurred.

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. Valuation allowances are then recorded to reduce deferred tax assets to the amounts management concludes are more-likely-than-not to be realized. First Banks and its eligible subsidiaries file a consolidated federal income tax return and unitary or consolidated state income tax returns in all applicable states.

First Banks implemented Financial Accounting Standards Board (FASB) Interpretation No. 48 — Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109 — Accounting for Income Taxes, which was subsequently incorporated into ASC Topic 740, on January 1, 2007. The implementation of ASC Topic 740 resulted in the recognition of a cumulative effect of change in accounting principle of $2.5 million, which was recorded as an increase to retained earnings, as further described in Note 13 to the consolidated financial statements.

In accordance with ASC Topic 740, First Banks’ policy is to separately disclose any interest or penalties arising from the application of federal or state income taxes. Interest related to unrecognized tax benefits is included in interest expense and penalties related to unrecognized tax benefits are included in noninterest expense. There were no penalties related to tax matters accrued at January 1, 2007, nor did the Company recognize any penalties during the years ended December 31, 2009, 2008 and 2007.

First Banks and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. Management of First Banks believes the accrual for tax liabilities is adequate for all open audit years based on its assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter. This assessment relies on estimates and assumptions.

95

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Noncontributory Defined Benefit Pension Plan. First Banks has a noncontributory defined benefit pension plan covering certain current and former employees of a bank holding company acquired by First Banks in 1994 (the Plan) and subsequently merged with and into First Banks on December 31, 2002. First Banks discontinued the accumulation of benefits under the Plan in 1994, and as such, there is no longer any service cost being accrued by Plan participants. First Banks records annual amounts relating to the Plan based on calculations that incorporate various actuarial and other assumptions including discount rates, mortality rates, and assumed rates of return. First Banks reviews these assumptions on an annual basis and makes modifications to the assumption s based on current rates and trends when deemed appropriate. The funded status of the Plan is recognized as a net asset or liability and changes in the Plan’s funded status are recognized through other comprehensive income to the extent those changes are not included in the net periodic cost.

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 pe rspective 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 (Loss) Per Common Share.  Basic earnings (loss) 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.

Note 2 – Discontinued Operations, Assets and Liabilities Held for Sale and Other Corporate Transactions

Discontinued Operations.  On August 7, 2009, First Bank signed a Purchase and Assumption Agreement that provided for the sale of certain assets, including premises and equipment associated with First Bank’s Texas operations, and the transfer of certain liabilities, associated with First Bank’s 19 Texas retail branches, including certain commercial deposit relationships, to Sterling Bank, headquartered in Houston, Texas. The Texas transaction was subsequently terminated by both parties on December 28, 2009. On February 8, 2010, First Bank entered into a Purchase and Assumption Agreement with Prosperity Bank (Prosperity), headquartered in Houston, Texas, that provides for the sal e of certain assets and the transfer of certain liabilities of First Bank’s Texas franchise (Texas Region) to Prosperity, as further described in Note 25 to the consolidated financial statements. The transaction, which is subject to regulatory approvals and certain closing conditions, is expected to be completed during the second quarter of 2010. First Banks applied discontinued operations accounting in accordance with ASC Topic 205-20, “Presentation of Financial Statements – Discontinued Operations,” to the assets and liabilities being sold in the Texas Region as of December 31, 2009 and for the years ended December 31, 2009, 2008 and 2007. These assets and liabilities, which were previously reported in the First Bank segment, are being sold as part of First Banks’ Capital Plan to preserve risk-based capital during the current and continuing economic downturn. See f urther discussion of First Banks’ Capital Plan under “—Management’s Discussion and Analysis of Financial Condition and Results of Operations —Business – Recent Developments.”

On September 18, 2009, First Bank, Adrian N. Baker & Company (ANB) and MVP signed a Stock Purchase Agreement that provided for the sale of First Bank’s subsidiaries, ANB and MVP, to AHM Corporation Holdings, Inc. (AHM). Under the terms of the agreement, AHM purchased all of the capital stock of ANB for a purchase price of approximately $14.3 million. The sale of ANB was completed on September 30, 2009 and resulted in a pre-tax gain on the sale of approximately $120,000. First Banks applied discontinued operations accounting to ANB for the years ended December 31, 2009, 2008 and 2007. ANB, which was previously reported in the First Bank segment, was sold as part of First Banks’ Capital Plan. The MVP transaction was subsequently terminated by First Bank on November 9, 2009. On March 5, 2010, First Bank entered into a Stock Purchase Letter Agreement that provides for the sale of First Bank’s subsidiary, MVP, as further described in Note 25 to the consolidated financial statements. The transaction is expected to be completed on or about March 31, 2010, or as soon as practicable after certain regulatory and other third-party approvals and consents have been obtained. MVP was previously reported in the First Bank segment. First Banks applied discontinued operations accounting to MVP as of December 31, 2009 and for the years ended December 31, 2009, 2008 and 2007.

96

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

On November 11, 2009, First Bank entered into a Purchase and Assumption Agreement that provided for the sale of certain assets and the transfer of certain liabilities of First Bank’s Chicago franchise (Chicago Region) to FirstMerit Bank, N.A. (FirstMerit). The transaction closed on February 19, 2010. Under the terms of the agreement, FirstMerit purchased $301.2 million of loans as well as certain other assets, including premises and equipment, associated with First Bank’s Chicago operations. FirstMerit also assumed substantially all of the deposits associated with First Bank’s 24 Chicago retail branches, including certain commercial deposit relationships, for a premium of 3.50%, or $42.1 million. The transaction resulted in a pre-tax gain of approximately $8.4 million during the first quarter of 2010, as furthe r described in Note 25 to the consolidated financial statements. First Banks applied discontinued operations accounting to the assets and liabilities being sold in the Chicago Region as of December 31, 2009 and for the years ended December 31, 2009, 2008 and 2007. These assets and liabilities, which were previously reported in the First Bank segment, were sold as part of First Banks’ Capital Plan.

On December 3, 2009, First Bank and UPAC entered into a Purchase and Sale Agreement that provided for the sale of certain assets and the transfer of certain liabilities of UPAC to PFS Holding Company, Inc., Premium Financing Specialists, Inc., Premium Financing Specialists of California, Inc. and Premium Financing Specialists of the South, Inc. (collectively, PFS). Under the terms of the agreement, PFS purchased approximately $141.3 million in loans as well as certain other assets, including premises and equipment, associated with UPAC. PFS also assumed certain other liabilities associated with UPAC. With the exception of the subsequent sale of approximately $1.5 million of loans to PFS on February 26, 2010, the transaction was completed on December 31, 2009, and resulted in a pre-tax loss of approximately $13.1 million. First B anks applied discontinued operations accounting to UPAC as of December 31, 2009 and for the years ended December 31, 2009, 2008 and 2007. UPAC, which was previously reported in the First Bank segment, was sold as part of First Banks’ Capital Plan.

Assets and liabilities of discontinued operations at December 31, 2009 were as follows:

	Chicago		Texas		UPAC		Total
	(dollars expressed in thousands)
Cash and due from banks	$	3,759		5,131		—		8,890
Loans:
Commercial, financial and agricultural		77,574		57,075		1,502		136,151
Real estate construction and development		—		4,352		—		4,352
Residential real estate		36,594		4,264		—		40,858
Multi-family residential		5,497		1,065		—		6,562
Commercial real estate		188,978		36,029		—		225,007
Consumer and installment, net of unearned discount		2,700		615		—		3,315
Total loans		311,343		103,400		1,502		416,245
Bank premises and equipment, net		26,497		18,534		—		45,031
Goodwill and other intangible assets		26,273		19,962		—		46,235
Other assets		947		708		—		1,655
Assets of discontinued operations	$	368,819		147,735		1,502		518,056
Deposits:
Noninterest-bearing demand	$	92,513		87,064		—		179,577
Interest-bearing demand		47,778		50,508		—		98,286
Savings and money market		387,941		167,783		—		555,724
Time deposits of $100 or more		225,635		91,779		—		317,414
Other time deposits		465,541		100,661		—		566,202
Total deposits		1,219,408		497,795		—		1,717,203
Other borrowings		2,605		6,942		—		9,547
Accrued expenses and other liabilities		2,589		925		—		3,514
Liabilities of discontinued operations	$	1,224,602		505,662		—		1,730,264

97

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Loss from discontinued operations, net of tax, for the year ended December 31, 2009 was as follows:

	Chicago			Texas			UPAC			MVP			ANB		Total
	(dollars expressed in thousands)
Interest income:
Interest and fees on loans	$	17,191			5,483			20,224			—			—		42,898
Other interest income		—			—			—			—			—		—
Total interest income		17,191			5,483			20,224			—			—		42,898
Interest expense:
Interest on deposits		26,961			8,006			—			—			—		34,967
Other borrowings		6			10			16			—			—		32
Total interest expense		26,967			8,016			16			—			—		34,999
Net interest (loss) income		(9,776	)		(2,533	)		20,208			—			—		7,899
Provision for loan losses		—			—			—			—			—		—
Net interest (loss) income after provision for loan losses		(9,776	)		(2,533	)		20,208			—			—		7,899
Noninterest income:
Service charges and customer service fees		4,179			4,378			782			—			—		9,339
Gain on loans sold and held for sale		—			218			—			—			—		218
Investment management income		—			—			—			2,316			—		2,316
Insurance fee and commission income		—			—			—			—			5,828		5,828
Loan servicing fees		7			383			—			—			—		390
Other		273			112			14			1			5		405
Total noninterest income		4,459			5,091			796			2,317			5,833		18,496
Noninterest expense:
Salaries and employee benefits		10,200			8,050			5,785			2,712			3,191		29,938
Occupancy, net of rental income		4,144			4,002			314			199			330		8,989
Furniture and equipment		1,101			1,100			1,253			69			50		3,573
Legal, examination and professional fees		508			667			2,453			434			542		4,604
Amortization of intangible assets		1,037			1,619			1,207			—			216		4,079
FDIC insurance		3,108			1,488			—			—			—		4,596
Other		1,997			2,891			2,049			139			500		7,576
Total noninterest expense		22,095			19,817			13,061			3,553			4,829		63,355
(Loss) income from operations of discontinued operations		(27,412	)		(17,259	)		7,943			(1,236	)		1,004		(36,960	)
Net (loss) gain on sale of discontinued operations		—			—			(13,077	)		—			120		(12,957	)
Provision for income taxes		—			—			27			—			2		29
Net (loss) income from discontinued operations, net of tax	$	(27,412	)		(17,259	)		(5,161	)		(1,236	)		1,122		(49,946	)

Loss from discontinued operations, net of tax, for the year ended December 31, 2008 was as follows:

	Chicago			Texas			UPAC			MVP			ANB		Total
	(dollars expressed in thousands)
Interest income:
Interest and fees on loans	$	13,027			5,611			22,543			—			—		41,181
Other interest income		—			—			—			—			9		9
Total interest income		13,027			5,611			22,543			—			9		41,190
Interest expense:
Interest on deposits		39,082			14,074			—			—			—		53,156
Other borrowings		105			68			—			—			—		173
Total interest expense		39,187			14,142			—			—			—		53,329
Net interest (loss) income		(26,160	)		(8,531	)		22,543			—			9		(12,139	)
Provision for loan losses		—			—			—			—			—		—
Net interest (loss) income after provision for loan losses		(26,160	)		(8,531	)		22,543			—			9		(12,139	)
Noninterest income:
Service charges and customer service fees		4,236			4,226			585			—			—		9,047
Gain on loans sold and held for sale		—			357			—			—			—		357
Investment management income		—			—			—			3,440			—		3,440
Insurance fee and commission income		—			—			—			—			7,336		7,336
Loan servicing fees		22			253			—			—			—		275
Other		1,033			1,837			60			1			174		3,105
Total noninterest income		5,291			6,673			645			3,441			7,510		23,560
Noninterest expense:
Salaries and employee benefits		11,805			10,112			6,468			2,323			4,039		34,747
Occupancy, net of rental income		4,360			3,922			321			197			468		9,268
Furniture and equipment		1,361			1,231			443			101			57		3,193
Legal, examination and professional fees		390			412			2,443			572			670		4,487
Amortization of intangible assets		1,132			2,158			1,207			—			288		4,785
FDIC insurance		783			367			—			—			—		1,150
Other		2,840			2,963			2,135			264			578		8,780
Total noninterest expense		22,671			21,165			13,017			3,457			6,100		66,410
(Loss) income from operations of discontinued operations		(43,540	)		(23,023	)		10,171			(16	)		1,419		(54,989	)
Benefit for income taxes		—			—			(115	)		—			—		(115	)
Net (loss) income from discontinued operations, net of tax	$	(43,540	)		(23,023	)		10,286			(16	)		1,419		(54,874	)

98

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Loss from discontinued operations, net of tax, for the year ended December 31, 2007 was as follows:

	Chicago			Texas			UPAC		MVP		ANB		Total
	(dollars expressed in thousands)
Interest income:
Interest and fees on loans	$	9,368			4,888			24,714		—		—		38,970
Other interest income		—			—			—		—		3		3
Total interest income		9,368			4,888			24,714		—		3		38,973
Interest expense:
Interest on deposits		52,595			21,077			—		—		—		73,672
Other borrowings		276			254			7		—		—		537
Total interest expense		52,871			21,331			7		—		—		74,209
Net interest (loss) income		(43,503	)		(16,443	)		24,707		—		3		(35,236	)
Provision for loan losses		—			—			—		—		—		—
Net interest (loss) income after provision for loan losses		(43,503	)		(16,443	)		24,707		—		3		(35,236	)
Noninterest income:
Service charges and customer service fees		4,074			3,700			867		—		—		8,641
Gain on loans sold and held for sale		186			23			—		—		—		209
Investment management income		—			—			—		7,111		—		7,111
Insurance fee and commission income		—			—			—		—		6,860		6,860
Loan servicing fees		51			118			—		—		—		169
Other		1,354			185			120		1		9		1,669
Total noninterest income		5,665			4,026			987		7,112		6,869		24,659
Noninterest expense:
Salaries and employee benefits		12,795			12,818			6,603		4,645		4,383		41,244
Occupancy, net of rental income		3,761			3,154			295		191		441		7,842
Furniture and equipment		1,271			1,227			445		146		63		3,152
Legal, examination and professional fees		464			406			2,009		544		476		3,899
Amortization of intangible assets		2,627			2,118			1,207		—		288		6,240
FDIC insurance		129			67			—		—		—		196
Other		1,958			3,344			2,384		327		602		8,615
Total noninterest expense		23,005			23,134			12,943		5,853		6,253		71,188
(Loss) income from operations of discontinued operations		(60,843	)		(35,551	)		12,751		1,259		619		(81,765	)
(Benefit) provision for income taxes		(24,056	)		(14,029	)		5,118		254		510		(32,203	)
Net (loss) income from discontinued operations, net of tax	$	(36,787	)		(21,522	)		7,633		1,005		109		(49,562	)

First Banks did not allocate any consolidated interest that is not directly attributable to or related to discontinued operations.

All financial information in the consolidated financial statements and notes to the consolidated financial statements reflects continuing operations, unless otherwise noted.

Assets Held for Sale and Liabilities Held for Sale.  On August 27, 2009, First Bank entered into a Branch Purchase and Assumption Agreement that provided for the sale of First Bank’s Lawrenceville, Illinois branch office (Lawrenceville Branch) to The Peoples State Bank of Newton (Peoples). The transaction was completed on January 22, 2010, and resulted in a pre-tax gain of $168,000 during the first quarter of 2010, as further described in Note 25 to the consolidated financial statements. Under the terms of the agreement, Peoples assumed approximately $23.7 million of deposits for a premium of 5.0%, or approximately $1.2 million, as well as certain other liabilities, and purchased app roximately $13.5 million of loans as well as certain other assets, including premises and equipment. The assets and liabilities associated with the Lawrenceville Branch are reflected in assets held for sale and liabilities held for sale in the consolidated balance sheet as of December 31, 2009. The Lawrenceville Branch sale was not included in discontinued operations as First Banks will have continuing involvement in the respective region.

On December 14, 2009, SBLS LLC entered into an agreement providing for the transfer of SBLS LLC’s SBA Lending Authority (SBA License) to a third party institution for cash of $750,000. The transaction is expected to be completed on or before March 31, 2010. The carrying value of SBLS LLC’s SBA License of $737,000 is reflected in assets held for sale in the consolidated balance sheet as of December 31, 2009.

Branch Sales. On July 19, 2007, First Bank completed the sale of two banking offices located in Denton and Garland, Texas to Synergy Bank, SSB, a subsidiary of Premier Bancshares, Inc., resulting in a pre-tax gain of $1.0 million. At the time of the transaction, the two banking offices had loans, net of unearned discount, of $911,000 and deposits of $52.0 million. See further discussion under “Discontinued Operations” above related to First Bank’s Texas Region.

On November 23, 2009, First Bank completed the sale of its banking office located in Springfield, Illinois (Springfield Branch) to First Bankers Trust Company, National Association, a subsidiary of First Bankers Trustshares, Inc., resulting in a pre-tax gain of $309,000. At the time of the transaction, the Springfield Branch had loans, net of unearned discount, of $887,000 and deposits of $20.1 million.

99

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

De Novo Branch Offices. During the three years ended December 31, 2009, First Bank opened the following de novo branch offices:

Branch Office Location	Date Opened
St. Louis, Missouri	January 22, 2007
Katy (Houston), Texas (1)	February 26, 2007
Lincoln (Sacramento), California	March 12, 2007
Dardenne Prairie (St. Louis), Missouri	May 9, 2007
Chula Vista (San Diego), California	June 25, 2007
Brentwood (San Francisco), California	September 24, 2007
Shadow Creek Ranch (Houston), Texas (1)	October 15, 2007
Valencia (Los Angeles), California	October 29, 2007
Naperville (Chicago), Illinois (1)	January 14, 2008
Arnold (St. Louis), Missouri	May 13, 2008
Blue Oaks Marketplace (Rocklin), California	August 18, 2008

_________________

(1) Branch office is associated with discontinued operations, as further described above in the “Discontinued Operations” section of this footnote.

Acquisitions.  On February 28, 2007, First Banks completed its acquisition of Royal Oaks Bancshares, Inc. and its wholly owned banking subsidiary, Royal Oaks Bank, ssb (collectively, Royal Oaks) for $38.6 million in cash. Royal Oaks was headquartered in Houston, Texas and operated five banking offices in the Houston area. In addition, at the time of the acquisition, Royal Oaks was in the process of opening a de novo branch banking office located in the Heights, near downtown Houston, which subsequently opened on April 16, 2007. The acquisition served to expand First Banks’ banking franchise in Houston, Texas. The transaction was funded through internally generated funds and the issuance of subordinated debentures associated with the priva te placement of $25.0 million of trust preferred securities through a newly formed affiliated statutory trust. At the time of the acquisition, Royal Oaks had assets of $206.9 million, loans, net of unearned discount, of $175.5 million, deposits of $159.1 million and stockholders’ equity of $9.6 million. Goodwill was $23.0 million and the core deposit intangibles, which are being amortized over five years utilizing the straight-line method, were $4.7 million. Royal Oaks Bancshares, Inc. and Royal Oaks Bank, ssb were merged with and into SFC and First Bank, respectively, at the time of the acquisition. See further discussion under “Discontinued Operations” above related to First Bank’s Texas Region.

On November 30, 2007, First Banks completed its acquisition of CFHI and its wholly owned banking subsidiary, Coast Bank (collectively, Coast) for $12.1 million in cash. Coast was headquartered in Bradenton, Florida and operated 20 banking offices in Florida’s Manatee, Pinellas, Hillsborough and Pasco counties. In addition, at the time of the acquisition, Coast had two planned de novo branch banking offices, one located in the Pinellas County community of Clearwater, and the other located in Sarasota County. The acquisition served to establish First Banks’ banking franchise in the state of Florida. The transaction was funded through internally generated funds and the issuance of subordinated debentures associated with the private placement of $15.0 million of trust preferred securities through a newly formed affiliate d statutory trust. At the time of the acquisition, Coast had assets of $660.4 million, loans, net of unearned discount, of $518.0 million, deposits of $628.1 million and stockholders’ equity of $14.2 million. Goodwill was $9.5 million, the core deposit intangibles, which are being amortized over five years utilizing the straight-line method, were $327,000 and other intangibles associated with non-compete agreements, which were being amortized over two years utilizing the straight-line method, were $174,000. CFHI operated as a wholly owned subsidiary of First Banks and owned 100% of the non-voting Class B common stock of First Bank. Coast Bank was merged with and into First Bank at the time of the acquisition, and accordingly, CFHI became the owner of 3.18% of First Bank. On December 31, 2009, CFHI was merged with and into SFC, as further described in Note 1 to the consolidated financial statements.

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 their estimated fair value on the acquisition dates. These fair value adjustments for the acquisitions completed in 2007 represented current estimates and were subject to further adjustments as the valuation data was finalized. Goodwill and other intangible assets associated with the acquisitions are not deductible for tax purposes. For 2007, goodwill and other intangible assets in the amount of $37.7 million was assigned to First Bank.

100

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 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, 2009 and 2008 were as follows:

	Maturity												Total		Gross							Weighted
	1 Year				1-5			5-10		After			Amortized		Unrealized					Fair		Average
	or Less			Years			Years			10 Years			Cost		Gains		Losses			Value		Yield
	(dollars expressed in thousands)
December 31, 2009:
Carrying value:
U.S. Government sponsored agencies	$	500			1,000			—			—			1,500		47		—			1,547		3.53	%
Residential mortgage-backed		353			10,449			5,782			480,875			497,459		2,788		(1,899	)		498,348		3.27
Commercial mortgage-backed		—			—			998			—			998		—		(13	)		985		3.90
State and political subdivisions		1,857			6,177			3,778			—			11,812		366		(4	)		12,174		4.14
Equity investments		—			—			—			14,278			14,278		—		—			14,278		2.76
Total	$	2,710			17,626			10,558			495,153			526,047		3,201		(1,916	)		527,332		3.28
Fair value:
Debt securities	$	2,770			18,139			10,866			481,279
Equity securities		—			—			—			14,278
Total	$	2,770			18,139			10,866			495,557
Weighted average yield		4.31	%		4.06	%		4.37	%		3.22	%
December 31, 2008:
Carrying value:
U.S. Government sponsored agencies	$	779			499			485			—			1,763		83		—			1,846		5.35	%
Residential mortgage-backed		2,376			17,594			35,804			461,634			517,408		3,171		(3,448	)		517,131		5.14
State and political subdivisions		4,687			9,246			6,565			584			21,082		229		(102	)		21,209		4.17
Equity investments		—			—			—			16,984			16,984		12		—			16,996		4.00
Total	$	7,842			27,339			42,854			479,202			557,237		3,495		(3,550	)		557,182		5.07
Fair value:
Debt securities	$	7,918			27,706			43,491			461,071
Equity securities		—			—			—			16,996
Total	$	7,918			27,706			43,491			478,067
Weighted average yield		4.64	%		4.22	%		4.30	%		5.19	%

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, 2009 and 2008 were as follows:

	Maturity												Total		Gross							Weighted
	1 Year				1-5			5-10		After			Amortized		Unrealized					Fair		Average
	or Less			Years			Years			10 Years			Cost		Gains		Losses			Value		Yield
	(dollars expressed in thousands)
December 31, 2009:
Carrying value:
Residential mortgage-backed	$	—			—			1,695			2,170			3,865		210		—			4,075		5.60	%
Commercial mortgage-backed		—			6,556			—			—			6,556		500		—			7,056		5.16
State and political subdivisions		891			736			644			1,533			3,804		323		—			4,127		5.26
Total	$	891			7,292			2,339			3,703			14,225		1,033		—			15,258		5.31
Fair value:
Debt securities	$	913			7,836			2,472			4,037
Weighted average yield		4.03	%		5.00	%		5.41	%		6.17	%
December 31, 2008:
Carrying value:
Residential mortgage-backed	$	—			—			748			4,265			5,013		120		—			5,133		5.09	%
Commercial mortgage-backed		—			—			6,669			—			6,669		218		—			6,887		5.16
State and political subdivisions		1,964			1,849			625			1,792			6,230		258		(1	)		6,487		4.97
Total	$	1,964			1,849			8,042			6,057			17,912		596		(1	)		18,507		5.07
Fair value:
Debt securities	$	1,974			1,900			8,299			6,334
Weighted average yield		4.19	%		4.12	%		5.10	%		5.62	%

101

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Proceeds from sales of available-for-sale investment securities were $521.8 million, $417.4 million and $170.7 million for the years ended December 31, 2009, 2008 and 2007, respectively. Proceeds from calls of investment securities were $2.9 million, $24.5 million and $7.3 million for the years ended December 31, 2009, 2008 and 2007, respectively. Gross realized gains and gross realized losses on available-for-sale investment securities for the years ended December 31, 2009, 2008 and 2007 were as follows:

	2009			2008			2007
	(dollars expressed in thousands)
Gross realized gains on sales	$	9,541			2,396			113
Gross realized losses on sales		(653	)		(126	)		(459	)
Gross realized gains on calls		15			405			12
Mark-to-market losses on trading portfolio (1)		—			—			(1,459	)
Gross realized gains on charitable contributions		—			—			147
Other-than-temporary impairment		(1,206	)		(11,435	)		(1,431	)
Net realized gains (losses)	$	7,697			(8,760	)		(3,077	)

_________________

(1) First Bank liquidated its trading portfolio in July 2007.

First Banks recorded other-than-temporary impairment of $1.2 million, $10.4 million and $1.4 million for the years ended December 31, 2009, 2008 and 2007 on equity investments in the common stock of two companies in the financial services industry, which management considers to have been primarily caused by economic events impacting the financial services industry as a whole. First Banks recorded other-than-temporary impairment of $1.0 million for the year ended December 31, 2008 on a preferred stock investment necessitated by bankruptcy proceedings of the underlying financial services company. The impairment recorded in 2009, 2008 and 2007 represented the difference between the cost basis and fair value of the equity securities as of the respective impairment recognition dates.

Investment securities with a carrying value of approximately $369.3 million and $479.4 million at December 31, 2009 and 2008, 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, 2009 and 2008, were as follows:

	December 31, 2009
	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(dollars expressed in thousands)
Available for sale:
Residential mortgage-backed	$	257,250		(1,731	)		726		(168	)		257,976		(1,899	)
Commercial mortgage-backed		837		(12	)		148		(1	)		985		(13	)
State and political subdivisions		20		—			261		(4	)		281		(4	)
Total	$	258,107		(1,743	)		1,135		(173	)		259,242		(1,916	)

	December 31, 2008
	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(dollars expressed in thousands)
Available for sale:
Residential mortgage-backed	$	123,944		(1,711	)		114,443		(1,729	)		238,387		(3,440	)
Commercial mortgage-backed		—		—			157		(8	)		157		(8	)
State and political subdivisions		4,479		(101	)		25		(1	)		4,504		(102	)
Total	$	128,423		(1,812	)		114,625		(1,738	)		243,048		(3,550	)
Held to maturity:
State and political subdivisions	$	202		(1	)		—		—			202		(1	)

Mortgage-backed securities – The unrealized losses on investments in mortgage-backed 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. At December 31, 2009 and 2008, the unrealized losses for residential mortgage-backed securities for 12 months or more included 14 securities and 24 securities, respectively. At December 31, 2009 and 2008, the unrealized losses for commercial mortgage-backed securities for 12 months or more included one security.

102

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

State and political subdivisions – The unrealized losses on investments in state and political subdivisions 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, 2009 and 2008, the unrealized losses for state and political subdivisions for 12 months or more included one security.

Note 4 – Loans and Allowance for Loan Losses

The following table summarizes the composition of our loan portfolio at December 31, 2009 and 2008:

	2009		2008
	(dollars expressed in thousands)
Commercial, financial and agricultural	$	1,692,922		2,575,505
Real estate construction and development		1,052,922		1,572,212
Real estate mortgage:
One-to-four family residential		1,279,166		1,553,366
Multi-family residential		223,044		220,404
Commercial real estate		2,269,372		2,562,598
Consumer and installment, net of unearned discount		48,183		70,170
Loans held for sale		42,684		38,720
Loans, net of unearned discount	$	6,608,293		8,592,975

Changes in the allowance for loan losses for the years ended December 31, 2009, 2008 and 2007 were as follows:

	2009			2008			2007
	(dollars expressed in thousands)
Balance, beginning of year	$	220,214			168,391			145,729
Acquired allowances for loan losses		—			—			14,425
Allowance for loan losses allocated to loans sold		(4,725	)		—			—
		215,489			168,391			160,154
Loans charged-off		(352,723	)		(331,021	)		(65,494	)
Recoveries of loans previously charged-off		13,682			14,844			8,675
Net loans charged-off		(339,041	)		(316,177	)		(56,819	)
Provision for loan losses		390,000			368,000			65,056
Balance, end of year	$	266,448			220,214			168,391

First Banks had $735.5 million and $442.4 million of impaired loans, consisting of loans on nonaccrual status and restructured loans, at December 31, 2009 and 2008, respectively. Interest on impaired loans that would have been recorded under the original terms of the loans was $64.1 million, $38.0 million and $16.2 million for the years ended December 31, 2009, 2008 and 2007, respectively. Of these amounts, $23.0 million, $19.0 million and $8.0 million was recorded as interest income on such loans in 2009, 2008 and 2007, respectively. The allowance for loan losses includes an allocation for each impaired loan, with the exception of acquired impaired loans classified as nonaccrual loans, which are initially measured at fair value with no allocated allowance for loan losses, in accordance with SOP 03-3, as further discussed below. The aggregate allocation of the allowance for loan losses related to impaired loans was approximately $83.4 million and $63.2 million at December 31, 2009 and 2008, respectively. The average recorded investment in impaired loans was $565.9 million, $351.5 million and $88.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. The amount of interest income recognized using a cash basis method of accounting during the time these loans were impaired was $4.7 million, $987,000 and zero in 2009, 2008 and 2007, respectively. At December 31, 2009 and 2008, First Banks had $3.8 million and $7.1 million, respectively, of loans past due 90 days or more and still accruing interest.

103

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The outstanding balance and carrying amount of impaired loans acquired in acquisitions was $5.9 million and $1.9 million, respectively, at December 31, 2009, and $26.5 million and $10.0 million, respectively, at December 31, 2008. Changes in the carrying amount of impaired loans acquired in acquisitions for the years ended December 31, 2009 and 2008 were as follows:

	2009			2008
	(dollars expressed in thousands)
Balance, beginning of year	$	9,997			46,003
Transfers to other real estate		(3,779	)		(11,552	)
Loans charged-off		(3,607	)		(13,727	)
Payments and settlements		(666	)		(10,727	)
Balance, end of year	$	1,945			9,997

There was no allowance for loan losses related to these loans as these loans were recorded at the lower of cost or fair value at December 31, 2009 and 2008. As these loans were classified as nonaccrual loans, there was no accretable yield related to these loans at December 31, 2009 and 2008. There were no impaired loans acquired during the years ended December 31, 2009 and 2008.

First Banks’ primary market areas are the states of California, Florida, Illinois, Missouri and Texas. At December 31, 2009 and 2008, approximately 94% and 92% of the total loan portfolio, and 88% and 82% of the commercial, financial and agricultural loan portfolio, respectively, were made to borrowers within these states.

Real estate lending constitutes the only significant concentration of credit risk. Real estate loans comprised approximately 74% and 69% of the loan portfolio at December 31, 2009 and 2008, respectively, of which 27% and 26%, 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, 2009, the balance of such loans, all of which were held for portfolio, was approximately $129.6 million, of which approximately 31.8% were delinquent. At December 31, 2008, the balance of such loans, all of which were held for portfolio, was approximately $168.0 million, of which approximately 24.6% were delinquent.

In general, First Banks is a secured lender. At December 31, 2009 and 2008, 99% and 98% of the loan portfolio was collateralized, respectively. 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.

First Bank originates certain one-to-four family residential mortgage loans for sale in the secondary market. First Bank has a repurchase obligation on these loans in the event of fraud or, on certain loans, early payment default. The early payment default provisions generally range from four months to one year after sale of the loan in the secondary market.

Loans to directors, their affiliates and executive officers of First Banks, Inc. were approximately $37.2 million and $49.0 million at December 31, 2009 and 2008, respectively, as further described in Note 19 to the consolidated financial statements.

Loans with a carrying value of approximately $3.00 billion and $3.74 billion at December 31, 2009 and 2008, respectively, were pledged as collateral under borrowing arrangements with the FRB and the FHLB. At December 31, 2009 and 2008, First Bank had aggregate outstanding advances of $600.0 million and $300.7 million, respectively, under these borrowing arrangements, as further described in Note 10 to the consolidated financial statements.

104

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 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, 2009 and 2008 are summarized as follows:

	December 31,
	2009				2008
	Notional Amount		Credit Exposure		Notional Amount		Credit Exposure
	(dollars expressed in thousands)
Cash flow hedges – subordinated debentures (1)	$	125,000		—		125,000		—
Customer interest rate swap contracts		80,194		683		16,000		85
Interest rate lock commitments		36,000		369		48,700		831
Forward commitments to sell mortgage-backed securities		61,000		647		40,300		—

_________________

(1) In August 2009, First Banks discontinued hedge accounting following the announcement of the deferral of interest payments on the underlying trust preferred securities associated with its subordinated debentures.

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. First Banks’ credit exposure on interest rate swaps is limited to the net fair value and related accrued interest receivable reduced by the amount of collateral pledged by the counterparty. At December 31, 2009 and 2008, First Banks had pledged cash of $3.9 million and $3.7 million, respectively, as collateral in connection with its interest rate swap agr eements on subordinated debentures. Collateral requirements are monitored on a daily basis and adjusted as necessary.

For the years ended December 31, 2009 and 2008, First Banks realized net interest income of $12.5 million and $11.5 million, respectively, on its derivative financial instruments, whereas for the year ended December 31, 2007, First Banks realized net interest expense of $3.1 million on its derivative financial instruments. First Banks also recorded net losses on derivative instruments of $4.9 million for the year ended December 31, 2009, which are included in noninterest income in the consolidated statements of operations, in comparison to net gains of $1.7 million and $1.2 million for the years ended December 31, 2008 and 2007, respectively.

Cash Flow Hedges – Subordinated Debentures. First Banks entered into four interest rate swap agreements, which were designated as cash flow hedges prior to August 2009, with the objective of stabilizing the long-term cost of capital and cash flow, and accordingly, net interest expense on subordinated debentures to the respective call dates of certain subordinated debentures. These swap agreements provide for First Banks to receive an adjustable rate of interest equivalent to the three-month London Interbank Offered Rate (LIBOR) plus 1.65%, 1.85%, 1.61% and 2.25%, and pay a fixed rate of interest. The terms of the swap agreements provide for First Banks to pay and receive interest on a quarterly basis.

The amount receivable by First Banks under these swap agreements was $197,000 and $528,000 at December 31, 2009 and 2008, respectively, and the amount payable by First Banks under these swap agreements was $451,000 at December 31, 2009 and 2008.

In August 2009, First Banks reclassified a cumulative fair value adjustment of $4.6 million on its interest rate swap agreements designated as cash flow hedges on its subordinated debentures from accumulated other comprehensive income to loss on derivative instruments as a result of the discontinuation of hedge accounting following the announcement of the deferral of interest payments on the underlying trust preferred securities. In conjunction with the discontinuation of hedge accounting, the net interest differential on these interest rate swap agreements was recorded as a reduction of noninterest income effective August 2009.

105

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

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 on certain subordinated debentures as of December 31, 2009 and 2008 were as follows:

Maturity Date	Notional Amount		Interest Rate Paid			Interest Rate Received			Fair Value
	(dollars expressed in thousands)
December 31, 2009:
July 7, 2011	$	25,000		4.40	%		1.93	%	$	(644	)
December 15, 2011		50,000		4.91			2.10			(1,668	)
March 30, 2012		25,000		4.71			1.86			(884	)
December 15, 2012		25,000		5.57			2.50			(975	)
	$	125,000		4.90			2.10		$	(4,171	)
December 31, 2008:
July 7, 2011	$	25,000		4.40	%		6.40	%	$	(575	)
December 15, 2011		50,000		4.91			3.85			(1,945	)
March 30, 2012		25,000		4.71			3.08			(1,048	)
December 15, 2012		25,000		5.57			4.25			(1,308	)
	$	125,000		4.90			4.29		$	(4,876	)

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

Ø In September 2006, First Banks entered into a $200.0 million notional amount three-year interest rate swap agreement and a $200.0 million notional amount four-year interest rate swap agreement. The underlying hedged assets were certain variable rate loans within First Banks’ commercial loan portfolio. The swap agreements provided 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 2.86%. The terms of the swap agreements provided for First Banks to pay and receive interest on a quarterly basis. In December 2008, First Banks terminated these swap agreements. The pre-tax gain of $20.8 million, in aggregate, is being amortized as an increase to interest and fees on loans in the consolidated statements of operations over the remaining terms of the respective interest rate swap agreements, which had contract ual maturity dates of September 18, 2009 and September 20, 2010.

For interest rate swap agreements designated as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into interest income or interest expense in the same period the hedged 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. First Banks did not recognize any ineffectiveness related to interest rate swap agreements that were designated as cash flow hedges on subordinated debentures in the consolidated statements of operations for the years ended December 31, 2008 and 2007, or from January 1, 2009 through the discontinuation of hedge accounting in August 2009. The net cash flows on the inter est rate swap agreements on subordinated debentures were recorded as an adjustment to interest expense on subordinated debentures until the discontinuation of hedge accounting in August 2009. First Banks also did not recognize any ineffectiveness related to interest rate swap agreements designated as cash flow hedges on loans in the consolidated statements of operations for the years ended December 31, 2009, 2008 and 2007. The net cash flows on the interest rate swap agreements on loans were recorded as an adjustment to interest income on loans.

Customer Interest Rate Swap Agreement Contracts. First Bank offers interest rate swap agreements to certain customers to assist in hedging their risks of adverse changes in interest rates. First Bank serves as an intermediary between its customers and the financial markets. Each interest rate swap agreement between First Bank and its customers is offset by an interest rate swap agreement between First Bank and various counterparties. These interest rate swap agreements do not qualify for hedge accounting treatment. Changes in the fair value are recognized in noninterest income on a monthly basis. Each customer contract is paired with an offsetting contract, and as such, there is no significant impact to net income (loss). The notional amount of these int erest rate swap agreement contracts at December 31, 2009 and 2008 was $80.2 million and $16.0 million, respectively.

106

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Interest Rate Floor Agreements. In September 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 provided 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%. In August 2006, First Bank entered into a $200.0 million notional amount three-year interest rate floor agreement in conjunction with the restructuring of one of First Bank’s $100.0 million term repurchase agreements, as further described below, to further stabilize net interest income in the event of a declining rate scenario. The interest rate floor agr eement provided for First Bank to receive a quarterly adjustable rate of interest equivalent to the differential between the strike price of 4.00% and the three-month LIBOR should the three-month LIBOR equal or fall below the strike price. In May 2008, First Bank terminated its interest rate floor agreements to modify its overall hedge position in accordance with its interest rate risk management program, and did not incur any gains or losses in conjunction with the termination of these interest rate floor agreements. Changes in the fair value of interest rate floor agreements are recognized in noninterest income.

Interest Rate Floor Agreements Embedded in Term Repurchase Agreements. First Bank has a term repurchase agreement under a master repurchase agreement with an unaffiliated third party, as further described in Note 10 to the consolidated financial statements. The underlying securities associated with the term repurchase agreement are agency collateralized mortgage obligation securities and are held by other financial institutions under safekeeping agreements. The term repurchase agreement was entered into with the objective of stabilizing net interest income over time, further protecting the net interest margin against changes in interest rates and providing funding for security purchases. The term repurchase agreement had a borrowing amount of $100.0 mill ion, a maturity date of October 12, 2010, and contained an embedded interest rate floor agreement which was terminated in 2008. The interest rate floor agreement included within the term repurchase agreement represented an embedded derivative instrument which, in accordance with existing accounting literature governing derivative instruments, was not required to be separated from the term repurchase agreement and accounted for separately as a derivative financial instrument. As such, the term repurchase agreement is 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 operations. In March 2008, First Bank restructured its existing $100.0 million term repurchase agreement. The primary modifications were to: (a) increase the borrowing amount from $100.0 million to $120.0 million; (b) extend the maturity date from October 12, 2010 to April 12, 2012; (c) convert the interest rate fr om a variable rate tied to LIBOR to a fixed rate of 3.36%; and (d) terminate the embedded interest rate floor agreement contained within the term repurchase agreement. These modifications resulted in a pre-tax gain of $5.0 million, which is reflected in noninterest income in the consolidated statements of operations.

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, which expire in March 2010. The fair value of the interest rate lock commitments, which is included in other assets in the consolidated balance sheets, was an unrealized gain of $369,000 and $831,000 at December 31, 2009 and 2008, respectively. The fair value of the forward contracts to sell mortgage-backed securities, which is included in other assets in the consolidated balance sheets, was an unrealized gain of $647,000 and an unrealized loss of $325,000 at December 31, 2009 and 2008, respectively. Changes in the fair value of interest rate lock commitments and forward commitments to sell mortgage-backed securities are recognized in noninterest income on a monthly basis.

107

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The following table summarizes derivative financial instruments held by First Banks, their estimated fair values and their location in the consolidated balance sheets at December 31, 2009 and 2008:

	December 31, 2009				December 31, 2008
	Balance Sheet Location	Fair Value Gain (Loss)			Balance Sheet Location	Fair Value Gain (Loss)
	(dollars expressed in thousands)
Derivative financial instruments designated as hedging instruments under ASC Topic 815:
Cash flow hedges – subordinated debentures (1)	Other liabilities	$	—		Other liabilities	$	(4,876	)
Derivative financial instruments not designated as hedging instruments under ASC Topic 815:
Customer interest rate swap agreements	Other assets	$	589		Other assets	$	76
Interest rate lock commitments	Other assets		369		Other assets		831
Forward commitments to sell mortgage-backed securities	Other assets		647		Other assets		(325	)
Total derivatives in other assets		$	1,605			$	582
Interest rate swap agreements – subordinated debentures	Other liabilities	$	(4,171	)	Other liabilities	$	—
Customer interest rate swap agreements	Other liabilities		(345	)	Other liabilities		(76	)
Total derivatives in other liabilities		$	(4,516	)		$	(76	)

_________________

(1) In August 2009, First Banks discontinued hedge accounting following the announcement of the deferral of interest payments on the underlying trust preferred securities associated with its subordinated debentures.

The following table summarizes amounts included in the consolidated statements of operations and in accumulated other comprehensive income (loss) in the consolidated balance sheets as of and for the years ended December 31, 2009, 2008 and 2007 related to interest rate swap agreements designated as cash flow hedges:

	2009			2008			2007
	(dollars expressed in thousands)
Derivative financial instruments designated as hedging instruments under ASC Topic 815:
Cash flow hedges – loans:
Amount reclassified from accumulated other comprehensive income (loss) to interest income on loans	$	13,730			11,664			(3,066	)
Amount of (loss) gain recognized in other comprehensive income (loss)		—			(252	)		8,850
Cash flow hedges – subordinated debentures (1):
Amount reclassified from accumulated other comprehensive loss to interest expense on subordinated debentures		1,279			124			—
Amount reclassified from accumulated other comprehensive loss to net gain (loss) on derivative instruments		(4,587	)		—			—
Amount of unrealized loss recognized in other comprehensive loss		(990	)		(5,000	)		—

_________________

(1) In August 2009, First Banks discontinued hedge accounting following the announcement of the deferral of interest payments on the underlying trust preferred securities associated with its subordinated debentures.

The unamortized gain related to the fair value of the cash flow hedges on loans terminated in December 2008 in accumulated other comprehensive loss was $5.7 million and $19.5 million on a gross basis and $3.7 million and $12.7 million, net of tax, at December 31, 2009 and December 31, 2008, respectively. The loss included in accumulated other comprehensive loss related to cash flow hedges on subordinated debentures was zero at December 31, 2009 and $4.9 million on a gross basis and $3.2 million, net of tax, at December 31, 2008, respectively. In August 2009, First Banks reclassified a cumulative fair value adjustment of $4.6 million on its interest rate swap agreements designated as cash flow hedges on its subordinated debentures from accumulated other comprehensive loss to net gain (loss) on derivative instruments as a result o f the discontinuation of hedge accounting following the announcement of the deferral of interest payments on the underlying trust preferred securities in August 2009, as further described in Note 12 to the consolidated financial statements.

108

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The following table summarizes amounts included in the consolidated statements of operations for the years December 31, 2009, 2008 and 2007 related to non-hedging derivative instruments:

	2009			2008			2007
	(dollars expressed in thousands)
Derivative financial instruments not designated as hedging instruments under ASC Topic 815:
Interest rate swap agreements – subordinated debentures:
Net gain (loss) on derivative instruments	$	(5,585	)		—			—
Customer interest rate swap agreements:
Net gain (loss) on derivative instruments		711			—			—
Interest rate floor agreements:
Net gain (loss) on derivative instruments		—			1,730			1,233
Interest rate floor agreements embedded in Term
Repurchase Agreements:
Gain on extinguishment of term repurchase agreement		—			5,000			—
Interest rate lock commitments:
Gain (loss) on loans sold and held for sale		(462	)		808			23
Forward commitments to sell mortgage-backed securities:
Gain (loss) on loans sold and held for sale		972			(365	)		(46	)

Note 6 – Servicing Rights

Mortgage Banking Activities.At December 31, 2009 and 2008, First Banks serviced mortgage loans for others totaling $1.26 billion and $1.09 billion, respectively. Borrowers’ escrow balances held by First Banks on such loans were $7.7 million and $6.5 million at December 31, 2009 and 2008, respectively. Changes in mortgage servicing rights for the years ended December 31, 2009 and 2008 were as follows:

	2009			2008
	(dollars expressed in thousands)
Balance, beginning of year	$	7,418			5,290
Re-measurement to fair value upon election to measure servicing rights at fair value under ASC Topic 860 (1)		—			9,538
Originated mortgage servicing rights		6,342			2,175
Change in fair value resulting from changes in valuation inputs or assumptions used in valuation model (2)		1,342			(7,915	)
Other changes in fair value (3)		(2,972	)		(1,670	)
Balance, end of year	$	12,130			7,418

_________________

(1) On January 1, 2008, First Banks elected to measure servicing rights at fair value as permitted by ASC Topic 860.

(2) The change in fair value resulting from changes in valuation inputs or assumptions used in valuation model primarily reflects the change in discount rates and prepayment speed assumptions, primarily due to changes in interest rates.

(3) Other changes in fair value reflect changes due to the collection/realization of expected cash flows over time.

109

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Other Servicing Activities.  AtDecember 31, 2009 and 2008, First Banks serviced SBA loans for others totaling $231.3 million and $221.5 million, respectively. Changes in SBA servicing rights for the years ended December 31, 2009 and 2008 were as follows:

	2009			2008
	(dollars expressed in thousands)
Balance, beginning of year	$	8,963			7,468
Re-measurement to fair value upon election to measure servicing rights at fair value under ASC Topic 860 (1)		—			905
Originated SBA servicing rights		781			2,830
Change in fair value resulting from changes in valuation inputs or assumptions used in valuation model (2)		282			(1,336	)
Other changes in fair value (3)		(1,548	)		(904	)
Balance, end of year	$	8,478			8,963

_________________

(1) On January 1, 2008, First Banks elected to measure servicing rights at fair value as permitted by ASC Topic 860.

(2) The change in fair value resulting from changes in valuation inputs or assumptions used in valuation model primarily reflects the change in discount rates and prepayment speed assumptions, primarily due to changes in interest rates.

(3) Other changes in fair value reflect changes due to the collection/realization of expected cash flows over time.

Note 7 – Bank Premises and Equipment, Net

Bank premises and equipment, net of accumulated depreciation and amortization, were comprised of the following at December 31, 2009 and 2008:

	2009			2008
	(dollars expressed in thousands)
Land	$	42,142			57,391
Buildings and improvements		151,046			185,288
Furniture, fixtures and equipment		118,231			142,554
Leasehold improvements		31,258			31,919
Construction in progress		3,205			11,509
Total		345,882			428,661
Accumulated depreciation and amortization		(167,580	)		(192,133	)
Bank premises and equipment, net	$	178,302			236,528

First Banks capitalized interest cost of $282,000, $400,000 and $1.8 million during the years ended December 31, 2009, 2008 and 2007, respectively.

Depreciation and amortization expense for the years ended December 31, 2009, 2008 and 2007 was $19.0 million, $20.9 million and $17.8 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 $18.8 million, $19.7 million and $18.5 million for the years ended December 31, 2009, 2008 and 2007, respectively. Future minimum lease payments under non-cancellable operating leases extend through 2084 as follows:

	(dollars expressed in thousands)
Year ending December 31 (1):
2010	$	13,673
2011		11,835
2012		10,207
2013		7,545
2014		5,818
Thereafter		34,759
Total future minimum lease payments	$	83,837

__________________

(1) Amounts exclude future minimum lease payments under non-cancellable operating leases associated with discontinued operations of $2.4 million, $2.2 million, $2.1 million, $1.8 million and $1.5 million for the years ended December 31, 2010, 2011, 2012, 2013 and 2014, respectively, and $6.0 million thereafter, or a total of $16.0 million.

110

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

First Banks also leases to unrelated parties a portion of its banking facilities. Rental income associated with these leases was $6.1 million, $5.9 million and $5.3 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Note 8 – Goodwill and Other Intangible Assets

Goodwill and other intangible assets, net of amortization, were comprised of the following at December 31, 2009 and 2008:

	2009					2008
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(dollars expressed in thousands)
Amortized intangible assets:
Core deposit intangibles (1)	$	23,622		(16,150	)		53,916		(33,251	)
Customer list intangibles (2)		—		—			23,320		(3,903	)
Other intangibles (3)		—		—			2,385		(1,695	)
Total	$	23,622		(16,150	)		79,621		(38,849	)
Unamortized intangible assets:
Goodwill (4)	$	136,967					266,028

__________________

(1) The gross carrying amount and accumulated amortization for core deposit intangibles at December 31, 2009 have been reduced by $12.5 million related to core deposit intangibles associated with certain acquisitions that became fully amortized in December 2008, and by $17.8 million and $11.6 million, respectively, or a net of $6.2 million, related to discontinued operations as further described in Note 2 to the consolidated financial statements.

(2) As further described in Note 2 to the consolidated financial statements, customer list intangibles associated with ANB and UPAC were written off to loss from discontinued operations as of the respective sale dates.

(3) Other intangibles were fully amortized in 2009.

(4) Goodwill at December 31, 2009 has been reduced by $41.0 million related to discontinued operations and assets held for sale, as further described below and in Note 2 to the consolidated financial statements.

First Banks allocated goodwill related to the sales of ANB, certain assets and liabilities of UPAC and the Springfield Branch of $10.0 million, $5.0 million and $1.0 million, respectively, based on the relative fair values of the businesses and operations disposed of during 2009 and the portion of the First Bank segment that will be retained. First Banks allocated goodwill related to the Chicago Region and the Texas Region of $24.0 million and $16.0 million, respectively, or $40.0 million in aggregate, which is included in assets of discontinued operations at December 31, 2009. First Banks allocated goodwill related to the sale of the Lawrenceville Branch of $1.0 million, which is included in assets held for sale at December 31, 2009. First Banks did not allocate any goodwill to MVP.

Core deposit intangibles of $2.3 million and $4.0 million related to the Chicago Region and the Texas Region, respectively, are included in assets of discontinued operations at December 31, 2009. A customer list intangible of $3.0 million related to ANB was recorded as a reduction of gain on sale of discontinued operations upon the sale of ANB on September 30, 2009. A customer list intangible of $15.0 million related to UPAC was recorded as an increase in the loss on sale of discontinued operations upon the sale of certain assets and liabilities of UPAC on December 31, 2009.

First Bank recorded goodwill impairment of $75.0 million for the year ended December 31, 2009, as further discussed below. First Bank did not record goodwill impairment for the years ended December 31, 2008 or 2007.

Amortization of intangible assets was $5.0 million, $6.3 million, and $6.2 million for the years ended December 31, 2009, 2008 and 2007, respectively. As of December 31, 2009, the remaining estimated life of the amortization periods for core deposit intangibles was three years. Amortization of core deposit intangibles 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:
2010	$	3,925
2011		3,074
2012		473
Total	$	7,472

111

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Changes in the carrying amount of goodwill for the years ended December 31, 2009 and 2008 were as follows:

	2009			2008
	(dollars expressed in thousands)
Balance, beginning of year	$	266,028			263,747
Goodwill acquired during the year (1)		2,939			2,920
Goodwill impairment		(75,000	)		—
Goodwill allocated to sale transactions (2)		(16,000	)		—
Goodwill allocated to discontinued operations (3)		(40,000	)		—
Goodwill allocated to assets held for sale (3)		(1,000	)		—
Acquisition-related and adjustments (4)		—			(639	)
Balance, end of year	$	136,967			266,028

__________________

(1) Goodwill acquired during 2009 and 2008 pertains to additional earn-out consideration associated with the acquisition of ANB in March 2006.

(2) Goodwill allocated to sale transactions during 2009 pertains to the sale of ANB on September 30, 2009, the sale of certain assets and liabilities of UPAC on December 31, 2009 and the sale of the Springfield Branch on November 23, 2009, as further described above and in Note 2 to the consolidated financial statements.

(3) Goodwill allocated to discontinued operations and assets held for sale pertains to the Chicago Region, the Texas Region and the Lawrenceville Branch, as further described above and in Note 2 to the consolidated financial statements.

(4) Acquisition-related adjustments include additional purchase accounting adjustments for prior years’ acquisitions necessary to appropriately adjust preliminary goodwill recorded at the time of the acquisition, which was based upon current estimates available at that time, to reflect the receipt of additional valuation data. Acquisition-related adjustments recorded in 2008 pertain to the acquisition of CFHI in November 2007.

First Banks’ annual measurement date for its goodwill impairment test is December 31. First Banks engaged an independent valuation firm to assist in computing the fair value estimate for the impairment assessment by utilizing two separate valuation methodologies and applying a weighted average to each methodology in order to determine fair value for its single reporting unit, First Bank. The valuation methodologies utilized a comparison of the average price to book value of comparable businesses and a discounted cash flow valuation technique. As a result of this independent third party valuation, First Banks concluded that the carrying value of its single reporting unit exceeded its estimated fair value at December 31, 2009.

Because the carrying value of First Banks’ reporting unit exceeded the estimated fair value at December 31, 2009, First Banks engaged the same independent valuation firm to assist in computing the fair value of First Bank’s assets and liabilities in order to determine the implied fair value of First Bank’s goodwill at December 31, 2009. Management compared the implied fair value of First Bank’s goodwill, as determined by the independent valuation firm, with its carrying value, and based on the results of the goodwill impairment analysis performed, First Bank recorded goodwill impairment of $75.0 million which is reflected in the consolidated statements of operations. The goodwill impairment charge was a direct result of continued deterioration in the real estate markets and economic conditions which decre ased the fair value of First Bank. The primary factor contributing to the impairment recognition was further deterioration in the actual and projected financial performance of First Bank, as evidenced by the increase in the provision for loan losses, net charge-offs and nonperforming loans and the decline in the net interest margin and net interest income during 2009.

First Banks believes the estimates and assumptions utilized in the goodwill impairment test are reasonable. However, further deterioration in the outlook for credit quality or other factors could impact the estimated fair value of the single reporting unit as determined under Step 1 of the goodwill impairment test. A decrease in the estimated fair value of the reporting unit would decrease the implied fair value of goodwill as further determined under Step 2 of the goodwill impairment test. Step 2 of the goodwill impairment test compared the implied fair value of goodwill with the carrying value of goodwill. The implied fair value of goodwill is determined in the same manner as the determination of the amount of goodwill recognized in a business combination. The fair value of a reporting unit is allocated to all of the assets an d liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. The fair value allocated to all of the assets and liabilities of the reporting unit requires significant judgment, especially for those assets and liabilities that are not measured on a recurring basis such as certain types of loans. The excess of the estimated fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.

The estimated fair value assigned to loans significantly affected the determination of the implied fair value of First Bank’s goodwill at December 31, 2009. The implied fair value of a reporting unit’s goodwill will generally increase if the estimated fair value of the reporting unit’s loans is less than the carrying value of the reporting unit’s loans. The estimated fair value of the reporting unit’s loans was derived from discounted cash flow analyses. Loans were grouped into loan pools based on similar characteristics such as maturity, payment type and payment frequency, and rate type and underlying index. These cash flow calculations include assumptions for prepayment estimates over the loan’s remaining life, considerations for the current interest rate environment compared to the weighted average rate of the loan portfolio, a credit risk component based on the historical and expected performance of each loan portfolio stratum and a liquidity adjustment related to the current market environment. To the extent any of these assumptions change in the future, the implied fair value of the reporting unit’s goodwill could change materially. A decrease in the discount rate utilized in deriving the estimated fair value of the reporting unit’s loans would decrease the implied fair value of goodwill.

112

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The estimated fair value assigned to the core deposit intangible, or First Bank’s deposit base, also significantly affected the determination of the implied fair value of First Bank’s goodwill at December 31, 2009. The implied fair value of a reporting unit’s goodwill will generally decrease by the estimated fair value assigned to the reporting unit’s core deposit intangible. The estimated fair value of the core deposit intangible was derived from discounted cash flow analyses with considerations for estimated deposit runoff, cost of the deposit base, interest costs, net maintenance costs and the cost of alternative funds. The resulting estimate of the fair value of the core deposit intangible represents the present value of the difference in cash flows between maintaining the existing deposits and obtain ing alternative funds over the life of the deposit base. To the extent any of these assumptions used to determine the estimated fair value of the core deposit intangible change in the future, the implied fair value of the reporting unit’s goodwill could change materially.

Due to the current economic environment and the uncertainties regarding the impact on First Bank, there can be no assurance that First Banks’ estimates and assumptions made for the purposes of the goodwill impairment testing will prove to be accurate predictions in the future. Adverse changes in the economic environment, First Bank’s operations, or other factors could result in a decline in the implied fair value of First Bank, which could result in the recognition of future goodwill impairment that may materially affect the carrying value of First Bank’s assets and its related operating results.

Note 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, 2009 is as follows:

	Time deposits of $100,000 or more		Other time deposits		Total
	(dollars expressed in thousands)
Year ending December 31:
2010	$	689,701		1,229,762		1,919,463
2011		224,974		399,783		624,757
2012		13,137		45,505		58,642
2013		1,615		7,572		9,187
2014		1,724		4,846		6,570
Thereafter		—		189		189
Total	$	931,151		1,687,657		2,618,808

113

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 10 – Other Borrowings

Other borrowings were comprised of the following at December 31, 2009 and 2008:

	2009		2008
	(dollars expressed in thousands)
Securities sold under agreements to repurchase:
Daily	$	47,494		154,423
Term		120,000		120,000
FRB borrowings (1)		—		100,000
FHLB advances		600,000		200,710
Total	$	767,494		575,133

________________________

(1) In November 2008, First Bank entered into a $100.0 million borrowing with the FRB upon termination of a $100.0 million FHLB advance and subsequently renewed the borrowing at maturity in December 2008 at a fixed interest rate of 0.42%. First Bank repaid this borrowing upon its maturity in February 2009.

The maturity date, par amount and interest rate on First Bank’s FHLB advances as of December 31, 2009 and 2008 were as follows:

Maturity Date	Par Amount		Interest Rate
	(dollars expressed in thousands)
December 31, 2009:
Fixed Rate:
April 23, 2010	$	100,000		1.69	%
July 9, 2010		100,000		0.85	%
April 27, 2011		100,000		1.77	%
July 11, 2011		100,000		1.49	%
August 8, 2012		100,000		2.20	%
	$	500,000		1.60	%
Variable Rate:
September 23, 2016	$	100,000		0.20	%
December 31, 2008:
Fixed Rate:
February 17, 2009 (1)	$	100,000		2.92	%
July 23, 2009(2)		100,000		2.53	%
September 1, 2010 (3)		446		4.32	%
September 1, 2010 (3)		264		4.23	%
	$	200,710		2.73	%

________________________

(1) First Bank repaid this FHLB advance upon its maturity in February 2009.

(2) In March 2009, First Bank prepaid this FHLB advance and incurred a prepayment penalty of $357,000. The prepayment penalty was recorded as interest expense on other borrowings in the consolidated statements of operations.

(3) In October 2009, First Bank prepaid these FHLB advances and incurred prepayment penalties of $21,000 in aggregate, which were recorded as interest expense on other borrowings in the consolidated statements of operations.

The average balance of other borrowings was $566.0 million and $575.6 million, and the maximum month-end balance of other borrowings was $824.2 million and $697.0 million for the years ended December 31, 2009 and 2008, respectively. The average rates paid on other borrowings during the years ended December 31, 2009, 2008 and 2007 were 1.77%, 2.44% and 4.24%, respectively. Interest expense on securities sold under agreements to repurchase was $4.3 million, $6.6 million and $15.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. Interest expense on FHLB advances was $5.8 million, $7.7 million and $348,000 for the years ended December 31, 2009, 2008 and 2007, respectively. Interest expense on federal funds purchased was zero, $417,000 and $130,000 for the years ended December 31, 2009, 2008 and 2007, respe ctively. Interest expense on FRB borrowings was $64,000 and $88,000 for the years ended December 31, 2009 and 2008, respectively. The underlying securities associated with the term repurchase agreement are mortgage-backed securities and callable U.S. Government agency securities and are held by other financial institutions under safekeeping agreements.

114

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The maturity date, par amount, and interest rate on First Bank’s term repurchase agreement as of December 31, 2009 and 2008 were as follows:

Maturity Date	Par Amount		Interest Rate
	(dollars expressed in thousands)
April 12, 2012 (1)	$	120,000		3.36	%

________________________

(1) On March 31, 2008, First Bank restructured its previous $100.0 million term repurchase agreement. The primary modifications were to:  (a) increase the borrowing amount to $120.0 million; (b) extend the maturity date from October 12, 2010 to April 12, 2012; (c) convert the interest rate from a variable rate to a fixed rate of 3.36%, with interest to be paid quarterly beginning on April 12, 2008; and (d) terminate the embedded interest rate floor agreements contained within the term repurchase agreement. These modifications resulted in a pre-tax gain of $5.0 million, which was recorded as noninterest income in the consolidated statements of operations.

Note 11 – Notes Payable

On May 15, 2008, First Banks entered into a Revolving Credit Note and a Stock Pledge Agreement with Investors of America Limited Partnership (Investors of America, LP) (the Credit Agreement), and on August 11, 2008, First Banks entered into a First Amended Revolving Credit Note (the Amended Credit Agreement) with Investors of America, LP (collectively, the Credit Agreement), which modified the existing original Credit Agreement to provide that First Banks receive the prior written consent of Investors of America, LP for any advance that would cause the aggregate outstanding principal amount to exceed $10.0 million. The Credit Agreement provided for a $30.0 million secured revolving line of credit to be utilized for general working capital needs and capital investments in subsidiaries. Advances outstanding under the Credit Agreem ent bore interest at the three-month LIBOR plus 300 basis points. Interest was payable on outstanding advances on the first day of each month (in arrears) and the aggregate principal balance of all outstanding advances and any accrued interest thereon was due and payable in full on June 30, 2009, the maturity date of the Credit Agreement. The Credit Agreement was secured by First Banks’ ownership interest in all of the capital stock of both SFC and CFHI.

First Banks received an advance of the entire $30.0 million under the Credit Agreement on May 15, 2008 and utilized the proceeds of the advance to terminate and repay in full of the obligations under its then existing secured credit agreement with a group of unaffiliated financial institutions. In July 2008, First Bank repaid in full its outstanding balance under the Credit Agreement in the aggregate of $30.0 million, including the accrued interest thereon, and as such, there were no balances outstanding on First Banks’ Credit Agreement at December 31, 2008. The Credit Agreement matured on June 30, 2009.

There were no balances outstanding with respect to notes payable as of and for the year ended December 31, 2009. The end of period balance, average balance and maximum month-end balance of notes payable as of and for the year ended December 31, 2008 were zero, $21.6 million and $58.0 million, respectively. The average rates paid on notes payable during the years ended December 31, 2008 and 2007 were 6.15% and 6.94%, respectively. Interest expense recognized on notes payable includes commitment, arrangement and renewal fees. Exclusive of these fees, the average rates paid on notes payable during the years ended December 31, 2008 and 2007 were 4.42% and 6.41%, respectively.

Note 12 – Subordinated Debentures

First Banks has formed or assumed various affiliated Delaware or Connecticut statutory and business trusts (collectively, the Trusts) that were created for the sole purpose of issuing trust preferred securities. The trust preferred securities were issued in private placements, with the exception of First Preferred Capital Trust IV, which was issued in a publicly underwritten offering. First Banks owns all of the common securities of the Trusts. The gross proceeds of the offerings were used by the Trusts to purchase variable rate or fixed rate subordinated debentures from First Banks. The subordinated debentures are the sole asset of the Trusts. In connection with the issuance of the trust preferred securities, First Banks made certain guarantees and commitments that, in the aggregate, constitute a full and unconditional guarante e by First Banks of the obligations of the Trusts under the trust preferred securities. First Banks’ distributions accrued on the subordinated debentures were $14.1 million, $20.9 million and $24.4 million for the years ended December 31, 2009, 2008 and 2007, respectively, and are included in interest expense in the consolidated statements of operations. 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 to the maturity date of the respective subordinated debentures. The structure of the trust preferred securities currently satisfies the regulatory requirements for inclusion, subject to certain limitations, in First Banks’ capital base.

115

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

A summary of the subordinated debentures issued to the Trusts in conjunction with the trust preferred securities offerings at December 31, 2009 and 2008 were as follows:

Name of Trust	Issuance Date	Maturity Date	Call Date (1)	Interest Rate (2)			Trust Preferred Securities		Subordinated Debentures
Variable Rate
First Bank Statutory Trust II	September 2004	September 20, 2034	September 20, 2009		+ 205.0	bp		20,000	$	20,619
Royal Oaks Capital Trust I	October 2004	January 7, 2035	January 7, 2010		+ 240.0	bp		4,000		4,124
First Bank Statutory Trust III	November 2004	December 15, 2034	December 15, 2009		+ 218.0	bp		40,000		41,238
First Bank Statutory Trust IV	March 2006	March 15, 2036	March 15, 2011		+ 142.0	bp		40,000		41,238
First Bank Statutory Trust V	April 2006	June 15, 2036	June 15, 2011		+ 145.0	bp		20,000		20,619
First Bank Statutory Trust VI	June 2006	July 7, 2036	July 7, 2011		+ 165.0	bp (3a)		25,000		25,774
First Bank Statutory Trust VII	December 2006	December 15, 2036	December 15, 2011		+ 185.0	bp (3b)		50,000		51,547
First Bank Statutory Trust VIII	February 2007	March 30, 2037	March 30, 2012		+ 161.0	bp (3c)		25,000		25,774
First Bank Statutory Trust X	August 2007	September 15, 2037	September 15, 2012		+ 230.0	bp		15,000		15,464
First Bank Statutory Trust IX	September 2007	December 15, 2037	December 15, 2012		+ 225.0	bp (3d)		25,000		25,774
First Bank Statutory Trust XI	September 2007	December 15, 2037	December 15, 2012		+ 285.0	bp		10,000		10,310
Fixed Rate
First Bank Statutory Trust	March 2003	March 20, 2033	March 20, 2008		8.10	%		25,000		25,774
First Preferred Capital Trust IV	April 2003	June 30, 2033	June 30, 2008		8.15	%		46,000		47,423

__________________

(1) The subordinated debentures are callable at the option of First Banks on the call date shown at 100% of the principal amount plus accrued and unpaid interest.

(2) The interest rates paid on the trust preferred securities are based on either a variable rate or a fixed rate. The variable rate is based on the three-month LIBOR plus the basis point spread shown.

(3) In March 2008, First Banks entered into four interest rate swap agreements, which were designated as cash flow hedges prior to August 10, 2009, to effectively convert the interest payments on these subordinated debentures from variable rate to fixed rate to the respective call dates as follows:

(a) $25.0 million notional amount with a maturity date of July 7, 2011 that converts the interest rate from a variable rate of LIBOR plus 165 basis points to a fixed rate of 4.40%;

(b) $50.0 million notional amount with a maturity date of December 15, 2011 that converts the interest rate from a variable rate of LIBOR plus 185 basis points to a fixed rate of 4.905%;

(c) $25.0 million notional amount with a maturity date of March 30, 2012 that converts the interest rate from a variable rate of LIBOR plus 161 basis points to a fixed rate of 4.71%; and

(d) $25.0 million notional amount with a maturity date of December 15, 2012 that converts the interest rate from a variable rate of LIBOR plus 225 basis points to a fixed rate of 5.565%.

On August 10, 2009, First Banks announced the deferral of its regularly scheduled interest payments on its outstanding junior subordinated notes relating to its $345.0 million of trust preferred securities beginning with the regularly scheduled quarterly interest payments that would otherwise have been made in September and October 2009. The terms of the junior subordinated notes and the related trust indentures allow First Banks to defer such payments of interest for up to 20 consecutive quarterly periods without default or penalty. During the deferral period, the respective trusts will suspend the declaration and payment of dividends on the trust preferred securities. During the deferral period, First Banks may not, among other things and with limited exceptions, pay cash dividends on or repurchase its common stock or preferre d stock nor make any payment on outstanding debt obligations that rank equally with or junior to the junior subordinated notes. First Banks has deferred $6.4 million of its regularly scheduled interest payments as of December 31, 2009. In addition, First Banks has accrued additional interest expense of $44,000 as of December 31, 2009 on the regularly scheduled deferred interest payments based on the interest rate in effect for each subordinated note issuance in accordance with the respective terms of the underlying agreements.

The announcement of the deferral of interest payments on the underlying trust preferred securities in August 2009 resulted in the discontinuation of hedge accounting on First Banks’ interest rate swap agreements designated as cash flow hedges on its subordinated debentures. Accordingly, First Banks reclassified a cumulative fair value adjustment of $4.6 million on its interest rate swap agreements designated as cash flow hedges from accumulated other comprehensive loss to net gain (loss) on derivative instruments. In conjunction with the discontinuation of hedge accounting, the net interest differential on these interest rate swap agreements was recorded as a reduction of noninterest income rather than an increase to interest expense on subordinated debentures effective August 2009.

116

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Under its agreement with the FRB, First Banks agreed, among other things, to provide certain information to the FRB, including, but not limited to, prior notice regarding the issuance of additional trust preferred securities. First Banks also agreed not to make any distributions of interest or other sums on its outstanding trust preferred securities without the prior approval of the FRB, as further described in Note 1 to the consolidated financial statements.

Note 13 – Income Taxes

The (benefit) provision for income taxes from continuing operations for the years ended December 31, 2009, 2008 and 2007 consists of the following:

	2009			2008			2007
	(dollars expressed in thousands)
Current provision (benefit) for income taxes:
Federal	$	(13	)		(48,256	)		48,191
State		89			134			7,954
		76			(48,122	)		56,145
Deferred (benefit) provision for income taxes:
Federal		(101,889	)		(29,754	)		(5,712	)
State		(27,699	)		(14,946	)		(2,409	)
		(129,588	)		(44,700	)		(8,121	)
Increase (decrease) in deferred tax asset valuation allowance		131,905			111,145			(10,746	)
Total	$	2,393			18,323			37,278

The effective rates of federal income taxes for the years ended December 31, 2009, 2008 and 2007 differ from the federal statutory rates of taxation as follows:

	Years Ended December 31,
	2009						2008						2007
	Amount			Percent			Amount			Percent			Amount			Percent
	(dollars expressed in thousands)
(Loss) income from continuing operations before provision for income taxes and noncontrolling interest in income (loss) of subsidiaries	$	(396,597	)				$	(215,116	)				$	136,378
(Benefit) provision for income taxes calculated at federal statutory income tax rates	$	(138,809	)		35.0	%	$	(75,291	)		35.0	%	$	47,733			35.0	%
Effects of differences in tax reporting:
Tax-exempt interest income, net of tax preference adjustment		(515	)		0.1			(768	)		0.4			(961	)		(0.7	)
State income taxes		(13,200	)		3.3			(9,834	)		4.6			3,565			2.6
Bank owned life insurance, net of premium		7,817			(2.0	)		(952	)		0.4			(1,283	)		(0.9	)
Noncontrolling investment in flow through entity		7,460			(1.9	)		405			(0.2	)		(27	)		—
Amortization of intangibles		26,600			(6.7	)		—			—			—			—
Increase (decrease) in deferred tax asset valuation allowance, net of federal benefit		111,109			(28.0	)		101,584			(47.2	)		(10,746	)		(7.9	)
Expiration of net operating loss carryforwards		2,175			(0.5	)		2,828			(1.3	)		—			—
Other, net		(244	)		0.1			351			(0.2	)		(1,003	)		(0.8	)
Provision for income taxes	$	2,393			(0.6	)%	$	18,323			(8.5	)%	$	37,278			27.3	%

117

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2009 and 2008 were as follows:

	December 31,
	2009			2008
	(dollars expressed in thousands)
Deferred tax assets:
Federal net operating loss carryforwards	$	98,249			37,013
State net operating loss carryforwards		31,291			11,933
Allowance for loan losses		111,624			95,302
Loans held for sale		1,997			1,349
Alternative minimum and general business tax credits		14,716			12,978
Interest on nonaccrual loans		17,820			7,626
Deferred compensation		3,869			5,715
Net fair value adjustment for available-for-sale investment securities		—			19
Core deposit intangibles		818			—
Partnership and corporate investments		21,923			13,541
Overdraft, robbery and other fraud losses		2,709			2,774
Accrued contingent liabilities		3,725			2,017
Other		11,026			6,636
Gross deferred tax assets		319,767			196,903
Valuation allowance		(295,067	)		(160,052	)
Deferred tax assets, net of valuation allowance		24,700			36,851
Deferred tax liabilities:
Depreciation on bank premises and equipment		6,521			6,861
Servicing rights		5,477			3,490
Net fair value adjustment for derivative instruments		2,011			5,110
Net fair value adjustment for available-for-sale investment securities		450			—
Core deposit intangibles		—			2,224
Customer list intangibles		—			8,084
Discount on loans		1,647			3,228
Equity investments		5,481			5,499
State taxes		4,549			4,362
Deferred loan fees		5,468			5,718
Other		968			989
Deferred tax liabilities		32,572			45,565
Net deferred tax liabilities	$	(7,872	)		(8,714	)

The realization of First Banks’ net deferred tax assets is based on the expectation of future taxable income and the utilization of tax planning strategies. First Banks has recorded a full valuation allowance against its net deferred tax assets at December 31, 2009 and 2008. The deferred tax asset valuation allowance was recorded in accordance with SFAS No. 109, Accounting for Income Taxes, which was subsequently incorporated into ASC Topic 740, “Income Taxes.” Under ASC Topic 740, First Banks is required to assess whether it is “more likely than not” that some portion or all of its deferred tax assets will not be realized. Pursuant to ASC Topic 740, concluding that a deferred tax asset valuation allowance is not required is difficult when there is significant evidence which is objective and verifiable, such as the lack of recoverable taxes, excess of reversing deductible differences over reversing taxable differences and cumulative losses in recent years. If, in the future, First Banks generates taxable income on a sustained basis, management may conclude the deferred tax asset valuation allowance is no longer required, which would result in the reversal of a portion or all of the deferred tax asset valuation allowance, which would be reflected as a benefit for income taxes in the consolidated statements of income.

118

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Changes in the deferred tax asset valuation allowance for the years ended December 31, 2009, 2008 and 2007 were as follows:

	2009			2008			2007
	(dollars expressed in thousands)
Balance, beginning of year	$	160,052			23,278			21,401
Purchase acquisitions		—			—			20,177
Reversal of deferred tax asset valuation allowance to provision for income taxes		(2,229	)		(22,938	)		(10,746	)
Reversal of deferred tax asset valuation allowance to goodwill and other intangible assets		—			—			(7,554	)
Increase in deferred tax asset valuation allowance to provision for income taxes		134,134			157,085			—
Increase in deferred tax asset valuation allowance to accumulated other comprehensive loss		3,110			1,707			—
Adjustment to purchase acquisitions completed in prior periods		—			920			—
Balance, end of year	$	295,067			160,052			23,278

Upon completion of the 2004 acquisition of CIB Bank and the 2007 acquisition of CFHI, the net deferred tax assets associated with the respective acquisitions were evaluated to determine whether it was more likely than not that the net deferred tax assets would be recognized in the future. The ability to utilize the net deferred tax assets recorded in connection with the acquisitions is subject to a number of limitations. Among these limitations is the restriction that any built-in loss (the fair value of the entity 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 deferred and must be carried forward and subjected to rules similar to the rules for carrying forward net operating losses. Based upon these factors, management e stablished a valuation allowance for CIB Bank in 2004 and CFHI in 2007 in the amounts of $21.4 million and $20.2 million, respectively.

At December 31, 2007, the deferred tax assets associated with the acquisition of CIB Bank were evaluated and management concluded that $18.3 million of the valuation allowance was no longer required as the corresponding net deferred tax assets no longer existed due to the recognition of temporary differences. First Banks did not have any goodwill related to the CIB Bank acquisition at December 31, 2007. In accordance with SFAS No. 141, Business Combinations, which was subsequently incorporated into ASC Topic 805, “Business Combinations,” First Banks reduced the carrying values of certain acquired assets to zero, which included a reduction of core deposit intangibles of $5.9 million and bank premises and e quipment of $6.6 million. In addition, net deferred tax assets were increased by $4.9 million to reflect the impact of the reductions of the carrying values of the core deposit intangibles and bank premises and equipment. The remaining amount of $10.7 million was recorded as a reduction of income tax expense.

On September 30, 2008, the Internal Revenue Service (IRS) issued Notice 2008-83. In accordance with Notice 2008-83, any deduction properly allowed after an ownership change to a bank with respect to losses on loans or bad debts (including any deduction for a reasonable addition to a reserve for bad debts) shall not be treated as a built-in loss. As a result of Notice 2008-83, certain loan charge-offs and additions to First Bank’s allowance for loan losses are no longer considered to be built-in losses. Consequently, on September 30, 2008, First Banks concluded that $1.8 million and $21.0 million of the deferred tax asset valuation allowances related to CIB Bank and CFHI, respectively, were no longer required and recorded a reversal of the deferred tax asset valuation allowances in the amount of $22.9 million, of which $21. 6 million resulted in an increase to the benefit for income taxes for the three months ended September 30, 2008, and a corresponding reduction of the provision for income taxes for the year ended December 31, 2008.

In the fourth quarter of 2008, First Bank recorded a deferred tax asset valuation allowance of $158.9 million, which resulted in increases to the provision for income taxes and accumulated other comprehensive loss of $144.8 million and $1.7 million, respectively. As described above, the deferred tax asset valuation allowance was primarily established as a result of the Company’s three-year cumulative operating loss for the years ended December 31, 2008, 2007 and 2006, after considering all available objective and verifiable evidence and potential tax planning strategies related to the amount of the deferred tax assets that are more likely than not to be realized.

119

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

On January 1, 2007, First Banks implemented FIN 48, which was subsequently incorporated into ASC Topic 740. The implementation resulted in the recognition of a cumulative effect of change in accounting principle of $2.5 million, which was recorded as an increase to retained earnings.

At December 31, 2009 and 2008, First Banks had unrecognized tax benefits for uncertain tax positions, excluding interest and penalties, of $3.4 million and $3.3 million, respectively. A reconciliation of the beginning and ending balance of these unrecognized tax benefits for the years ended December 31, 2009 and 2008 is as follows:

	2009			2008
	(dollars expressed in thousands)
Balance, beginning of year	$	3,314			12,244
Additions:
Tax positions taken during the current year		234			301
Tax positions taken during the prior year		—			195
Reductions:
Tax positions taken during the prior year		(39	)		(2,968	)
Change in tax law		—			(4,794	)
Lapse of statute of limitations		(85	)		(1,664	)
Balance, end of year	$	3,424			3,314

At December 31, 2009 and 2008, the total amount of unrecognized tax benefits that would affect the effective income tax rate was $1.6 million. It is First Banks’ policy to separately disclose any interest or penalties arising from the application of federal or state income taxes. Interest related to unrecognized tax benefits is included in interest expense and penalties related to unrecognized tax benefits are included in noninterest expense. During the years ended December 31, 2009 and 2007, First Banks recorded interest expense of $211,000 and $527,000 related to unrecognized tax benefits, whereas First Banks recorded interest income of $412,000 related to unrecognized tax benefits during the year ended December 31, 2008. At December 31, 2009 and 2008, interest accrued for uncertain tax positions was $1.2 million and $1. 0 million, respectively. There were no penalties for uncertain tax positions accrued at December 31, 2009 and 2008, nor did First Banks recognize any expense for penalties during 2009 and 2008.

As previously described, Notice 2008-83 was issued on September 30, 2008. When applying Notice 2008-83 to the acquisition of CIB Bank, a contingency reserve on the loan charge-offs would not have been required to be established under ASC Topic 740. Consequently, the full amount of the contingency reserve of $4.5 million, net of the federal benefit, and the related interest reserve of $904,000 that had been established in accordance with ASC Topic 740 were reversed during 2008.

First Banks continually evaluates the unrecognized tax benefits associated with its uncertain tax positions. It is reasonably possible that the total unrecognized tax benefits as of December 31, 2009 could decrease by approximately $2.3 million by December 31, 2010, as a result of the lapse of statutes of limitations or potential settlements with the federal and state taxing authorities, of which the impact to the effective income tax rate is estimated to be approximately $823,000. It is also reasonably possible that this decrease could be substantially offset by new matters arising during the same period.

First Banks files consolidated and separate income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. Management of First Banks believes the accrual for tax liabilities is adequate for all open audit years based on its assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter. This assessment relies on estimates and assumptions. The Company’s federal returns through 2004 have been examined by the IRS and, except for changes to 2003 from the carryback of a 2008 casualty loss, there are no open issues for years prior to 2005. Currently, the IRS is examining First Bank’s federal income tax returns for the years 2003 and 2005 through 2008. These years contain matters that could be subject to differing interpretations of applicabl e tax laws and regulations as they relate to the amount, timing or inclusion of revenue and expenses. First Banks has recorded a tax benefit only for those positions that meet the “more likely than not” standard. The Company’s current estimate of the resolution of various state examinations, none of which are in process, is reflected in accrued income taxes; however, final settlement of the examinations or changes in the Company’s estimate may result in future income tax expense or benefit. First Bank has executed a waiver for the statute of limitations extending the period for the 2005 and 2006 tax years to December 31, 2011.

First Banks is no longer subject to U.S. federal, state or local income tax examination by tax authorities for the years prior to 2005. During 2008, First Banks had a federal tax examination for the 2004 tax year and a California tax examination for the 2004 and 2005 tax years. Both examinations were subsequently closed during 2008 with no changes to the reported tax required.

120

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

At December 31, 2009 and 2008, 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, 2009, First Banks’ net operating loss carryforwards expire as follows:

	(dollars expressed in thousands)
Year ending December 31:
2010	$	7
2011		3
2012		1,834
2017 – 2020		5,346
2021 – 2026		43,105
2028 – 2029		268,758
Total	$	319,053

Note 14 – Earnings (Loss) Per Common Share

The following is a reconciliation of basic and diluted (loss) income per share for the years ended December 31, 2009, 2008 and 2007:

	Years Ended December 31,
	2009			2008			2007
	(dollars in thousands, except share and per share data)
Basic:
Net (loss) income from continuing operations attributable to First Banks, Inc.	$	(377,675	)		(232,281	)		99,022
Preferred stock dividends declared and undeclared		(16,536	)		(786	)		(786	)
Accretion of discount on preferred stock		(3,299	)		—			—
Net (loss) income from continuing operations attributable to common stockholders		(397,510	)		(233,067	)		98,236
Net loss from discontinued operations attributable to common stockholders		(49,946	)		(54,874	)		(49,562	)
Net (loss) income available to First Banks, Inc. common stockholders	$	(447,456	)		(287,941	)		48,674
Weighted average shares of common stock outstanding		23,661			23,661			23,661
Basic (loss) income per common share – continuing operations	$	(16,800.20	)		(9,850.28	)		4,151.82
Basic loss per common share – discontinued operations	$	(2,110.90	)		(2,319.18	)		(2,094.68	)
Basic (loss) income per common share	$	(18,911.10	)		(12,169.46	)		2,057.14
Diluted:
Net (loss) income from continuing operations attributable to common stockholders	$	(397,510	)		(233,067	)		98,236
Net loss from discontinued operations attributable to common stockholders		(49,946	)		(54,874	)		(49,562	)
Net (loss) income available to First Banks, Inc. common stockholders		(447,456	)		(287,941	)		48,674
Effect of dilutive securities:
Class A convertible preferred stock		—			—			769
Diluted (loss) income per common share – net (loss) income available to First Banks, Inc. common stockholders	$	(447,456	)		(287,941	)		49,443
Weighted average shares of common stock outstanding		23,661			23,661			23,661
Effect of dilutive securities:
Class A convertible preferred stock		—			—			394
Weighted average diluted shares of common stock outstanding		23,661			23,661			24,055
Diluted (loss) income per common share – continuing operations	$	(16,800.20	)		(9,850.28	)		4,115.77
Diluted loss per common share – discontinued operations	$	(2,110.90	)		(2,319.18	)		(2,060.35	)
Diluted (loss) income per common share	$	(18,911.10	)		(12,169.46	)		2,055.42

121

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 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 described 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, 2009 and 2008 were as follows:

	December 31,
	2009		2008
	(dollars expressed in thousands)
Commitments to extend credit	$	1,491,353		2,140,532
Commercial and standby letters of credit		147,313		181,388
	$	1,638,666		2,321,920

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, 2009 expire, at various dates, within eight years.

Note 16 – Fair Value Disclosures

In accordance with ASC Topic 820, “Fair Value Measurements and Disclosures,” financial assets and financial liabilities that are measured at fair value subsequent to initial recognition are grouped into three levels of inputs or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the reliability of assumptions used to determine fair value. The three input levels of the valuation hierarchy are as follows:

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

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

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

122

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The following describes valuation methodologies used to measure financial assets and financial liabilities at fair value, as well as the general classification of such financial instruments pursuant to the valuation hierarchy.

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

Loans held for sale.  Mortgage loans held for sale are carried at fair value on a recurring basis. The determination of fair value is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent trading activity and other relevant information. Other loans held for sale are carried at the lower of cost or market value, which is determined on an individual loan basis. The fair value is based on the prices secondary markets are offering for portfolios with similar characteristics. The Company classifies mortgage loans held for sale subjected to recurring fair value adjustments as recurring Level 2. The Company classifies other loans held for sale subjected to nonrecurring fair value adjustments as nonrecurring Level 2.

Loans.  The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans are considered impaired when, in the judgment of management based on current information and events, it is probable that payment of all amounts due under the contractual terms of the loan agreement will not be collected. Acquired impaired loans are classified as nonaccrual loans and are initially measured at fair value with no allocated allowance for loan losses. An allowance for loan losses is recorded to the extent there is further credit deterioration subsequent to acquisition date. In accordance with ASC Topic 820, impaired loans where an allowance is e stablished based on the fair value of collateral require classification in the fair value hierarchy. Once a loan is identified as impaired, management measures the impairment in accordance with SFAS No. 114 – Accounting by Creditors for Impairment of a Loan, which was subsequently incorporated into ASC Topic 310-10-35, “Receivables.” Impairment is measured by reference to an observable market price, if one exists, the expected future cash flows of an impaired loan discounted at the loan’s effective interest rate, or the fair value of the collateral for a collateral-dependent loan. In most cases, First Banks measures fair value based on the value of the collateral securing the loan. Collateral may be in the form of real estate or personal property, including equipment and inventory. The vast majority of the collateral is real estate. The value of the collateral is determine d based on third party appraisals as well as internal estimates. These measurements are classified as Level 3.

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

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

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

123

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Items Measured on a Recurring Basis.  Assets and liabilities measured at fair value on a recurring basis as of December 31, 2009 and 2008 are reflected in the following table:

	Fair Value Measurements
	December 31, 2009
	Level 1		Level 2		Level 3		Fair Value
	(dollars expressed in thousands)
Assets:
Available-for-sale investment securities:
U.S. Government sponsored agencies	$	—		1,547		—		1,547
Residential mortgage-backed		—		498,348		—		498,348
Commercial mortgage-backed		—		985		—		985
State and political subdivisions		—		12,174		—		12,174
Equity investments		3,600		10,678		—		14,278
Mortgage loans held for sale		—		35,562		—		35,562
Derivative instruments		—		1,605		—		1,605
Servicing rights		—		—		20,608		20,608
Total	$	3,600		560,899		20,608		585,107
Liabilities:
Derivative instruments	$	—		4,516		—		4,516
Nonqualified deferred compensation plan		9,013		—		—		9,013
Total	$	9,013		4,516		—		13,529

	Fair Value Measurements
	December 31, 2008
	Level 1		Level 2		Level 3		Fair Value
	(dollars expressed in thousands)
Assets:
Available-for-sale investment securities:
U.S. Government sponsored agencies	$	—		1,846		—		1,846
Residential mortgage-backed		—		517,131		—		517,131
State and political subdivisions		—		21,209		—		21,209
Equity investments		6,318		10,678		—		16,996
Mortgage loans held for sale		—		18,483		—		18,483
Derivative instruments		—		583		—		583
Servicing rights		—		—		16,381		16,381
Total	$	6,318		569,930		16,381		592,629
Liabilities:
Derivative instruments	$	—		4,953		—		4,953
Nonqualified deferred compensation plan		7,676		—		—		7,676
Total	$	7,676		4,953		—		12,629

The following table presents the changes in Level 3 assets measured on a recurring basis for the years ended December 31, 2009 and 2008:

	Servicing Rights
	2009			2008
	(dollars expressed in thousands)
Balance, beginning of year	$	16,381			12,758
Impact of election to measure servicing rights at fair value under ASC Topic 860		—			10,443
Total gains or losses (realized/unrealized):
Included in earnings (1)		(2,896	)		(11,825	)
Included in other comprehensive income		—			—
Purchases, issuances and settlements		7,123			5,005
Transfers in and/or out of level 3		—			—
Balance, end of year	$	20,608			16,381

__________________

(1) Gains or losses (realized/unrealized) are included in noninterest income in the consolidated statements of operations.

124

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Items Measured on a Nonrecurring Basis.  From time to time, First Banks measures certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis as of December 31, 2009 and 2008 are reflected in the following table:

	Fair Value Measurements
	December 31, 2009
	Level 1		Level 2		Level 3		Fair Value
	(dollars expressed in thousands)
Assets:
Loans held for sale	$	—		7,122		—		7,122
Impaired loans		—		—		652,166		652,166
Total	$	—		7,122		652,166		659,288

	Fair Value Measurements
	December 31, 2008
	Level 1		Level 2		Level 3		Fair Value
	(dollars expressed in thousands)
Assets:
Loans held for sale	$	—		20,237		—		20,237
Impaired loans		—		—		382,105		382,105
Total	$	—		20,237		382,105		402,342

Non-Financial Assets and Non-Financial Liabilities.Certain non-financial assets measured at fair value on a non-recurring basis include other real estate (upon initial recognition or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.

During 2009, certain other real estate, upon initial recognition, was re-measured and reported at fair value through a charge-off to the allowance for loan losses based upon the estimated fair value of the other real estate. The fair value of other real estate, upon initial recognition, is estimated using Level 3 inputs based on third-party appraisals, and where applicable, discounted based on management’s judgment taking into account current market conditions, distressed or forced sale price comparisons and other factors in effect at the time of valuation. Other real estate measured at fair value upon initial recognition totaled $143.6 million and $109.3 million during the years ended December 31, 2009 and 2008, respectively. In addition to other real estate measured at fair value upon initial recognition, First Banks rec orded write-downs to the balance of other real estate of $37.4 million and $2.8 million to noninterest expense for the years ended December 31, 2009 and 2008, respectively. Other real estate was $125.2 million at December 31, 2009, compared to $91.5 million at December 31, 2008.

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 goodwill and other intangible assets. 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 following summarizes the methods and assumptions used in estimating the fair value of all other financial instruments:

Cash and cash equivalents and accrued interest receivable:The carrying values reported in the consolidated balance sheets approximate fair value.

Held-to-maturity investment securities: The fair value of held-to-maturity investment securities is based on quoted market prices where available. If quoted market prices are not available, the fair value is based on quoted market prices of comparable instruments.

125

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Loans: The fair value of all other loans held for portfolio was estimated utilizing discounted cash flow calculations. These cash flow calculations include assumptions for prepayment estimates over the loans’ remaining life, considerations for the current interest rate environment compared to the weighted average rate of the loan portfolio, a credit risk component based on the historical and expected performance of each portfolio and a liquidity adjustment related to the current market environment. This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC Topic 820.

Loans held for sale: 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 are not available, the fair value is based on quoted market prices of comparable instruments.

Bank-owned life insurance: The fair value of bank-owned life insurance is based on quoted market prices where available. If quoted market prices are not available, the fair value is based on quoted market prices of comparable instruments.

Deposits: The fair value of deposits generally payable on demand (i.e., noninterest-bearing and interest-bearing demand, and savings and money market 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. If the estimated fair value is lower than the carrying value, the carry ing value is reported as the fair value of time deposits.

Other borrowings, notes payable and accrued interest payable: The carrying values reported in the consolidated balance sheets for variable rate borrowings approximate fair value. The fair value of fixed rate borrowings is based on quoted market prices where available. If quoted market prices are not available, the fair value is based on discounting contractual maturities using an estimate of current market rates for similar instruments.

Subordinated debentures: The fair value of subordinated debentures is based on quoted market prices of comparable instruments.

Off-Balance Sheet Financial Instruments: The fair value of commitments to extend credit, standby letters of credit and financial guarantees is based on estimated probable credit losses.

126

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The estimated fair value of First Banks’ financial instruments at December 31, 2009 and 2008 were as follows:

	2009						2008
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
	(dollars expressed in thousands)
Financial Assets:
Cash and cash equivalents	$	2,516,251			2,516,251			842,316			842,316
Investment securities:
Available for sale		527,332			527,332			557,182			557,182
Held to maturity		14,225			15,258			17,912			18,507
Loans held for portfolio		6,299,161			5,902,354			8,334,041			7,683,098
Loans held for sale		42,684			42,684			38,720			38,720
FHLB and Federal Reserve Bank stock		65,076			65,076			47,832			47,832
Derivative instruments		1,605			1,605			583			583
Bank-owned life insurance		26,372			26,372			118,825			118,825
Accrued interest receivable		25,731			25,731			35,773			35,773
Assets held for sale		16,975			16,975			—			—
Assets of discontinued operations		518,056			518,056			—			—
Financial Liabilities:
Deposits:
Noninterest-bearing demand	$	1,270,276			1,270,276			1,241,916			1,241,916
Interest-bearing demand		914,020			914,020			935,805			935,805
Savings and money market		2,260,869			2,260,869			2,777,285			2,777,285
Time deposits		2,618,808			2,640,741			3,786,514			3,832,495
Other borrowings		767,494			764,992			575,133			576,021
Derivative instruments		4,516			4,516			4,953			4,953
Accrued interest payable		12,196			12,196			12,561			12,561
Subordinated debentures		353,905			272,007			353,828			269,946
Liabilities held for sale		24,381			23,164			—			—
Liabilities of discontinued operations		1,730,264			1,660,206			—			—
Off-Balance Sheet Financial Instruments:
Commitments to extend credit, standby letters of credit and financial guarantees	$	(738	)		(738	)		(419	)		(419	)

Note 17 – Employee Benefits

401(k) Plan.  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 $16,500 of gross compensation for 2009. Total employer contributions under the plan were $932,000, $4.0 million and $4.4 million for the years ended December 31, 2009, 2008 and 2007, respectively. The plan assets are held and managed under a trust agreement with First Bank’s trust department.

Nonqualified Deferred Compensation Plan. First Banks’ nonqualified deferred compensation plan (the NQDC Plan), which covers a select group of employees, is administered by an independent third party. The NQDC Plan is exempt from the participation, vesting, funding and fiduciary requirements of the Employee Retirement Income Security Act of 1974. Participants may contribute from 1% to 25% of their salary and up to 100% of their bonuses on a pre-tax basis. Balances outstanding under the NQDC Plan, which are reflected in accrued and other liabilities in the consolidated balance sheets, were $9.0 million and $7.7 million at December 31, 2009 and 2008, respectively. First Banks recognized salaries and employee benefits expense related to the NQDC Plan o f $1.3 million and $682,000 for the years ended December 31, 2009 and 2007, respectively, resulting from net earnings incurred by participants on the underlying investments in the plan. First Banks recognized a decrease in salaries and employee benefits expense related to the NQDC Plan of $2.0 million for the year ended December 31, 2008 resulting from net losses incurred by participants on the underlying investments in the plan.

Noncontributory Defined Benefit Pension Plan.  First Banks has a noncontributory defined benefit pension plan covering certain current and former employees of a bank holding company acquired by First Banks in 1994 and subsequently merged with and into First Banks on December 31, 2002. First Banks discontinued the accumulation of benefits under the Plan in 1994, and as such, there is no longer any service cost being accrued by Plan participants. During 2007, First Banks adopted the provisions of ASC Topic 715 which resulted in the recognition of a cumulative effect of change in accounting principle of $902,000, which was recorded as an increase to accumulated other comprehensive loss.

127

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

A summary of the Plan’s change in the projected benefit obligation and change in the fair value of Plan assets for the years ended December 31, 2009 and 2008 and amounts recognized in First Banks’ consolidated balance sheets as of December 31, 2009 and 2008 is as follows:

	2009			2008
	(dollars expressed in thousands)
Change in Projected Benefit Obligation:
Projected benefit obligation at beginning of year	$	9,893			11,600
Interest cost		724			688
Actuarial loss (gain)		2,269			(1,529	)
Benefit payments		(762	)		(866	)
Projected benefit obligation at end of year	$	12,124			9,893
Change in Fair Value of Plan Assets:
Fair value at beginning of year	$	8,112			10,491
Actual return on plan assets		1,426			(1,813	)
Employer contributions		218			300
Benefit payments		(762	)		(866	)
Fair value at end of year	$	8,994			8,112
Amount Recognized in Consolidated Balance Sheets:
Accrued pension liability	$	3,130			1,781
Amounts Recognized in Accumulated Other Comprehensive Loss:
Loss	$	(3,713	)		(2,568	)
Deferred tax liability		1,497			1,015
Loss, net of tax	$	(2,216	)		(1,553	)

First Banks’ accrued pension liability of $3.1 million and $1.8 million at December 31, 2009 and 2008, respectively, represents the difference between the fair value of the Plan assets and the projected benefit obligation of the Plan, is reflected in accrued expenses and other liabilities in the consolidated balance sheets.

The following table reflects the weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2009 and 2008:

	2009			2008
Discount rate		7.64	%		6.15	%
Expected long-term rate of return on Plan assets		7.00			7.50

The discount rate used to determine benefit obligations was 5.36% and 7.64% for the years ended December 31, 2009 and 2008, respectively.

A summary of the components of net periodic benefit cost for the years ended December 31, 2009 and 2008 is as follows:

	2009			2008
	(dollars expressed in thousands)
Interest cost	$	724			688
Expected return on Plan assets		(543	)		(769	)
Amortization of net actuarial loss		242			66
Net periodic benefit cost	$	423			(15	)

Amounts recognized in accumulated other comprehensive loss consist of:

	2009			2008
	(dollars expressed in thousands)
Net loss	$	1,386			1,053
Amortization of net actuarial loss		(242	)		(66	)
Total recognized in accumulated other comprehensive loss	$	1,144			987

128

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The Plan’s investment strategy is focused on maximizing asset returns. The target allocations for Plan assets are 50% equity securities and 50% fixed income. Asset allocations can fluctuate between acceptable ranges commensurate with market volatility. Equity securities primarily include investments in large capitalization companies located in the United States. Debt securities include U.S. Treasuries, investment-grade corporate bonds of companies from diversified industries and mortgage-backed securities.

The fair value of Plan assets at December 31, 2009 and 2008 was comprised of the following:

	Fair Value Measurements
	December 31, 2009
	Level 1		Level 2		Level 3		Fair Value
	(dollars expressed in thousands)
Plan Assets:
Cash and cash equivalents	$	426		—		—		426
Equity securities		—		4,790		—		4,790
Debt securities		—		3,400		—		3,400
Other		—		378		—		378
Total	$	426		8,568		—		8,994

	Fair Value Measurements
	December 31, 2008
	Level 1		Level 2		Level 3		Fair Value
	(dollars expressed in thousands)
Plan Assets:
Cash and cash equivalents	$	789		—		—		789
Equity securities		—		3,946		—		3,946
Debt securities		—		3,020		—		3,020
Other		—		357		—		357
Total	$	789		7,323		—		8,112

Equity and debt securities included in Level 1 are valued using quoted market prices. Where quoted market prices are unavailable, the fair value of equity and debt securities included in Level 2 is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent trading activity and other relevant information.

First Banks expects to contribute $327,000 to the Plan in 2010. Pension benefit payments are expected to be paid to Plan participants by the Plan as follows:

	(dollars expressed in thousands)
Year ending December 31:
2010	$	809
2011		829
2012		837
2013		832
2014		832
2015 – 2019		4,287

Note 18 – Stockholders’ Equity

There is no established public trading market for First Banks’ common stock. Various trusts, which were established by and are administered by and for the benefit of First Banks’ Chairman of the Board and members of his immediate family, own all of the voting stock of First Banks.

First Banks has four 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 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 sh all 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. Effective August 10, 2009, First Banks suspended the declaration of dividends on its Class A and Class B preferred stock. The annual dividend rate was 2.50% for the Class A preferred stock and 2.92% for the Class B preferred stock for the year ended December 31, 2009. The annual dividend rate was 6.0% for the Class A preferred stock and 7.0% for the Class B preferred stock for the years ended December 31, 2008 and 2007, respectively.

129

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

On December 31, 2008,First Banks issued 295,400 shares of Class C Fixed Rate Cumulative Perpetual Preferred Stock (Class C Preferred Stock) and 14,770 shares of Class D Fixed Rate Cumulative Perpetual Preferred Stock (Class D Preferred Stock) to the United States Department of the Treasury (U.S. Treasury) in conjunction with the U.S. Treasury’s Troubled Asset Relief Program’s Capital Purchase Program (CPP). The Class C Preferred Stock has a par value of $1.00 per share and a liquidation preference of $1,000 per share. The holders of the Class C Preferred Stock have no voting rights except in certain limited circumstances. The Class C Preferred Stock carries an annual dividend rate equal to 5% for the first five years and the annual dividend rate increases to 9% thereafter, payable quarterly in arrears beginning February 15, 2009. The Class D Preferred Stock has a par value of $1.00 per share and a liquidation preference of $1,000 per share. The holders of the Class D Preferred Stock have no voting rights except in certain limited circumstances. The Class D Preferred Stock carries an annual dividend rate equal to 9%, payable quarterly in arrears beginning February 15, 2009. The Class C Preferred Stock and the Class D Preferred Stock qualify as Tier 1 capital. Effective February 17, 2009, the Class C Preferred Stock and the Class D Preferred Stock may be redeemed at any time without penalty and without the need to raise new capital, subject to the U.S. Treasury’s consultation with the Company’s primary regulatory agency. The Class D Preferred Stock may not be redeemed until all of the outstanding shares of the Class C Preferred Stock have been redeemed.

First Banks allocated the total proceeds received under the CPP of $295.4 million to the Class C Preferred Stock and the Class D Preferred Stock based on the relative fair values of the respective classes of preferred stock at the time of issuance. The discount on the Class C Preferred Stock of $17.3 million is being amortized to retained earnings on a level-yield basis over five years, consistent with management’s estimates of the life of the preferred stock. Accretion of the discount on the Class C Preferred Stock was $3.3 million for the year ended December 31, 2009.

The redemption of any issue of preferred stock requires the prior approval of the Board of Governors of the Federal Reserve System (Federal Reserve). Furthermore, the agreement that First Banks entered into with the U.S. Treasury associated with the issuance of the Class C Preferred Stock and the Class D Preferred Stock contains limitations on certain actions of First Banks, including, but not limited to, payment of dividends and redemptions and acquisitions of First Banks’ equity securities. In addition, First Banks, under its agreement with the FRB, has agreed, among other things, to provide certain information to the FRB including, but not limited to, notice of plans to materially change its fundamental business and notice to raise additional equity capital. In addition, First Banks agreed not to declare any dividends o n its common or preferred stock without the prior approval of the FRB, as further described in Note 1 to the consolidated financial statements.

On August 10, 2009, First Banks announced the deferral of its regularly scheduled interest payments on its outstanding junior subordinated notes relating to its $345.0 million of trust preferred securities beginning with the regularly scheduled quarterly interest payments that would otherwise have been made in September and October 2009, as further described in Note 12 to the consolidated financial statements. During the deferral period, First Banks may not, among other things and with limited exceptions, pay cash dividends on or repurchase its common stock or preferred stock nor make any payment on outstanding debt obligations that rank equally with or junior to the junior subordinated notes. Accordingly, First Banks also suspended the payment of cash dividends on its outstanding common stock and preferred stock beginning with the regularly scheduled quarterly dividend payments on the preferred stock that would otherwise have been made in August and September 2009. First Banks has declared and deferred $8.0 million of its regularly scheduled dividend payments on its Class C Preferred Stock and Class D Preferred Stock and has declared and accrued an additional $109,000 of cumulative dividends on such deferred dividend payments as of December 31, 2009.

130

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The following table presents the transactions affecting accumulated other comprehensive income (loss) included in stockholders’ equity for the years ended December 31, 2009, 2008 and 2007:

	Years Ended December 31,
	2009			2008			2007
	(dollars expressed in thousands)
Net (loss) income	$	(448,936	)		(288,313	)		49,538
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale investment securities, net of tax		5,874			6,043			(205	)
Reclassification adjustment for available-for-sale investment securities (gains) losses included in net loss, net of tax		(5,004	)		5,694			122
Reclassification adjustment for deferred tax asset valuation allowance on investment securities		469			—			—
Change in unrealized (losses) gains on derivative instruments, net of tax (1)		(5,755	)		1,745			9,148
Reclassification adjustment for deferred tax asset valuation allowance on derivative instruments		(3,099	)		(1,707	)		—
Amortization of net loss related to pension liability, net of tax		(664	)		(651	)		—
Reclassification adjustment for deferred tax asset valuation allowance on pension liability		(480	)		—			—
Comprehensive (loss) income		(457,595	)		(277,189	)		58,603
Comprehensive (loss) income attributable to noncontrolling interest in subsidiaries		(21,315	)		(1,158	)		78
Comprehensive (loss) income attributable to First Banks, Inc.	$	(436,280	)		(276,031	)		58,525

_______________________

(1) In the third quarter of 2009, First Banks reclassified a cumulative fair value adjustment of $4.6 million on its interest rate swap agreements designated as cash flow hedges on its subordinated debentures from accumulated other comprehensive loss to net gain (loss) on derivative instruments as a result of the discontinuation of hedge accounting following the announcement of the deferral of interest payments on the underlying trust preferred securities in August 2009, as further described in Note 5 and Note 12 to the consolidated financial statements.

Other comprehensive (loss) income of ($8.7) million, $11.1 million and $9.1 million, as presented in the consolidated statements of changes in stockholders’ equity and comprehensive income (loss), is reflected net of income tax (benefit) expense of ($3.0) million, $6.9 million and $4.9 million for the years ended December 31, 2009, 2008 and 2007, respectively.

On January 1, 2009, First Banks implemented new guidance under ASC Topic 810, “Consolidation,” which resulted in the reclassification of noncontrolling interest in subsidiaries of $129.4 million from a liability to a component of stockholders’ equity in the consolidated balance sheets, as further described in Note 1 to the consolidated financial statements.

As a result of First Bank’s purchase of FCA’s noncontrolling interest in SBLS LLC, as further described in Note 19 to the consolidated financial statements, First Banks recorded an increase in additional paid-in-capital of $2.8 million and a decrease in noncontrolling interest in subsidiaries of $4.7 million during the second quarter of 2009.

On January 1, 2008, First Banks elected to measure servicing rights at fair value as permitted by ASC Topic 860. The election of this option resulted in the recognition of a cumulative effect of change in accounting principle of $6.3 million, net of tax, which was recorded as an increase to retained earnings, as further described in Note 6 to the consolidated financial statements.

Effective December 31, 2007, First Banks adopted the recognition and disclosure provisions of ASC Topic 715, which resulted in the recognition of a cumulative effect of change in accounting principle of $902,000, which was recorded as a decrease to other comprehensive income as further described in Note 17 to the consolidated financial statements.

On January 1, 2007, First Banks implemented FIN 48, which was subsequently incorporated into ASC Topic 740. The implementation of the new provisions of ASC Topic 740 resulted in the recognition of a cumulative effect of change in accounting principle of $2.5 million, which was recorded as an increase to retained earnings, as further described in Note 1 and Note 13 to the consolidated financial statements.

131

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 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. First Services, L.P. (First Services), a limited partnership indirectly owned by First Banks’ Chairman and members of his immediate family, provides information technology, item processing and various related services to First Banks and its subsidiaries. Fees paid under agreements with First Services were $29.4 million, $33.6 million and $34.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. First Services leases information technology and other equipment from First Bank. First Services paid First Bank rental fees for the use of that equipment of $3.1 million, $3.8 million and $3.7 million during the years ended December 31, 2009, 2008 and 2007, respectively. In addition, First Services paid approxima tely $1.9 million, $1.9 million and $1.8 million for the years ended December 31, 2009, 2008 and 2007, respectively, in rental payments to First Bank for occupancy of certain First Bank premises from which business is conducted.

Effective January 1, 2009, First Services entered into an Affiliate Services Agreement with First Banks and First Bank. The Affiliate Services Agreement relates to various services provided to First Services, including certain human resources, payroll, employee benefit and training services, insurance services and vendor payment processing services. Fees paid under the Affiliate Services Agreement by First Services were $231,000 for the year ended December 31, 2009.

First Brokerage America, L.L.C. First Brokerage America, L.L.C. (First Brokerage), a limited liability company indirectly owned by First Banks’ Chairman and members of his immediate family, received approximately $5.7 million, $6.2 million and $4.8 million for the years ended December 31, 2009, 2008 and 2007, respectively, in gross commissions paid by unaffiliated third-party companies. The commissions received were primarily in connection with the sales of annuities, securities and other insurance products to customers of First Bank. First Brokerage paid approximately $227,000, $216,000 and $183,000 for the years ended December 31, 2009, 2008 and 2007, respectively, to First Bank in rental payments for occupancy of certain First Bank premises from which brokerage business is conducted.

The Dierberg Educational Foundation, Inc. In January 2007, First Banks contributed 48,796 shares of common stock held in its available-for-sale investment securities portfolio with a fair value of $1.7 million to the Dierberg Educational Foundation, Inc. (the Foundation), a charitable foundation established by First Banks’ Chairman and members of his immediate family. In conjunction with this transaction, First Banks recorded charitable contribution expense of $1.7 million, which was partially offset by a gain on the contribution of these available-for-sale investment securities of $147,000, representing the difference between the cost basis and the fair value of the common stock on the date of the contribution. In addition, First Banks recognized a tax benefit of $1.0 million associated with this transaction. Furthermore, First Bank contributed $3.5 million in cash to the Foundation, thereby bringing the total value of charitable contributions to the Foundation to $5.3 million for the year ended December 31, 2007. There were no charitable contributions made to the Foundation during the years ended December 31, 2009 and 2008.

Dierberg Vineyards / Wineries. First Banks periodically purchases various products from Hermannhof, Inc. and Dierberg Star Lane Vineyards, entities that are owned and operated 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, 2009, 2008 and 2007, First Banks purchased products aggregating approximately $133,000, $258,000 and $333,000, respectively, from these entities.

Dierbergs Markets, Inc. First Bank leases certain of its in-store branch offices and automated teller machine (ATM) sites from Dierbergs Markets, Inc., a grocery store chain headquartered in St. Louis, Missouri that is owned and operated by the brother of First Banks’ Chairman and members of his immediate family. Total rent expense incurred by First Bank under the lease obligation contracts was $437,000, $419,000 and $395,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

First Capital America, Inc. / Small Business Loan Source LLC. In June 2005, FCA, a corporation owned by First Banks’ Chairman and members of his immediate family, became a 49.0% owner of SBLS LLC in exchange for $7.4 million pursuant to a written option agreement with First Bank. In January and June 2007, First Bank contributed $4.0 million and $7.8 million, respectively, to SBLS LLC in the form of additional capital contributions, thereby increasing First Bank’s ownership of SBLS LLC to 76.0% and decreasing FCA’s ownership to 24.0%. On March 31, 2009, First Bank contributed $5.0 million to SBLS LLC in the form of an additional capital contribution, thereby increasing First Bank’s ownership of SBLS LLC to 82.55% and decreasing FCA ’s ownership to 17.45%.

132

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

On April 30, 2009, First Bank and FCA entered into a Purchase Agreement providing for FCA to sell its 17.45% ownership interest in SBLS LLC to First Bank for a purchase price consisting of (i) an initial payment to be made on or before May 15, 2009 of an amount equal to 50% of the carrying value of FCA’s ownership interest in SBLS LLC as of April 30, 2009, as reflected within the financial statements of First Banks, which represented an estimate agreed to by First Bank and FCA of the fair market value of FCA’s ownership interest in SBLS LLC, and (ii) an adjustment in the purchase price to reflect such fair market value, based upon an appraisal of such value to be performed by an independent third party mutually acceptable to First Bank and FCA. As such, effective April 30, 2009, First Bank owned 100% of SBLS LLC. On May 14, 2009, First Bank made an initial payment of $1.6 million to FCA, representing 50% of the carrying value of FCA’s ownership interest in SBLS LLC as of April 30, 2009. Subsequent to May 14, 2009, First Bank obtained an appraisal of SBLS LLC from an independent third party indicating the fair market value of FCA’s ownership interest to be $1.9 million as of April 30, 2009, or $241,000 greater than the initial payment. The additional amount of $241,000 due to FCA was paid in July 2009. As a result of the purchase of FCA’s noncontrolling interest in SBLS LLC, First Banks recorded an increase in additional paid-in-capital with a corresponding decrease in noncontrolling interest in subsidiaries of $2.8 million during the second quarter of 2009.

During the first and third quarters of 2007, SBLS LLC modified the structure of its then existing Multi-Party Agreement by and among SBLS LLC, First Bank, Colson Services Corp., fiscal transfer agent for the SBA, and the SBA, in addition to a Loan and Security Agreement by and among First Bank and the SBA, that provided a $50.0 million warehouse line of credit for loan funding purposes. In September 2007, the existing loan under the agreement was refinanced by a Promissory Note entered into between SBLS LLC and First Bank that provided a $75.0 million unsecured revolving line of credit which was subsequently renewed at maturity on September 30, 2008 with a new maturity date of September 30, 2009. Interest was payable monthly in arrears on the outstanding loan balances at a current rate equal to the 30-day LIBOR plus 40 basis poi nts. On January, 1, 2009, SBLS LLC executed an Amended Promissory Note with First Bank, which modified the interest payable monthly in arrears on the outstanding loan balance to a current rate equal to the First Bank internal Commercial Cost of Funds Rate, which averaged 3.63% for the nine months ended September 30, 2009. On September 30, 2009, First Bank purchased all of the loans and certain other assets and assumed all of the liabilities of SBLS LLC, and in conjunction with this transaction, SBLS LLC paid off in full the outstanding loan balance. The balance of advances outstanding under the respective agreement was $66.2 million at December 31, 2008. Interest expense recorded by SBLS LLC under the respective agreements was $1.8 million, $2.0 million and $3.4 million for the years ended December 31, 2009, 2008 and 2007, respectively. The balance of the advances and the related interest expense recognized by SBLS LLC was eliminated for purposes of the consolidated financial statements.

First Capital America, Inc. / FB Holdings, LLC. In May 2008, First Banks formed FB Holdings, a limited liability company organized in the state of Missouri. FB Holdings operates as a majority-owned subsidiary of First Bank and was formed for the primary purpose of holding and managing certain nonperforming loans and assets to allow the liquidation of such assets at a time that is more economically advantageous to First Bank and to permit an efficient vehicle for the investment of additional capital by the Company’s sole owner of its Class A and Class B preferred stock. During 2008, First Bank contributed cash of $9.0 million and nonperforming loans and assets with a fair value of approximately $133.3 million and FCA contributed cash of $125.0 milli on to FB Holdings. As a result, First Bank owned 53.23% and FCA owned the remaining 46.77% of FB Holdings as of December 31, 2009. The contribution of cash by FCA is reflected as a component of stockholders’ equity in the consolidated balance sheets and, consequently, increased the Company’s and First Bank’s total risk-based capital ratios under existing regulatory guidelines.

FB Holdings entered into a Services Agreement with First Banks and First Bank effective May 2008. The Services Agreement relates to various services provided to FB Holdings by First Banks and First Bank, including loan servicing and special assets services as well as various other financial, legal, human resources and property management services. Fees paid under the Services Agreement by FB Holdings were $570,000 and $428,000 in aggregate for the years ended December 31, 2009 and 2008, respectively.

133

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Investors of America Limited Partnership. In May 2008, First Banks entered into a Credit Agreement with Investors of America, LP, and in August 2008, First Banks entered into an Amended Credit Agreement with Investors of America, LP, as further described in Note 11 to the consolidated financial statements. Investors of America, LP is a Nevada limited partnership that was created by and for the benefit of First Banks’ Chairman and members of his immediate family. The Credit Agreement matured on June 30, 2009. There were no advances outstanding under the Credit Agreement at December 31, 2008. Interest expense, comprised of commitment fees, recorded by First Banks under the Credit Agreement was $37,000 for the year ended December 31, 2009. Interest ex pense, including commitment fees, recorded by First Banks under the Credit Agreement was $303,000 for the year ended December 31, 2008.

Steven F. Schepman. Mr. Steven F. Schepman, the former son-in-law of First Banks’ Chairman, and former Director and Executive Vice President of First Banks, received salary and bonus compensation of $157,000 and $204,000 for the years ended December 31, 2009 and 2008, respectively.

Loans to Directors and/or their Affiliates. First Bank has had in the past, and may have in the future, loan transactions in the ordinary course of business with its directors and/or their affiliates. These loan transactions have been 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 collectability or present other unfavorable features. Loans to directors, their affiliates and executive officers of First Banks were approximately $37.2 million and $49.0 million at December 31, 2009 and 2008, respectively. First Bank does not extend credit to its officersor to officers of First Banks, 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.

Note 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 consumer and commercial loans. Consumer lending includes residential real estate, home eq uity 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 trade financing. Other financial services include mortgage banking, debit cards, brokerage services, internet banking, remote deposit, ATMs, telephone banking, safe deposit boxes and trust and private banking services. The revenues generated by First Bank and its subsidiaries consist primarily of interest income, generated from the loan and investment security portfolios, service charges and fees generated from deposit products and services, and fees generated by First Banks’ mortgage banking and trust and private banking business units. First Banks’ products and services are offered to customers primarily within its geographic areas, which include eastern Missouri, Illinois, southern and northern California, Houston and Dallas, Texas, and Florida’s Manatee, Pinellas, Hillsborough and Pasco counties. Certain loan products are available nationwide.

134

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

The business segment results are consistent with First Banks’ internal reporting system and, in all material respects, with GAAP and practices predominant in 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									Consolidated Totals
	2009			2008			2007			2009			2008			2007			2009			2008			2007
	(dollars expressed in thousands)
Balance sheet information:
Investment securities	$	527,279			559,611			956,891			14,278			15,483			21,785			541,557			575,094			978,676
Loans, net of unearned discount		6,608,293			8,592,975			8,886,184			—			—			—			6,608,293			8,592,975			8,886,184
FHLB and FRB stock		65,076			47,832			40,595			—			—			—			65,076			47,832			40,595
Goodwill and other intangible assets		144,439			306,800			315,651			—			—			—			144,439			306,800			315,651
Assets held for sale		16,975			—			—			—			—			—			16,975			—			—
Assets of discontinued operations		518,056			—			—			—			—			—			518,056			—			—
Total assets		10,561,500			10,756,737			10,872,602			20,496			26,417			29,868			10,581,996			10,783,154			10,902,470
Deposits		7,071,493			8,843,901			9,164,868			(7,520	)		(102,381	)		(15,675	)		7,063,973			8,741,520			9,149,193
Other borrowings		767,494			575,133			409,616			—			—			—			767,494			575,133			409,616
Notes payable		—			—			—			—			—			39,000			—			—			39,000
Subordinated debentures		—			—			—			353,905			353,828			353,752			353,905			353,828			353,752
Liabilities held for sale		24,381			—			—			—			—			—			24,381			—			—
Liabilities of discontinued operations		1,730,264			—			—			—			—			—			1,730,264			—			—
Stockholders’ equity		878,277			1,240,940			1,208,552			(355,897	)		(244,585	)		(360,931	)		522,380			996,355			847,621
Income statement information:
Interest income	$	413,726			550,517			657,414			549			900			1,169			414,275			551,417			658,583
Interest expense		113,081			173,842			215,157			15,301			22,330			27,356			128,382			196,172			242,513
Net interest income		300,645			376,675			442,257			(14,752	)		(21,430	)		(26,187	)		285,893			355,245			416,070
Provision for loan losses		390,000			368,000			65,056			—			—			—			390,000			368,000			65,056
Net interest (loss) income after provision for loan losses		(89,355	)		8,675			377,201			(14,752	)		(21,430	)		(26,187	)		(104,107	)		(12,755	)		351,014
Noninterest income		80,934			76,725			60,321			(6,771	)		(10,952	)		(1,793	)		74,163			65,773			58,528
Goodwill impairment		75,000			—			—			—			—			—			75,000			—			—
Amortization of intangible assets		4,991			6,346			6,179			—			—			—			4,991			6,346			6,179
Other noninterest expense		286,492			260,150			263,276			170			1,638			3,709			286,662			261,788			266,985
(Loss) income from continuing operations before provision (benefit) for income taxes		(374,904	)		(181,096	)		168,067			(21,693	)		(34,020	)		(31,689	)		(396,597	)		(215,116	)		136,378
Provision (benefit) for income taxes		2,422			21,331			48,787			(29	)		(3,008	)		(11,509	)		2,393			18,323			37,278
Net (loss) income from continuing operations, net of tax		(377,326	)		(202,427	)		119,280			(21,664	)		(31,012	)		(20,180	)		(398,990	)		(233,439	)		99,100
Discontinued operations, net of tax		(49,946	)		(54,874	)		(49,562	)		—			—			—			(49,946	)		(54,874	)		(49,562	)
Net (loss) income		(427,272	)		(257,301	)		69,718			(21,664	)		(31,012	)		(20,180	)		(448,936	)		(288,313	)		49,538
Net (loss) income attributable to noncontrolling interest in subsidiaries		(21,315	)		(1,158	)		78			—			—			—			(21,315	)		(1,158	)		78
Net (loss) income attributable to First Banks, Inc	$	(405,957	)		(256,143	)		69,640			(21,664	)		(31,012	)		(20,180	)		(427,621	)		(287,155	)		49,460

135

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 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. In addition , First Bank is currently required to maintain its Tier 1 capital ratio at no less than 7.00% in accordance with the provisions of its agreement entered into with the MDOF and the FRB, as further described in Note 1 to the consolidated financial statements and under “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Business – Regulatory Matters.” At December 31, 2009, First Bank’s Tier 1 capital ratio of 9.11% was approximately $159.6 million over the minimum level required by the agreement.

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. First Banks was categorized as undercapitalized at December 31, 2009 and well capitalized as of December 31, 2008. First Bank was categorized as well capitalized as of December 31, 2009 and 2008. As of December 31, 2009, the most recent notification from First Banks’ primary regulator categorized First Banks as undercapitalized and First Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized and adequately capitalized, First Banks and First Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table.

As further described in Notes 1 and 2 to the consolidated financial statements and “Item 1 —Business – Recent Developments,” on August 10, 2009, First Banks announced the adoption of its Capital Plan, in order to, among other things, preserve First Banks’ risk-based capital in the current and continuing economic downturn.

The successful completion of all or any portion of the Capital Plan is not assured, and no assurance can be made that the Capital Plan will not be materially modified in the future. If First Banks is not able to complete a substantial portion of the Capital Plan, its regulatory capital ratios may be materially and adversely affected and its ability to withstand continued adverse economic conditions could be threatened.

At December 31, 2009 and 2008, First Banks’ and First Bank’s required and actual capital ratios were as follows:

	Actual										For Capital Adequacy Purposes			To be Well Capitalized Under Prompt Corrective Action Provisions
	2009					2008
	Amount		Ratio			Amount		Ratio
	(dollars expressed in thousands)
Total capital (to risk-weighted assets):
First Banks	$	740,560		9.78	%	$	1,148,407		12.11	%		8.0	%		N/A
First Bank		785,799		10.39			1,042,948		11.01			8.0			10.0	%
Tier 1 capital (to risk-weighted assets):
First Banks		370,280		4.89			841,152		8.87			4.0			N/A
First Bank		689,117		9.11			923,318		9.75			4.0			6.0
Tier 1 capital (to average assets):
First Banks		370,280		3.52			841,152		8.04			4.0			N/A
First Bank		689,117		6.56			923,318		8.85			4.0			5.0

In March 2005, the Federal Reserve adopted a final rule, Risk-Based Capital Standards: Trust Preferred Securities and the Definition of Capital, which allows for the continued limited inclusion of trust preferred securities in Tier 1 capital. The Federal Reserve’s final rule limits restricted core capital elements to 25% of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability. Amounts of restricted core capital elements in excess of these limits may generally be included in Tier 2 capital. Specifically, amounts of qualifying trust preferred securities and cumulative perpetual preferred stock in excess of the 25% limit may be included in Tier 2 capital, but will be limited, togethe r 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 provided for a five-year transition period, ending March 31, 2009, for the application of the quantitative limits. On March 16, 2009, the Federal Reserve adopted a final rule that delays the effective date for the application of the quantitative limits to March 31, 2011. Until March 31, 2011, 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 preferr ed stock, qualifying noncontrolling interest in the equity accounts of consolidated subsidiaries and qualifying trust preferred securities. First Banks has determined that the Federal Reserve’s final rules that will be effective in March 2011, if implemented as of December 31, 2009, would reduce First Banks’ total capital (to risk-weighted assets), Tier 1 capital (to risk-weighted assets) and Tier 1 capital (to average assets) to 7.44%, 4.11% and 2.95%, respectively. The final rules that will be effective in March 2011, if implemented as of December 31, 2009, would not have an impact on First Bank’s regulatory capital ratios.

136

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 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. Under the most restrictive of these requirements, the payment of dividends is limited in any calendar year to the net profit of the current year combined with the retained net profits of the preceding two years. Permission must be obtained for dividends exceeding these amounts. Based on the current level of earnings, permission must be obtained for any payment of dividends from First Bank to First Banks, Inc. Furthermore, First Bank, under its agreement with the MDOF and the FRB, has agreed, among other things, not to declare or pay any dividends or make certain other payments without the prior consent of the MDOF and the FRB, as further described in Note 1 to the consolidated financial s tatements.

137

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 23 – Parent Company Only Financial Information

Following are condensed balance sheets of First Banks, Inc. as of December 31, 2009 and 2008, and condensed statements of operations and cash flows for the years ended December 31, 2009, 2008 and 2007:

CONDENSED BALANCE SHEETS

	December 31,
	2009		2008
	(dollars expressed in thousands)
Assets
Cash deposited in First Bank	$	7,400		102,182
Cash deposited in unaffiliated financial institutions		3,862		3,747
Total cash		11,262		105,929
Investment securities		14,278		15,483
Investment in subsidiaries		775,034		1,109,706
Advances due from CFHI		—		1,555
Other assets		2,664		7,191
Total assets	$	803,238		1,239,864
Liabilities and Stockholders’ Equity
Subordinated debentures	$	353,905		353,828
Derivative instruments		4,171		4,876
Accrued interest payable		7,075		1,333
CPP dividends payable		8,158		—
Accrued expenses and other liabilities		10,965		12,855
Total liabilities		384,274		372,892
First Banks, Inc. stockholders’ equity		418,964		866,972
Total liabilities and stockholders’ equity	$	803,238		1,239,864

CONDENSED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2009			2008			2007
	(dollars expressed in thousands)
Income:
Dividends from subsidiaries	$	—			55,182			45,000
Management fees from subsidiaries		2,120			32,039			34,386
Loss on available-for-sale investment securities		(1,205	)		(10,480	)		(1,286	)
Net loss on derivative instruments		(5,585	)		—			—
Other		873			1,040			1,424
Total income		(3,797	)		77,781			79,524
Expense:
Interest		15,535			22,386			27,537
Salaries and employee benefits		840			19,767			23,829
Legal, examination and professional fees		146			3,664			2,979
Charitable contributions		—			55			1,905
Other		1,188			9,280			10,037
Total expense		17,709			55,152			66,287
(Loss) income before benefit for income taxes and equity in undistributed (losses) earnings of subsidiaries		(21,506	)		22,629			13,237
Benefit for income taxes		(17	)		(3,057	)		(11,535	)
(Loss) income before equity in undistributed (losses) earnings of subsidiaries		(21,489	)		25,686			24,772
Equity in undistributed (losses) earnings of subsidiaries		(406,132	)		(312,841	)		24,688
Net (loss) income	$	(427,621	)		(287,155	)		49,460

138

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

CONDENSED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2009			2008			2007
	(dollars expressed in thousands)
Cash flows from operating activities:
Net (loss) income	$	(427,621	)		(287,155	)		49,460
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Net loss (income) of subsidiaries		406,132			257,659			(69,688	)
Dividends from subsidiaries		—			55,182			45,000
Decrease in advances due from SFC		—			—			90,000
Other, net		13,832			10,174			10,057
Net cash (used in) provided by operating activities		(7,657	)		35,860			124,829
Cash flows from investing activities:
Increase in investment securities		—			(147	)		(2,616	)
Investment in common securities of affiliated business
and statutory trusts		—			—			(2,322	)
Payments from redemption of investment in common securities of affiliated business and statutory trusts		—			—			2,481
Acquisitions of subsidiaries		—			—			(50,749	)
Capital contributions to subsidiaries		(80,000	)		(200,000	)		(40,000	)
Other, net		(645	)		(189	)		(1,401	)
Net cash used in investing activities		(80,645	)		(200,336	)		(94,607	)
Cash flows from financing activities:
Advances drawn on notes payable		—			55,000			35,000
Repayments of notes payable		—			(94,000	)		(61,000	)
Proceeds from issuance of subordinated debentures		—			—			77,322
Repayments of subordinated debentures		—			—			(82,681	)
Proceeds from issuance of preferred stock		—			295,400			—
Payment of preferred stock dividends		(6,365	)		(786	)		(786	)
Net cash (used in) provided by financing activities		(6,365	)		255,614			(32,145	)
Net (decrease) increase in cash		(94,667	)		91,138			(1,923	)
Cash, beginning of year		105,929			14,791			16,714
Cash, end of year	$	11,262			105,929			14,791
Noncash investing activities:
Cash paid for interest	$	11,132			22,122			28,685

Note 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, 2009 and 2008, 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. As further described in Note 25 to the consolidated financial statements, First Bank expects to sell MVP on or about March 31, 2010. As a condition to completing this transaction, First Bank must be fully released from all obligations associated with the two continuing guaranty contracts.

139

First Banks, Inc.

Notes to Consolidated Financial Statements (Continued)

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

On March 24, 2010, the Company, SFC and First Bank entered into an Agreement with the FRB, as further described in Note 1 to the consolidated financial statements.

Note 25 – (Unaudited) Subsequent events

On January 22, 2010, First Bank completed the sale of its Lawrenceville Branch to Peoples, which resulted in a pre-tax gain of $168,000, as further described in Note 2 to the consolidated financial statements. In conjunction with the transaction, Peoples assumed approximately $23.7 million of deposits for a premium of 5.0%, or approximately $1.2 million, as well as certain other liabilities, and purchased approximately $13.5 million of loans at par value as well as certain other assets, including premises and equipment.

On February 8, 2010, First Bank entered into a Purchase and Assumption Agreement with Prosperity, headquartered in Houston, Texas, that provides for the sale of certain assets and the transfer of certain liabilities of First Bank’s Texas Region to Prosperity, as further described in Note 2 to the consolidated financial statements. Under the terms of the agreement, Prosperity is to purchase approximately $100.0 million in loans at par value as well as certain other assets, including premises and equipment, associated with First Bank’s Texas operations. Prosperity is also to assume approximately $500.0 million of deposits associated with First Bank’s 19 Texas retail branches, including certain commercial deposit relationships, for a premium of 5.5%, or approximately $27.5 million. The transaction, which is subjec t to regulatory approvals and certain closing conditions, is expected to be completed during the second quarter of 2010.

On February 19, 2010, First Bank completed the sale of certain assets and the transfer of certain liabilities of First Bank’s Chicago Region to FirstMerit, which resulted in a pre-tax gain of $8.4 million, as further described in Note 2 to the consolidated financial statements. In conjunction with the transaction, FirstMerit purchased approximately $301.2 million in loans at par value as well as certain other assets, including premises and equipment, associated with First Bank’s Chicago operations. FirstMerit also assumed substantially all of the deposits associated with First Bank’s 24 Chicago retail branches, including certain commercial deposit relationships, which totaled $1.20 billion, for a premium of 3.50%, or $42.1 million.

On March 5, 2010, First Bank entered into a Stock Purchase Letter Agreement that provides for the sale of First Bank’s subsidiary, MVP. Under the terms of the agreement, First Bank is to sell all of the capital stock of MVP for a purchase price of $100,000. The transaction is expected to be completed on or about March 31, 2010, or as soon as practicable after all applicable regulatory and other third-party approvals and consents have been obtained.

On March 24, 2010, the Company, SFC and First Bank entered into an Agreement with the FRB, as further described in Note 1 to the consolidated financial statements.

140

First Banks, Inc.

Quarterly Condensed Financial Data ¾ Unaudited

	2009 Quarter Ended
	March 31			June 30			September 30			December 31
	(dollars expressed in thousands, except per share data)
Interest income	$	109,417			106,569			101,992			96,297
Interest expense		37,771			32,798			31,323			26,490
Net interest income		71,646			73,771			70,669			69,807
Provision for loan losses		108,000			112,000			107,000			63,000
Net interest (loss) income after provision for loan losses		(36,354	)		(38,229	)		(36,331	)		6,807
Noninterest income		20,303			22,043			15,920			15,897
Noninterest expense		64,352			66,651			64,215			171,435
Loss from continuing operations before (benefit) provision for income taxes		(80,403	)		(82,837	)		(84,626	)		(148,731	)
(Benefit) provision for income taxes		(543	)		2,972			58			(94	)
Net loss from continuing operations, net of tax		(79,860	)		(85,809	)		(84,684	)		(148,637	)
Loss from discontinued operations before provision for income taxes		(11,511	)		(10,343	)		(7,773	)		(20,290	)
Provision for income taxes		29			—			—			—
Loss from discontinued operations, net of tax		(11,540	)		(10,343	)		(7,773	)		(20,290	)
Net loss		(91,400	)		(96,152	)		(92,457	)		(168,927	)
Less: net loss attributable to noncontrolling interest in subsidiaries		(1,994	)		(2,833	)		(1,380	)		(15,108	)
Net loss attributable to First Banks, Inc.	$	(89,406	)		(93,319	)		(91,077	)		(153,819	)
Basic and diluted loss per common share:
Loss per common share from continuing operations	$	(3,503.67	)		(3,717.28	)		(3,727.15	)		(5,852.11	)
Loss per common share from discontinued operations	$	(487.73	)		(437.13	)		(328.51	)		(857.53	)
Loss per common share	$	(3,991.40	)		(4,154.41	)		(4,055.66	)		(6,709.64	)

	2008 Quarter Ended
	March 31			June 30			September 30			December 31
	(dollars expressed in thousands, except per share data)
Interest income	$	154,612			137,520			133,743			125,542
Interest expense		58,845			47,756			45,939			43,632
Net interest income		95,767			89,764			87,804			81,910
Provision for loan losses		45,947			84,053			99,000			139,000
Net interest income (loss) after provision for loan losses		49,820			5,711			(11,196	)		(57,090	)
Noninterest income		26,573			13,721			13,473			12,006
Noninterest expense		66,339			67,299			67,161			67,335
Income (loss) from continuing operations before provision (benefit) for income taxes		10,054			(47,867	)		(64,884	)		(112,419	)
Provision (benefit) for income taxes		5,173			(16,559	)		(46,702	)		76,411
Net income (loss) from continuing operations, net of tax		4,881			(31,308	)		(18,182	)		(188,830	)
Loss from discontinued operations before (benefit) provision for income taxes		(16,787	)		(15,154	)		(13,030	)		(10,018	)
(Benefit) provision for income taxes		(7,178	)		(6,578	)		(6,097	)		19,738
Loss from discontinued operations, net of tax		(9,609	)		(8,576	)		(6,933	)		(29,756	)
Net loss		(4,728	)		(39,884	)		(25,115	)		(218,586	)
Less: net income (loss) attributable to noncontrolling interest in subsidiaries		145			33			(154	)		(1,182	)
Net loss attributable to First Banks, Inc.	$	(4,873	)		(39,917	)		(24,961	)		(217,404	)
Basic and diluted (loss) income per common share:
Income (loss) per common share from continuing operations	$	191.85			(1,330.15	)		(770.23	)		(7,941.75	)
Loss per common share from discontinued operations	$	(406.11	)		(362.46	)		(293.01	)		(1,257.60	)
Loss per common share	$	(214.26	)		(1,692.61	)		(1,063.24	)		(9,199.35	)

141

First Banks, Inc.

Investor Information

First Banks, Inc. Preferred Securities

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 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 2009 and 2008 are summarized as follows:

First Preferred Capital Trust IV (Issue Date – April 2003) – FBSPrA

	2009				2008				Dividend Declared (1)
	High		Low		High		Low
First quarter	$	16.50		11.64		25.30		20.00	$	0.509375
Second quarter		20.00		13.65		24.96		21.50		0.509375
Third quarter		19.60		5.58		24.85		12.73		0.509375
Fourth quarter		9.10		4.71		24.50		9.57		0.509375
									$	2.037500

__________________

(1) Amounts exclude the additional dividends on any cumulative unpaid dividends following the announcement of the deferral of payments in August 2009.

For Information Concerning First Banks, Please Contact:
Terrance M. McCarthy	Lisa K. Vansickle
President and    Chief Executive Officer	Senior Vice President    and Chief Financial Officer
135 North Meramec	135 North Meramec
Mail Code – M1-821-014	Mail Code – M1-821-014
Clayton, Missouri 63105	Clayton, Missouri 63105
Telephone – (314) 854-5400	Telephone – (314) 854-5400
www.firstbanks.com	www.firstbanks.com

Transfer Agent:

Computershare Investor Services, LLC

2 North LaSalle Street

Chicago, Illinois 60602

Telephone – (312) 588-4990

www.computershare.com

142

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/	Terrance M. McCarthy
		Terrance M. McCarthy
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: March 25, 2010

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 25, 2010
	James F. Dierberg
/s/	Terrance M. McCarthy	Director and President	March 25, 2010
	Terrance M. McCarthy	and Chief Executive Officer
		(Principal Executive Officer)
/s/	Allen H. Blake	Director	March 25, 2010
	Allen H. Blake
/s/	James A. Cooper	Director	March 25, 2010
	James A. Cooper
/s/	David L. Steward	Director	March 25, 2010
	David L. Steward
/s/	Douglas H. Yaeger	Director	March 25, 2010
	Douglas H. Yaeger
/s/	Lisa K. Vansickle	Senior Vice President	March 25, 2010
	Lisa K. Vansickle	and Chief Financial Officer
		(Principal Financial Officer)

143

INDEX TO EXHIBITS

Exhibit
Number		Description
	2.1+	Purchase and Assumption Agreement, dated as of November 11, 2009, by and between First Bank and FirstMerit Bank, N.A, as amended. – filed herewith.
	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	Certificate of Designation of First Banks, Inc. with respect to Class C Fixed Rate Cumulative Perpetual Preferred Stock dated as of December 24, 2008 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated December 31, 2008).
	3.3	Certificate of Designation of First Banks, Inc. with respect to Class D Fixed Rate Cumulative Perpetual Preferred Stock dated as of December 24, 2008 (incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K dated December 31, 2008).
	3.4	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	Instruments defining the rights of security holders, including indentures. The registrant hereby agrees to furnish to the Commission upon request copies of instruments defining the rights of holders of long-term debt of the registrant and its consolidated subsidiaries; no issuance of debt exceeds 10% of the assets of the registrant and its subsidiaries on a consolidated basis.
	4.2	Warrant to Purchase Shares of First Banks, Inc. Class D Fixed Rate Cumulative Perpetual Preferred Stock dated as of December 31, 2008 (incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K dated December 31, 2008).
	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	Comprehensive Banking System License and Service Agreement dated as of July 24, 1991, by and between the Company and FiServ CIR, Inc. (incorporated herein by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1, File No. 33-50576, dated August 6, 1992).
	10.3	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).
	10.4	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).
	10.5	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).
	10.6	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).
	10.7	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).
	10.8*	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).
	10.9	Secured Credit Agreement ($125.0 million Revolving Credit Facility, including $10.0 million Swingline Sub-Facility and $5.0 million Letter of Credit Sub-Facility), dated as of August 8, 2007, by and among First Banks, Inc. and Wells Fargo Bank, National Association, as Agent, JP Morgan Chase Bank, N.A., LaSalle Bank National Association, The Northern Trust Company, Union Bank of California, N.A., Fifth Third Bank (Chicago) and U.S. Bank National Association (incorporated herein by reference to Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007).

144

10.10	First Amendment to the Secured Credit Agreement, dated as of February 12, 2008, by and among First Banks, Inc. and Wells Fargo Bank, National Association, as Agent, and JP Morgan Chase Bank, N.A., LaSalle Bank National Association, The Northern Trust Company, Union Bank of California, N.A. and Fifth Third Bank (Chicago) (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 19, 2008).
10.11	Second Amendment to the Secured Credit Agreement, dated as of February 12, 2008, by and among First Banks, Inc. and Wells Fargo Bank, National Association, as Agent, and 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 10.2 to the Company’s Current Report on Form 8-K dated February 19, 2008).
10.12	Termination Agreement, dated as of May 19, 2008, 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. and Fifth Third Bank (Chicago) (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
10.13	First Amended Revolving Credit Note, dated as of August 11, 2008, by and between First Banks, Inc. and Investors of America Limited Partnership (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
10.14	Stock Pledge Agreement, dated as of May 15, 2008, by and between First Banks, Inc. and Investors of America Limited Partnership (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
10.15*	First Banks, Inc. Nonqualified Deferred Compensation Plan, as amended (incorporated herein by reference to Exhibit 5.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
10.16	Letter Agreement including the Securities Purchase Agreement – Standard Terms incorporated therein, between First Banks, Inc. and the United States Department of the Treasury, dated as of December 31, 2008 (as amended by the Side Letter Agreement between First Banks, Inc. and the United States Department of the Treasury, dated as of December 31, 2008, and included herein as Exhibit 10.12) (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 31, 2008).
10.17	Side Letter Agreement between First Banks, Inc. and the United States Department of the Treasury, dated as of December 31, 2008 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 31, 2008).
10.18*	Form of Omnibus Amendment Agreement executed by each of Terrance M. McCarthy, Russell L. Goldammer, Robert S. Holmes, F. Christopher McLaughlin and Lisa K. Vansickle, dated as of December 24, 2008 (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated December 31, 2008).
10.19	Written Agreement by and among First Banks, Inc., The San Francisco Company, First Bank and the Federal Reserve Bank of St. Louis, dated as of March 24, 2010 – filed herewith.
14.1	Code of Ethics for Principal Executive Officer and Financial Professionals, as amended (incorporated herein by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).
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.
99.1	EESA Section 111(b)(4) Certification of Chief Executive Officer – filed herewith.
99.2	EESA Section 111(b)(4) Certification of Chief Financial Officer – filed herewith.
+	Pursuant to Item 601(b)(2), the registrant undertakes to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.
*	Exhibits designated by an asterisk in the Index to Exhibits relate to management contracts and/or compensatory plans or arrangements.

 145

EX-2 2 ex2_1.htm EXHIBIT 2.1

EXHIBIT 2.1

EXECUTION COPY

PURCHASE AND ASSUMPTION AGREEMENT

BY AND BETWEEN

FIRSTMERIT BANK, N.A.

AND

FIRST BANK

Dated as of November 11, 2009

TABLE OF CONTENTS

Tab

ARTICLE 1 DEFINITIONS			1
ARTICLE 2 PURCHASE AND SALE			15
	2.1	The Acquisition.	15
	2.2	Consideration for the Acquisition.	19
	2.3	Allocation.	22
	2.4	Pro Rata Adjustment and Reimbursement.	23
	2.5	Closing.	24
	2.6	Repurchase of Non-Conforming Loans	25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER			26
	3.1	Organization, Qualification, and Corporate Power	26
	3.2	Authorization of Transaction	26
	3.3	Noncontravention	27
	3.4	Governmental Authorizations	27
	3.5	Brokers’ Fees	27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES CONCERNING THE BRANCHES			27
	4.1	Title; Tangible Personal Property	28
	4.2	Deposits.	28
	4.3	Undisclosed Liabilities	29
	4.4	Tax Matters.	29
	4.5	Employee Benefits	30
	4.6	Compliance with Applicable Laws	30
	4.7	Legal Proceedings; Orders	31
	4.8	Employees.	31
	4.9	Environmental Matters.	32
	4.10	Loans	34
	4.11	Owned Real Property, Leased Real Properties and Tangible Personal Property.	36
	4.12	Leased Real Property	39
	4.13	Acquired Contracts	39
	4.14	Absence of Certain Changes and Events	40
	4.15	Escheat Deposits	41
	4.16	Books and Records.	41
	4.17	Insurance.	41
	4.18	Disclosure.	41

(i)

	4.19	Community Reinvestment Act Designations.	41
	4.20	No Knowledge of Fraud.	42
	4.21	Limitation on Warranties	42
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER			42
	5.1	Organization, Qualification, and Corporate Power	42
	5.2	Authorization of Transaction	42
	5.3	Noncontravention	42
	5.4	Brokers’ Fees	43
	5.5	Legal Proceedings; Orders	43
	5.6	Financial Condition	43
	5.7	Regulatory Condition	43
ARTICLE 6 PRE-CLOSING COVENANTS			43
	6.1	Operation of Business.	44
	6.2	Notice of Potential Material Adverse Effect	46
	6.3	Reasonable Access	46
	6.4	Press Releases	47
	6.5	Exclusivity	47
	6.6	Regulatory Matters and Approvals	47
	6.7	Employment.	48
	6.8	Conveyance of Customer Accounts.	50
	6.9	Branch Access	50
	6.10	Maintenance of Properties	51
	6.11	Conversion Planning and Execution	51
	6.12	General Third Party Consents	51
	6.13	Title Insurance and Surveys	52
	6.14	Insurance Proceeds and Casualty Payments	53
	6.15	Environmental Reports and Investigations	53
	6.16	Condemnation	55
	6.17	Exclusion of Non-Core Deposits	55
	6.18	Additions to Loans; Removal of Certain Loans	55
	6.19	Subordination, Non-Disturbance and Attornment Agreements	56
	6.20	Assumption of Ira and Keogh Account Deposits.	56
	6.21	Naperville Branch	57
	6.22	Post-Signing Selection of Certain Excluded Tangible Personal Property	57
ARTICLE 7 POST-CLOSING COVENANTS			57
	7.1	Continued Cooperation	57
	7.2	Transitional Matters Concerning Deposits.	57

(ii)

	7.3	Transitional Matters Concerning Loans	60
	7.4	Transitional Matters Concerning Real Estate Interests	60
	7.5	Transfer of Books and Records	60
	7.6	Electronic Records, Conversion, and Servicing.	62
	7.7	Tax Reporting Obligations.	62
	7.8	Credit Life Insurance Refunds	63
	7.9	Non-Solicitation of Employees	64
	7.10	Non-Solicitation of Business	64
	7.11	Covenant Not to Compete.	64
	7.12	Legal Inquiries	66
	7.13	Employment.	66
	7.14	Removal of Seller’s Name From Signs	67
ARTICLE 8 CONDITIONS TO OBLIGATION TO CLOSE			67
	8.1	Conditions to Obligation of Buyer	67
	8.2	Conditions to Obligation of Seller	70
ARTICLE 9 ITEMS TO BE DELIVERED AT OR PRIOR TO CLOSING			70
	9.1	By Seller	70
	9.2	By Buyer	71
ARTICLE 10 TERMINATION			72
	10.1	Termination of Agreement.	72
	10.2	Effect of Termination	73
ARTICLE 11 REMEDIES FOR BREACH OF THIS AGREEMENT			73
	11.1	Survival	73
	11.2	Indemnification by Seller	74
	11.3	Indemnification by Buyer	74
	11.4	Limitations on Indemnity.	75
	11.5	Third Party Claims.	76
	11.6	Losses Computed Without Giving Effect to Materiality	79
	11.7	Indemnity Payments Treated as Adjustments to Purchase Price	79
	11.8	After-Tax Nature of Indemnity Payments	79
	11.9	Third Party Beneficiaries	79
ARTICLE 12 MISCELLANEOUS			79
	12.1	Governing Law	79
	12.2	Consent to Jurisdiction; Waiver of Jury Trial.	79
	12.3	Waiver of Punitive Damages and Jury Trial.	80

(iii)

12.4	Successors and Assigns; No Third-Party Rights	81
12.5	Entire Agreement; Amendment	81
12.6	Notices	81
12.7	Amendments and Waivers	82
12.8	Counterparts	82
12.9	Severability	82
12.10	Titles and Subtitles	82
12.11	Construction	82
12.12	Expenses	83
12.13	Waiver of Compliance with Bulk Sales Laws	83
12.14	Next Business Day	83

Exhibit A	Seller’s Branches
Exhibit B	FMER Loan Review Standards
Exhibit C	Form of Limited Power of Attorney
Schedule 1.1	Loans
Schedule 1.2	Select Remote Employees
Schedule 2.1(a)(vii)(B)	Acquired Contracts
Schedule 2.1(b)(i)	Excluded Tangible Personal Property
Schedule 3.2	Consents
Schedule 4.2(e)	Exceptions to Deposits
Schedule 4.2(f)	Exceptions to Deposit Agreements
Schedule 4.7(a)	Legal Proceedings; Orders
Schedule 4.8(b)	Employment Agreements
Schedule 4.8(d)	Employment-Related Claims
Schedule 4.9(a)	Compliance with Environmental Laws
Schedule 4.9(g)	Asbestos, Mold and Lead-Based Paint
Schedule 4.10(a)	Loans to Employees and Affiliates
Schedule 4.11(a)(i)	Owned Real Property
Schedule 4.11(a)(ii)	Tenant Leases
Schedule 4.11(b)	Issues Affecting Owned Real Property, Leased Property and Tangible Personal Property
Schedule 4.12	Leases
Schedule 4.14(e)	Compensation Increases
Schedule 6.11	Conversion-Related Responsibilities
Schedule 6.20(c)	Excluded IRA/Keogh Accounts
Schedule 8.1(m)	Employment Agreements with Buyer

(iv)

PURCHASE AND ASSUMPTION AGREEMENT

THIS PURCHASE AND ASSUMPTION AGREEMENT (this “Agreement”) entered into as of November 11, 2009, by and between FIRSTMERIT BANK, N.A., a national banking association (“Buyer”), and FIRST BANK, a Missouri state chartered bank (“Seller”).  Buyer and Seller are referred to collectively herein as the “Parties.”

W I T N E S S E T H

WHEREAS, Buyer and Seller are each engaged in the business of banking;

WHEREAS, Seller desires to sell certain assets and transfer certain liabilities with respect to Seller’s branch operations which are listed on Exhibit A and referred to herein as the Branches;

WHEREAS, Buyer desires to purchase certain assets and assume certain liabilities of Seller related to the Branches;

WHEREAS, the Parties desire to set forth in writing the terms and conditions under which the transaction will be consummated.

NOW, THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized terms used but not otherwise defined herein shall have the following meanings:

“ABL Purchase Agreement” means that certain Loan Purchase Agreement, dated of even date hereof, between Buyer and First Bank Business Capital, Inc., as amended, modified or supplemented from time to time in accordance with the terms thereof.

“Accountant” has the meaning set forth in Section 2.2(d) of this Agreement.

“ACH” has the meaning set forth in Section 7.2(g) of this Agreement.

“Acquired Assets” has the meaning set forth in Section 2.1(a) of this Agreement.

“Acquired Branches” means the Branches other than the Rejected Branches.

“Acquired Contracts” has the meaning set forth in Section 2.1(a)(vii) of this Agreement.

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“Acquired Intellectual Property” has the meaning set forth in Section 2.1(a)(iii) of this Agreement.

“Acquired Leased Real Properties” has the meaning set forth in Section 2.1(a)(v) of this Agreement.

“Acquired Leasehold Improvements” has the meaning set forth in Section 2.1(a)(vi) of this Agreement.

“Acquired Leases” has the meaning set forth in Section 2.1(a)(v) of this Agreement.

“Acquired Owned Real Property” means the Owned Real Property other than the Excluded Owned Real Property, if any.

“Acquired Tangible Personal Property” has the meaning set forth in Section 2.1(a)(ii) of this Agreement.

“Acquisition” means the acquisition by Buyer of the Acquired Assets and the assumption of the Assumed Liabilities pursuant to the terms of this Agreement.

“Acquisition Closing Date Balance Sheet” means an unaudited balance sheet listing only the Acquired Assets and the Assumed Liabilities as of the close of business on the Closing Date and prepared from and using the same methodologies and principles used in connection with the Closing Date Balance Sheet, which unaudited balance sheet shall also include appropriate line items in respect of the Taxes and other prepaid expenses or items to be prorated between Buyer and Seller as required by Section 2.4 of this Agreement.

“Acquisition Pre-Closing Balance Sheet” means an unaudited balance sheet listing only the Acquired Assets and the Assumed Liabilities as of the last day of the immediately preceding month end prior to the Closing Date and prepared from and using the same methodologies and principles used in connection with the Pre-Closing Balance Sheet, which unaudited balance sheet shall be prepared by Seller and delivered to Buyer on or before the fifth (5th) Business Day prior to the Closing Date and shall include appropriate line items in respect of the Taxes and other prepaid expenses or items to be prorated between Buyer and Seller as required by Section 2.4 of this Agreement.

“Affiliate” means with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person.  For purposes of this definition, “control” (including with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise; provided, however, that with respect to Seller, “Affiliate” means FB Parent and the Affiliates of Seller or FB Parent that are controlled, either directly or indirectly, by Seller or FB Parent.

“Agreement” has the meaning set forth in the preface above.

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“Applicable Laws” means all applicable federal, state, county and municipal laws, codes, injunctions, judgments, orders, decrees, rulings and charges thereunder and other governmental requirements, constitutions, ordinances, statutes, rules, regulations, and administrative interpretations and pronouncements.

“Assumed Liabilities” has the meaning set forth in Section 2.1(c) of this Agreement.

“Book Value” means, with respect to any Acquired Asset and any Assumed Liability, the dollar amount thereof stated on the accounting records of Seller.  The Book Value of any item shall be determined as of the Closing Date after adjustments made by Seller for differences in accounts, suspense items, unposted debits and credits, and other similar adjustments or corrections.  Without limiting the generality of the foregoing, the Book Value of (i) an Assumed Liability shall include all accrued and unpaid interest thereon as of the Closing Date, (ii) a Loan shall reflect adjustments for earned or unearned interest (as it relates to the “rule of 78s” or add-on-interest loans, as applicable), if any, as of the Closing Date, and adjustments for the portion of earned or unearned loan-related credit life and/or disability insurance premiums, FAS 91 costs, if any, attributable to Seller as of the Closing Date in each case determined for financial reporting purposes, (iii) a Commitment shall be deemed to be zero, and (iv) the Acquired Tangible Personal Property and the Owned Real Property shall be the net book value thereof prorated to the Closing Date except that the Book Value of all signs and sign framing, posts, structures and other signage infrastructure shall be zero.  The Book Value of an Acquired Contract shall be zero.  The Book Value of an Acquired Asset shall not include any adjustment for any general or specific reserves on the accounting records of Seller.  Seller shall continue to depreciate the Acquired Assets in accordance with generally accepted accounting principles applied on a basis consistent with prior periods provided that Seller shall not book depreciation less often t han monthly.

“Books and Records” has the meaning set forth in Section 7.5 of this Agreement.

“Branches” means Seller’s branch offices listed on Exhibit A.  (Any individual location may be referred to as “Branch” if the context so requires.)

“Business Day” means a day other than a Saturday, Sunday or any holiday observed by the Federal Reserve.

“Buyer” has the meaning set forth in the preface above.

“Buyer Documents” means this Agreement and each other agreement, instrument or document entered into by Buyer pursuant to this Agreement.

“Buyer Indemnitees” has the meaning set forth in Section 11.2 of this Agreement.

“Buyer Material Adverse Effect” means, with respect to Buyer, any condition, event, change or occurrence that, individually or collectively, is reasonably likely to have a material adverse effect upon the ability of Buyer to perform its obligations under, and to consummate the transactions contemplated by this Agreement.

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“Buyer’s 401(k) plan”  has the meaning set forth in Section 7.13(a) of this Agreement.

“Buyer Taxes” has the meaning set forth in Section 11.5(d) of this Agreement.

“Cap” has the meaning set forth in Section 11.4(a) of this Agreement.

“Claim Notice” has the meaning set forth in Section 11.5(a)(i) of this Agreement.

“Closing” has the meaning set forth in Section 2.5(a) of this Agreement.

“Closing Date” has the meaning set forth in Section 2.5(a) of this Agreement.

“Closing Date Balance Sheet” means an unaudited balance sheet listing the assets and liabilities of the Branches as of the close of business on the Closing Date prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commercially Reasonable Efforts” means efforts that a prudent Person desirous of achieving a result would use in similar circumstances to achieve that result; provided, however, that Commercially Reasonable Efforts shall not be deemed to require a Person to undertake extraordinary or unreasonable measures, including the payment of amounts in excess of normal and usual filing fees and processing fees, if any, or other payments with respect to any Contract that are significant in the context of such Contract (or significant on an aggregate basis as to all Contracts).

“Commitments” means unfunded commitments by Seller to lend funds to customers of the Branches on the terms and conditions set forth in the applicable commitment letters or other documentation, as such commitments exist as of the Closing Date.

“Consent” means any approval, consent, ratification, waiver, or other authorization (including, without limitation, any Governmental Authorization, and any other third party consents necessary for the assignment to Buyer of any Acquired Contract); provided, however, that “Consent” shall not include any Landlord Consent.

“Contract” means any agreement, contract, lease, obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding.

“Controlling Party” has the meaning set forth in Section 11.5(d) of this Agreement.

“Cut-Off Date” means the date that is one hundred eighty days following the Closing Date.

“Deposits” means all deposits (as defined in 12 U.S.C. § 1813(l)), and the obligations and duties incidental thereto, which are assigned to the Branches, including demand deposit accounts, time and savings accounts, interest checking accounts, deposits relating to debit cards / ATM cards, certificates of deposits, IRAs (to the extent contemplated by Section 6.20(a)), Keogh

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Accounts (to the extent contemplated by Section 6.20(b)), sweep accounts and other deposit accounts, including for each, all interest accrued but unpaid and both collected and uncollected funds through the Closing Date; and including the obligations relating to the clearance of checks and drafts drawn against the deposit liabilities, in accordance with the Books and Records of the Branches as of the close of business on the Closing Date; provided however that deposits shall not include (a) deposits constituting official checks, travelers checks, money orders, certified checks or other items in the process of clearing on the Closing Date; ( b) deposits pledged as collateral for any Excluded Loan; (c) any deposit account with an overdraft in excess of $1,000 outstanding as of the calendar month end immediately preceding the Closing Date; (d) the Excluded IRA/Keogh Account Deposits; (e) Non-Core Deposits excluded by Buyer pursuant to the provisions of Section 6.17; (f) deposits that would be presumed to be abandoned under escheat law or other abandoned property law of any applicable jurisdiction, (g) brokered deposits, and (h) deposits of Branches excluded under Section 6.12, 6.13, 6.15 or 6.21 due to the inability to transfer such Deposits to Buyer on account of the failure to satisfy ap plicable regulatory requirements with respect to any such transfer prior to the Closing Date.

“Disagreement” has the meaning set forth in Section 2.2(c) of this Agreement.

“Disclosure Schedule” means the disclosure Schedules delivered by Seller under Articles 3 and 4 of this Agreement that limit or qualify the representations and warranties made by Seller under Articles 3 and 4 of this Agreement.

“Draft Allocation Statement” has the meaning set forth in Section 2.3(a) of this Agreement.

“Effective Time” has the meaning set forth in Section 2.5(b) of this Agreement.

“Encumbrance” means any charge, claim, community property interest, condition, encumbrance, equitable interest, lien, option, pledge, mortgage, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

“Environmental Law” means any federal, state or local law (including common law), statute, ordinance, rule, regulation, code, Consent, Order, or agreement with any Governmental Body in each case as amended from time to time relating to (1) the protection, preservation or restoration of the indoor or outdoor environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), or (2) the use, storage, remediation, removal, inspection, monitoring, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of, or exposure to, or injury or damage by, any Hazardous Materials , including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended; the Hazardous Materials Transportation Act, as amended; the Resource Conservation and Recovery Act of 1976, as amended; the Federal Water Pollution Control Act, as amended; the Toxic Substances Control Act, as amended; the Clean Air Act, as amended; the Occupational Safety and Health Act, as amended; and the Safe Drinking Water Act, as amended.

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“Estimated Payment Amount” has the meaning set forth in Section 2.2(b) of this Agreement.

“Estimated Payment Amount Statement” has the meaning set forth in Section 2.2(b) of this Agreement.

“Excluded Assets” has the meaning set forth in Section 2.1(b) of this Agreement.

“Excluded Intellectual Property” has the meaning set forth in Section 2.1(b)(ii) of this Agreement.

“Excluded IRA/Keogh Account Deposits” has the meaning set forth in Section 6.20(c).

“Excluded Lease” means any Lease in respect of any item of Excluded Leased Real Property.

“Excluded Leased Real Property” means any Leased Real Property that has been excluded from the Acquisition by Buyer pursuant to Section 6.12, 6.13 or 6.15 of this Agreement.

“Excluded Liabilities” has the meaning set forth in Section 2.1(d) of this Agreement.

“Excluded Loans” has the meaning set forth in Section 2.1(b)(iv) of this Agreement.

“Excluded Owned Real Property” means any Owned Real Property that has been excluded from the Acquisition by Buyer pursuant to Section 6.13, 6.15 or 6.21 of this Agreement.

“Excluded Tangible Personal Property” has the meaning set forth in Section 2.1(b)(i) of this Agreement.

“Fair Market Value” means the fair market value as determined by an appraiser that is mutually agreeable to Seller and Buyer and that is independent and has no fewer than seven (7) years experience appraising similar property in the county in which the parcel of Owned Real Property is located.

“FB Parent” means First Banks, Inc., a Missouri corporation and the legal and beneficial owner of all of the issued and outstanding capital stock of The San Francisco Company and Coast Financial Holdings, Inc., which together are the legal and beneficial owners of all of the issued and outstanding capital stock of Seller.

“FDIC” means the Federal Deposit Insurance Corporation.

“Federal Funds Rate” means the federal funds target rate as quoted by the Federal Reserve Bank of St. Louis on the relevant Business Day.

“Fiduciary Relationships” means (a) any and all common law or other trusts between individual, corporate or other entities with Seller as a trustee or co-trustee, including, without

6

limitation, pension, compensation, testamentary, and charitable trusts and indentures, (b) any and all decedents’ estates where Seller is serving as a co- or sole executor, personal representative or administrator, administrator de bonis non, administrator de bonis non with will annexed, or in any similar fiduciary capacity, (c) any and all guardianships, conservatorships or similar positions where Seller is serving or has served as a co- or sole guardian or conservator, or any similar fiduciary capacity, (d) any and all agency and/or custodial accounts and/or similar arrangements under which Seller is serving or has served as an agent or custodian for the owner or other party establishing the account with or without investment authority and (e) any and all escrow arrangements under which Seller holds or held assets for any party or parties on stated terms and conditions.

“Final Allocation Statement” has the meaning set forth in Section 2.3(a) of this Agreement.

“Final Payment Amount Statement” has the meaning set forth in Section 2.2(c) of this Agreement.

“FMER Loan Review Standards” means the loan review standards of Buyer described on Exhibit B hereto.

“Geographic Region” has the meaning set forth in Section 7.11 of this Agreement.

“Governmental Authorization” means any approval, consent, license, permit, registration, certification, exemption, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Applicable Law.

“Governmental Body” means any (a) federal, state, local, municipal, foreign or other government; (b) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); or (c) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority.

“Hazardous Materials” means (i) any petroleum or petroleum products, natural gas, or natural gas products, radioactive materials, asbestos, mold, lead, radon gas, urea formaldehyde foam insulation, transformers or other equipment that contains dielectric fluid containing levels of polychlorinated biphenyls (PCBs) and radon gas; (ii) any chemical, material, waste or substance defined, listed, classified or described as “hazardous substance,” “hazardous waste,” “regulated substance,” “solid waste,” “hazardous material,” “extremely hazardous waste,” “restricted hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” under any Environmental Laws; and (iii) any material, waste or substance the use, disposal, or handling of which is in any way regulated by any Governmental Body, including any such material, waste or substance regulated as hazardous or toxic by any Governmental Body, including mixtures thereof with other materials, and including any regulated building materials containing asbestos or lead.  Notwithstanding the preceding, however, “Hazardous Materials” shall not mean or include any such Hazardous Material (A) used, generated, manufactured, stored, disposed of or otherwise handled in normal quantities in the Ordinary Course of Business

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in compliance with all applicable Environmental Laws as in existence on the date hereof, or (B) that may be naturally occurring in any ambient air, surface water, ground water, land surface or subsurface strata.

“Holds” has the meaning set forth in Section 7.2(h) of this Agreement.

“Indemnifying Party” means the Party that is required to indemnify an Indemnitee pursuant to Article 11 hereof.

“Insurance” has the meaning set forth in Section 7.8 of this Agreement.

“Indemnitee” means any Person that may be entitled to seek indemnification pursuant to Article 11 hereof.

“IRA” means an “individual retirement account” or similar account created by a trust for the exclusive benefit of any individual or his beneficiaries in accordance with the provisions of Section 408 or Section 408A of the Code.

“Keogh Account” means an account created by a trust for the benefit of employees (some or all of whom are owner-employees) and that complies with the provisions of Section 401 of the Code.

“Knowledge” of a particular fact or other matter means information actually known to a Parties’ officers, directors, senior managers or Branch managers or such other information that a prudent person could be expected to discover after due inquiry appropriate under the circumstances; provided, however, that Seller shall be deemed to have knowledge of any matter, fact, event, default, violation, breach, noncompliance, notice, consent or other circumstance if any of the same shall have been delivered in writing to Seller at anytime prior to the Closing.

“Landlord Consents” has the meaning set forth in Section 4.12 of this Agreement.

“Leased Real Property” means, with respect to any Lease, the real property and improvements leased by Seller under such Lease.

“Leasehold Improvements” means, with respect to any Lease, all improvements by Seller to the Leased Real Property under such Lease.

“Leases” has the meaning set forth in Section 4.12 of this Agreement; provided, however, that, for the avoidance of doubt, the Leases shall not include, and Buyer shall not be acquiring or assuming from Seller (i) the leases for suites 140 and 165, 161 N. Clark, Chicago, Illinois, (ii) the leases for suites 110 and 113, drive thru and ATM facilities at 15255 South 94th Avenue, Orland Park, Illinois, or (iii) suite 3, 700 Osterman Avenue, Deerfield, Illinois.

“Liability” means any liability (INCLUDING, WITHOUT LIMITATION, ANY STRICT LIABILITY), whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and due or to become due, of any nature whatsoever, including any liability for Taxes.

8

“Loans” mean (a) the loans and participation interests in the loans (including servicing rights where applicable, accrued but unpaid interest and any accrued but unpaid ancillary income due under the term of the note) and Commitments in the amounts set forth on the Books and Records of the Branches as of the close of business on the Closing Date that are identified by Buyer to Seller on Schedule 1.1, as such Schedule may be supplemented or amended pursuant to Section 6.18 of this Agreement, and (b) overdrafts of less than $1,000 in deposit accounts of the Branches; provided, however, that Loans shall not include any of the following loans, participation interests, Commitments and overdrafts except to the extent any of them are identified in the Special Acceptance Notice delivered by Buyer to Seller at least five (5) Business Days prior to the Closing Date:

(i)           any such loan, participation interest, Commitment or overdraft that is delinquent as of the Closing Date or, if not delinquent as of the Closing Date, would have been delinquent at anytime during the 180 day period prior to the Closing Date but for the granting of any grace period, waiver, forbearance, extension, modification or amendment;

(ii)           any such loan, participation interest, Commitment or overdraft of any obligor if the financial condition of such obligor as of the Closing Date is such that Buyer would place such loan, participation interest, Commitment or overdraft on “watch” (or worse) status in accordance with the FMER Loan Review Standards;

(iii)           any such loan, participation interest, Commitment or overdraft of any obligor that is subject to a pending legal proceeding related to a customer’s inability or refusal to pay such loan, Commitment or overdraft;

(iv)           any such loan, participation interest, Commitment or overdraft of any obligor that is subject to pending proceedings against the obligor or obligors (including any guarantor) of such loan, participation interest, Commitment or overdraft under any law, rule or regulation relating to bankruptcy, insolvency, reorganization or other relief from creditors;

(v)           any such loan, participation interest, Commitment or overdraft that constitutes an SBA Loan unless the SBA Consent with respect thereto shall have been obtained as of the Closing Date;

(vi)           any such loan, participation interest or Commitment that has been fully discharged and satisfied or, in the case of a Commitment, terminated as of the Closing Date; and

(vii)           any such loan, participation interest, Commitment or overdraft that constitutes a Non-Conforming Loan pursuant to clause (i) or (ii) of the definition of Non-Conforming Loan set forth in this Article 1.

”Loss” or “Losses” means any and all losses, costs, Liabilities, damages, demands, penalties, fines, settlements, response or remedial or inspection costs, reasonable expenses  (including, without limitation, interest on any amount payable to a third party as a result of the foregoing), and any legal, accounting, auditing, consulting or other expenses reasonably incurred

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in connection with investigating or defending any claims, actions or proceedings, whether or not resulting in any liability, or enforcing any right to indemnification under Article 11, actually incurred by an Indemnitee in connection with the matters described in Section 11.2 or 11.3, as the case may be; provided, however, that the term “Loss” shall not be deemed to include lost profits, opportunity costs, any other consequential damages or punitive damages except to the extent that, in connection with a Third Party Claim, any such profits, opportunity costs, consequential damages or punitive damages are incurred or suffered by a third party and are included in a judgment awarded to, or a settlement or compromise obtained by, such third party.

“Loss Threshold” has the meaning set forth in Section 11.4(a) of this Agreement.

“Naperville Branch” has the meaning set forth in Section 6.21 of this Agreement.

“New Loan” has the meaning set forth in Section 6.18 of this Agreement.

“Non-Conforming Loan” means any Loan acquired under this Agreement as to which Buyer shall have determined in its reasonable good faith judgment not later than the Cut-Off Date is or constitutes a Loan:

(i)           that is fraudulent in nature as a result of any intentional act or omission taken by any Person at anytime on or prior to the Closing Date;

(ii)           as to which any one or more of the representations or warranties made by Seller under this Agreement in respect of such Loan shall have been inaccurate or untrue; or

(iii)           that should not constitute a “Loan” on account of any of the circumstances described in any of clauses (i) through (vi) of the proviso to the definition of Loans set forth in Article 1 of this Agreement.

“Non-Conforming Loan Closing Date” has the meaning set forth in Section 2.6 of this Agreement.

“Non-Conforming Loan Notice” has the meaning set forth in Section 2.6 of this Agreement.

“Non-Controlling Party” has the meaning set forth in Section 11.5(d) of this Agreement.

“Non-Core Deposit” shall mean certificates of deposit or money market deposit accounts originated by Seller after the date of this Agreement that had a rate of interest (i) greater than 1.5% on the date of origination, in the case of certificates of deposits or money market deposit accounts with a maturity of one (1) year or less, and (ii) greater than 1.75% on the date of origination, in the case of certificates of deposits or money market deposit accounts with a maturity of more than one (1) year.

“Non-disclosure Agreement” means the letter agreement dated August 19, 2009 between Hovde Financial, Inc. and FirstMerit Bank, N.A.

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“Non-Divested Branches” means all of the banking branches of Seller in any jurisdiction, other than the Branches.

“Notice of Disagreement” has the meaning set forth in Section 2.2(c) of this Agreement.

“Notice Period,” as applied to any Third Party Claim for which an Indemnitee seeks to be indemnified pursuant to this Agreement, shall mean the period ending the earlier of the following:

(a)           sixty (60) days after the time at which the Indemnitee has either (i) received notice of the facts giving rise to such Third Party Claim, or (ii) commenced an active investigation of circumstances likely to give rise to such Third Party Claim and, in the case of clause (ii), where such Indemnitee believes or should reasonably believe that such facts or circumstances would give rise to such Third Party Claim for which such Indemnitee would be entitled to indemnification pursuant to this Agreement; and

(b)           sixty (60) days after the time at which any Third Party Claim against the Indemnitee has become the subject of Proceedings before any court or tribunal or other decision-making body, or such shorter time as would allow the Indemnifying Party  sufficient time to contest, on the assumption that there is an arguable defense to such Third Party Claim, such Proceeding prior to any judgment or decision thereon.

“Objectionable Title Matter” has the meaning set forth in Section 6.13 of this Agreement.

“OCC” means the Office of the Comptroller of the Currency.

“Order” means any cease or desist order, written agreement, memorandum of understanding, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body or by any arbitrator.

“Ordinary Course of Business” shall mean an action taken by a Person if:

(a)           such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person;

(b)           if the Person is a corporation, bank, partnership, limited liability company or any other entity of any nature, such action is not required to be authorized by the board of directors of such entity (or by any Person or group of Persons exercising similar authority) and is not required to be authorized by the shareholders or other equity owners (if any) of such entity; and

(c)           such action is similar in nature and magnitude to actions customarily taken in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business of and of similar size to such Person.

“Overdraft Items” has the meaning set forth in Section 7.2(e) of this Agreement.

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“Owned Location” has the meaning set forth in Section 6.13 of this Agreement.

“Owned Real Property” has the meaning set forth in Section 4.11(a) of this Agreement; provided, however, that, for the avoidance of doubt, the Owned Real Property shall not include, and Buyer shall not be purchasing from Seller under this Agreement, the real property owned by Seller associated with the closed branch located at 2356 S. Kedzie, Chicago, Illinois (Little Village) or Lot 3 of the Vineyard of Frankfort, or 12505 S. Ridgeland Avenue, Palos Heights, Illinois.

“Par Value” means, with respect to any Non-Conforming Loan as of any date of determination, the unpaid principal amount of such Non-Conforming Loan plus all accrued or earned, but unpaid, interest and fees thereon.

“Parties” has the meaning set forth in the preface above.

“Payment Amount” has the meaning set forth in Section 2.2(a) of this Agreement.

“Permitted Encumbrances” means any exceptions to good and marketable title to the Owned Real Property (i) which is not an Objectionable Title Matter or (ii) to which Buyer in its sole discretion shall consent in writing prior to the Closing to accept as a permitted exception to good and marketable title.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a joint venture, an unincorporated organization, or a Governmental Body.

“Phase I Environmental Assessment” means an environmental assessment that is intended  to be consistent with ASTM E 1527-05 and/or the federal “All Appropriate Inquiries” Rule found at 40 C.F.R. Part 312.

“Phase I Environmental and Hazardous Materials Assessment” has the meaning set forth in Section 6.15 of this Agreement.

“Phase II Environmental Assessment” means an environmental investigation, including but not limited to invasive sampling and chemical analyses, that further evaluates previously identified Recognized Environmental Conditions (“RECs”), including historic RECs.

“Potential Employees” has the meaning set forth in Section 6.7(a) of this Agreement.

“Pre-Closing Balance Sheet” means an unaudited balance sheet listing the assets and liabilities of the Branches (as of the last day of the immediately preceding month end prior to the Closing Date) prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods to be prepared by Seller and delivered to Buyer on or before the fifth (5th) Business Day prior to the Closing Date.

“Pre-Closing Environmental Liability” has the meaning set forth in Section 2.1(d)(ii) of this Agreement.

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“Pre-Closing Event Liability” means, with reference to any item and whether or not any of the acts, omissions, circumstances, events, violations, breaches or other matters described in the following clauses are now or hereafter known, all obligations and Liabilities arising out of or relating to (i) any breach of or noncompliance with any Contract to the extent such breach or noncompliance arises out of any act, omission, circumstance or event attributable to the period prior to the Effective Time, (ii) any Proceeding to the extent such Proceeding arises out of any act, omission, circumstance or event attributable to the period prior to the Effective Time, (iii) any violation of or noncompliance with any Applicable Law to the extent such violat ion or noncompliance arises out of any act, omission, circumstance or event attributable to the period prior to the Effective Time, (iv) any fraudulent or criminal activity or conduct or other wrong doing on the part of Seller or any of its employees or agents at any time on or prior to the Effective Time (or, in the case of a Retained Employee, at any time prior to the time such Retained Employee shall become an employee of Buyer), (v) any violation of any express policy or standard (including any underwriting standard) of Seller with respect to the origination, renewal, waiver, forbearance, extension, renewal, amendment, modification of, or release of any collateral or guaranty collateralizing or guarantying, any Loan, (vi) any data or security breach or other misappropriation of customer data or information attributable to any period prior to the Effective Time, and (vii) Seller Taxes.

“Pre-Closing Tax Period” means a taxable period or portion thereof that ends on or prior to the Closing Date; if a taxable period is a Straddle Period, then the portion of the Straddle Period that ends on and includes the Closing Date shall constitute the Pre-Closing Tax Period.

“Proceeding” means any action, arbitration, audit, proceeding, oversight, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced brought, conducted, or heard (or capable of being heard) by or before, or otherwise involving, any Governmental Body or arbitrator, involving the Branches, the Acquired Assets or the Assumed Liabilities.

“Real Estate Interests” means the Owned Real Property and the Leased Real Property.

“Reclaimed Amount” has the meaning set forth in Section 7.2(c) of this Agreement.

“Recognized Environmental Condition” or “REC” has the meaning set forth in ASTM E 1527-05 Section 3.2.74.

“Regulatory Approvals” means the following approvals required to consummate the Acquisition:  the approval of the OCC, the United States Department of Justice, the Division of Banking of Illinois Department of Financial & Professional Regulation, and the Missouri Division of Finance.

“Rejected Branch” means any Branch that Buyer has excluded from the Acquisition as contemplated by, and pursuant to, Section 6.12 (which relates to Landlord Consents), Section 6.13 (which relates to title insurance and land surveys), Section 6.15 (which relates to environmental liabilities) or Section 6.21 (which relates to the Naperville Branch) of this Agreement.

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“Rejected Branch Deposits” means, collectively, all Deposits of the Rejected Branches.

“Retained Employees” has the meaning set forth in Section 6.7(b) of this Agreement.

“Safe Deposit Business” means the maintenance of all necessary facilities for the use of safe deposit boxes by the renters thereof, subject to the provisions of the applicable leases or other agreements relating to such boxes, and the safekeeping of items maintained by the Acquired Branches for the benefit of its customers, pursuant to applicable safekeeping agreements, memoranda or receipts.

“Safe Deposit Contracts” means all customer agreements, leases, and maintenance agreements related to the Safe Deposit Business.

“SBA” means the United States Small Business Administration.

“SBA Consent” means all consents necessary to transfer to Buyer the SBA Loans.

“SBA Loan” means any Loan that is guaranteed by the SBA or otherwise made pursuant to the small business loan program of, or administered by, the SBA.

“Select Remote Employees” means those employees of Seller listed on Schedule 1.2 hereto.

“Seller” has the meaning set forth in the preface above.

“Seller Documents” means this Agreement and each other agreement, instrument or document entered into by Seller pursuant to this Agreement.

“Seller Indemnitees” has the meaning set forth in Section 11.3 of this Agreement.

“Seller Material Adverse Effect” means, with respect to Seller, any condition, event, change or occurrence that, individually or collectively, is reasonably likely to have a material adverse effect upon (i) the condition, financial or otherwise, properties, business, assets, deposits, earnings or results of operations or cash flows of the Branches, the Acquired Assets or the Assumed Liabilities, or (ii) the ability of Seller to perform its obligations under, or to consummate the transactions contemplated by, this Agreement.

“Seller Taxes” has the meaning set forth in Section 2.1(d)(i) of this Agreement.

“SNDAs” has the meaning set forth in Section 6.19 of this Agreement.

“Special Acceptance Notice” has the meaning set forth in Section 6.18 of this Agreement.

“Straddle Period” means any taxable period beginning on or prior to and ending after the Closing Date.

“Subpoenas” has the meaning set forth in Section 7.12 of this Agreement.

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“Supplemental Closing” has the meaning set forth in Section 2.5(c) of this Agreement.

“Supplemental Closing Date” has the meaning set forth in Section 2.5(c) of this Agreement.

“Taxes” has the meaning set forth in Section 4.4(f) of this Agreement.

“Tax Claim” has the meaning set forth in Section 11.5(d) of this Agreement.

“Tax Returns” has the meaning set forth in Section 4.4(f) of this Agreement.

“Tenant Leases” has the meaning set forth in Section 4.11(a) of this Agreement.

“Third Party Claims” means any and all Losses which arise out of or result from (a) any claims or actions asserted against an Indemnitee by any Person not a party to this Agreement, (b) any rights of any Person not a party hereto asserted against an Indemnitee, or (c) any Liabilities of, or amounts payable by, an Indemnitee to any Person not a party hereto arising out of clause (a) or (b), including, without limitation, claims or actions asserted against an Indemnitee by any taxing authority on account of Taxes.

“Transfer Taxes” has the meaning set forth in Section 2.4(f) of this Agreement.

“Transferred Records” has the meaning set forth in Section 7.6(a) of this Agreement.

ARTICLE 2

PURCHASE AND SALE

2.1           The Acquisition.

(a)           The Acquired Assets.  As of the Effective Time, upon the terms and conditions set forth herein, Seller will sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from Seller, all of Seller’s rights, title and interests in, to and under all of the following loans, properties, contracts and other assets, whether now existing or hereafter acquired, free and clear of all Encumbrances other than the Permitted Encumbrances (collectively, the “Acquired Assets”):

(i)           all cash on hand (including all ATM cash, petty cash and teller cash), cash held in the vaults and other cash items or cash equivalents, in each case held at the Branches as of the Closing Date;

(ii)           except for those items that constitute Excluded Tangible Personal Property, all of the tangible personal property of Seller located in or at, or affixed to the premises of, the Acquired Branches, including trade fixtures, shelving, furniture, on-premises ATMs, equipment (including all televisions, Bloomberg terminals, cell phones and PDAs used by the Retained Employees), security systems, safe deposit boxes (exclusive of contents), vaults, copier paper, all signs (including signs with Seller’s name or logo but excluding all logo boxes and

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channel letter sets) and sign framing, structures, posts and other signage infrastructure, and all non-logo office supplies (collectively, the “Acquired Tangible Personal Property”);

(iii)           lists of borrowers, depositors and other customers of the Branches to the extent relating to any Acquired Asset or Assumed Liability, lists of prospective customers of the Branches, and any other information (including confidential information) of Seller relating to the Branches that is necessary for Buyer to possess in connection with its administration, ownership and use of any Acquired Asset or Assumed Liability (the “Acquired Intellectual Property”);

(iv)           all Acquired Owned Real Property;

(v)           all Leases other than the Excluded Leases, if any (the “Acquired Leases”), together with all Leased Real Properties other than the Excluded Leased Real Properties, if any (the “Acquired Leased Real Properties”);

(vi)           all Leasehold Improvements in respect of all Leases other than the Excluded Leases (the “Acquired Leasehold Improvements”);

(vii)           all (A) Safe Deposit Contracts, and (B) (1) all equipment leases relating to the lease of equipment located at the Acquired Branches and related maintenance agreements, and (2) all other contracts, in each case as to subclause (1) and (2) of this clause (vii) solely to the extent listed on Schedule 2.1(a)(vii)(B) attached hereto other than any such equipment leases and other contracts that Buyer has elected to remove from such Schedule 2.1(a)(vii)(B) by giving written notice of such election to Seller not later than thirty (30) days following the date hereof, in which case such Schedule delivered on the date hereof, as so modified by such election notice, shall be deemed to constitute Schedule 2.1(a)(vii)(B) for all purposes of this Agreement (the leases and contracts listed on Schedule 2.1(a)(vii)(B), collectively, the “Acquired Contracts”);

(viii)           all Loans and servicing rights with respect thereto, including (A) all (1) collateral pledged as collateral security therefor, (2) guaranties and other instruments of credit support issued in favor of the Seller as a guaranty or credit support thereof and (3) monies held by Seller in escrow for taxes, insurances, special assessments or other purposes in respect of such Loans, and (B) all related loan documents and instruments and promissory notes, collateral documents, guaranty and other credit support instruments or agreements and other documents evidencing, governing or in respect of such Loans;

(ix)           all rights of Seller relating to pre-paid expenses associated with the foregoing Acquired Assets or any of the Deposits, including an appropriately pro-rated portion of any pre-paid FDIC deposit insurance assessment, as contemplated by Section 2.4 hereof; and

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(x)           without limiting any other provision contained in this Section 2.1(a), all Books and Records relating to any of the foregoing Acquired Assets or any of the Assumed Liabilities.

(b)           The Excluded Assets.  Seller shall not sell and transfer and shall retain, and Buyer shall not purchase or acquire, all of the following assets and properties of Seller, as follows (collectively, the “Excluded Assets”):

(i)           all (A) paper stock, forms and other supplies containing any logos, trade name, trademark or service mark, if any, of Seller, other than all signage, (B) desk top and lap top computers, computer monitors and computer servers of Seller, and (C) the specific items of tangible personal property in or at, or affixed to the premises of, the Branches listed on Schedule 2.1(b)(i) hereof (all such items, as the same may be adjusted for inclusion in the Acquired Assets pursuant to Section 6.22 hereof, collectively, the “Excluded Tangible Personal Property”) ;

(ii)           except for the Acquired Intellectual Property, all of Seller’s computer software programs, trade secrets, registered or common law trademarks or trade names, corporate logos and other intellectual property rights, including the name “First Bank” (collectively, the “Excluded Intellectual Property”);

(iii)           the (A) Excluded Owned Real Property, if any, and (B) the Excluded Leases, if any, together with the Excluded Leased Real Properties in respect thereof;

(iv)           all loans, loan participation interests, Commitments, overdrafts and similar items of the Branches, other than the Loans (the “Excluded Loans”);

(v)           all of Seller’s right to recover assets charged off by Seller prior to the Closing;

(vi)           all items of real estate that are classified as “other real estate owned” of the Branches on the books and records of Seller;

(vii)           Seller’s credit card portfolio;

(viii)           foreclosed or repossessed personal property of customers of the Branches, except to the extent any thereof shall constitute collateral for the Loans;

(ix)           all assets, Contracts (including Safe Deposit Contracts) and properties of Seller in respect of the Rejected Branches (other than (A) the Books and Records relating to the Loans and Deposits of such Rejected Branches, (B) the Loans (and other items contemplated by Section 2.1(a)(viii)) of such Rejected Branches, and (C) the cash and other cash items of the Branches included in the Acquired Assets pursuant to Section 2.1(a)(i) hereof);

(x)           all assets, rights and interests of Seller relating to the Branches in respect of Fiduciary Relationships, except for the Deposits in respect of IRAs and

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Keogh Accounts included in the Acquired Assets or Assumed Liabilities as contemplated by Section 6.20 hereof;

(xi)           records of Seller not included in the Acquired Assets or that are otherwise not required to be delivered to Buyer pursuant to any other provision of this Agreement; and

(xii)           any other assets or properties of Seller not included in the Acquired Assets, including all Non-Divested Branches of Seller.

(c)           The Assumed Liabilities.  Subject to the terms and conditions hereof, from and after the Effective Time, Seller will transfer to Buyer, and Buyer shall assume, pay, perform and discharge and indemnify Seller in accordance with Article 11 hereof with respect to, the following (and only the following) obligations and liabilities of Seller to the extent required to be paid, performed, satisfied or discharged from and after the Effective Time (collectively, the “Assumed Liabilities”):

(i)           all of Seller’s obligations and liabilities with respect to the Acquired Contracts and the Acquired Leases, other than any Pre-Closing Event Liability relating to or in respect of such Acquired Contracts or Acquired Leases;

(ii)           all of Seller’s obligations and liabilities with respect to the Deposits, other than any Pre-Closing Event Liability relating to or in respect of such Deposits;

(iii)           all of Seller’s obligations and liabilities with respect to the Commitments, other than any Pre-Closing Event Liability relating to or in respect of such Commitments; and

(iv)           in the event that the Phase I Environmental and Hazardous Materials Assessment or Phase II Environmental Assessment with respect to a single Branch confirms the existence of a condition in violation of applicable Environmental Laws, the presence of asbestos, or the presence of any other Hazardous Materials in excess of industrial/commercial remediation standards and such condition was not disclosed or identified on Schedule 4.9(a) or 4.9(g) or in the documents (or attachments to the documents) referenced on Schedule 4.9(a) or 4.9(g), the remediation costs of up to $25,000 for all Real Estate Interests relating to such single Branch, as contemplated by Section 6.15 hereof.

(d)           The Excluded Liabilities.  Notwithstanding anything to the contrary contained in this Agreement, Buyer shall not assume or be bound by any duties, responsibilities, obligations or Liabilities of Seller relating to Seller or arising out of the Acquired Assets, the Excluded Assets, the Deposits or the Branches, of any kind or nature and whether known, unknown, contingent or otherwise, other than the Assumed Liabilities (all such duties, responsibilities, obligations and Liabilities, other than the Assumed Liabilities, the “Excluded Liabilities”), including the following:

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(i)           any (A) Taxes imposed on Seller for any period, (B) Taxes imposed with respect to the Acquired Assets or the Deposits, or the operation of the Acquired Branches, for any Pre-Closing Tax Period, (C) Transfer Taxes to the extent of the amount allocated to Seller pursuant to Section 2.4(f) hereof, and (D) Taxes imposed on Buyer or any of its Affiliates as a successor or transferee of Seller (collectively, the “Seller Taxes”);

(ii)           subject to the provisions of Section 2.1(c)(iv) and Section 11.4(d) hereof, all Liabilities (A) imposed on Buyer with respect to or in respect of the Real Estate Interests arising under any Environmental Law to the extent arising out of or relating to any release, violation of Applicable Law, event, condition, action, omission or other circumstance attributable to any period on or prior to the Closing Date, including any claims, penalties, remediation costs, Liabilities arising from the emission, discharge release or disposal of any Hazardous Materials into the air, ground or water or the presence of any Hazardous Materials on, at o r in any Branches or any real property included in the Acquired Assets, and (B) without limiting the provisions of clause (A) above, all Liabilities imposed on Buyer with respect to or in respect of the Real Estate Interests arising out of any underground storage tank located in, or asbestos located in any building upon, any Real Estate Interests at anytime on or prior to the Closing Date, whether or not such Liability shall arise prior to or after the Closing Date, including, without limitation, in the case of each of clause (A) and clause (B), all such Liabilities arising out of any environmental event or condition disclosed on Schedules 4.9(a) and 4.9(g) hereof or in the documents (or the attachments to the documents) referenced on Schedules 4.9(a) and 4.9(g) hereof; provided, however, that (1) Seller shall not be responsible for any Liabilities under this clause (ii) arising under any Environmental Law to the extent such Liabilities are caused by (X) Buyer’s changed use of any Real Estate Interests following the Closing Date, (Y) changes made by Buyer to any structures on any Real Estate Interest following the Closing Date, or (Z) exacerbation of any underlying condition by the acts or omissions of Buyer following the Closing Date (and all environmental Liabilities for which Seller shall be responsible to the extent provided in this Section 2.1(d)(ii) are referred to herein as, collectively, the “Pre-Closing Environmental Liabilities”), and (2) Selle r’s obligation to indemnify Buyer for the Excluded Liabilities described in this clause (ii) shall survive for a period of only eight (8) years following the Closing Date as provided in Section 11.1 hereof;

(iii)           all Liabilities arising out of or relating to the employment by Seller of any employee, including any former employee and any Retained Employee, including all salary, bonus, change of control and other obligations arising under or out of any employment agreement between Seller (or any Affiliate thereof) and any such employee (including any Retained Employee);

(iv)           all Liabilities arising out of or relating to all employee benefit plans, agreements or arrangements, as described in Section 4.5 hereof, of or maintained by Seller or at anytime as to which Seller contributed or had any Liability;

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(v)           all account, trade and note payables of Seller with respect to the Branches; and

(vi)           all Liabilities arising out of the ownership or operation of the Branches or their respective business or properties or assets (including the Acquired Assets and Deposits) on or prior to the Closing Date, including the Liabilities arising out of the Proceedings listed on Schedule 4.7(a) hereof.

2.2           Consideration for the Acquisition.

(a)           In consideration for the Acquisition, Seller shall make available and transfer to Buyer, or Buyer shall make available and transfer to Seller, the Payment Amount in accordance with this Section 2.2.  The “Payment Amount” means an amount equal to the sum of the aggregate balance of all the Deposits (as set forth on the Acquisition Closing Date Balance Sheet) including interest posted or accrued with respect to the Deposits as of the close of business on the Closing Date, less an amount equal to the sum of:

(i)           A premium for the Deposits and franchise value relating to the Branches equal to 3.5% of the average Deposit balances of the Branches for the thirty (30) calendar days immediately preceding and including the Closing Date; provided, however, that (A) Non-Core Deposits (to the extent included in the Deposits), and (B) all Rejected Branch Deposits shall, in each case, be excluded from such Deposits for purposes of the calculation of average Deposit balances;

(ii)           The amount held as cash and cash items of the Branches as reflected on the Acquisition Closing Date Balance Sheet;

(iii)           The Book Value of all Loans, including accrued interest as reflected on the Acquisition Closing Date Balance Sheet;

(iv)           The Book Value of Acquired Owned Real Property;

(v)           The Book Value of the Acquired Tangible Personal Property and Leasehold Improvements as reflected on the Acquisition Closing Date Balance Sheet; and

(vi)           Buyer’s share of the pro rata adjustment of items required pursuant to Section 2.4.

(b)           On the Closing Date, (i) Seller shall deliver to Buyer an amount estimated to be the Payment Amount, calculated as set forth in clause (a) of this Section 2.2 off of the balances reflected on the Acquisition Pre-Closing Balance Sheet (the “Estimated Payment Amount”) if the Estimated Payment Amount is a positive number, and (ii) Buyer shall deliver to Seller the absolute value of the Estimated Payment Amount if the Estimated Payment Amount is a negative number.  The Estimated Payment Amount shall be set forth in a statement prepared as of the date of the Acquisition Pre-Closing Balance

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Sheet and delivered to Buyer at least two (2) Business Days prior to the Closing Date (such statement, the “Estimated Payment Amount Statement”).

(c)           Within ten (10) Business Days following the Closing Date, Seller shall prepare and deliver to Buyer the Acquisition Closing Date Balance Sheet, together with a statement prepared as of the close of business on the Closing Date showing the Payment Amount and reconciling the Payment Amount to the Estimated Payment Amount (such statement, the “Final Payment Amount Statement”).  Within twenty (20) Business Days after receipt of delivery of the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement, Buyer may dispute all or any portion of the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement by giving written notice (a “Notice of Disagreement”) to Seller setting forth in reasonable detail the basis for any such dispute (a “Disagreement”).  Seller shall provide Buyer and its designees with full reasonable access, during normal business hours, to relevant books, records, work papers, personnel and representatives of Seller and such other information as Buyer may reasonably request in connection with its review of the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement and with respect to the resolution of any Disagreement.  The Parties shall promptly commence good faith negotiations with a view to resolving all such Disagreements.  Subject to Sections 2.5(e) and 2.5(f), if Buyer does not give a Notice of Di sagreement within the twenty (20) Business Day period set forth above, Buyer shall be deemed to have irrevocably accepted such Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement in the form delivered to Buyer by Seller.  Seller shall be deemed to have irrevocably accepted the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement as modified by and disclosed in Buyer’s Notice of Disagreement if Seller does not dispute all or any portion of such Notice of Disagreement by giving its written response to Buyer within ten (10) Business Days following the delivery of such Notice of Disagreement setting forth in reasonable detail the basis for its dispute.

(d)           In the event that a dispute arises as to the appropriate amounts to be paid to either Party pursuant to the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement discussed in subsection (c), each Party shall pay to the other all amounts other than those as to which a dispute exists.  The Parties shall refer the disputed amounts to an independent firm of certified public accountants of national standing (an “Accountant”) reasonably acceptable to Buyer and Seller, and Buyer and Seller agree to be bound by the determination of such firm with respect to such disputed matters (absent manifest error).  Buyer and Seller shall agree upon an Accountant wit hin fourteen (14) calendar days after the date on which either Buyer or Seller notifies the other in writing that the referral of a disputed matter within the scope of this Section 2.2(d) is necessary.  If Buyer and Seller shall fail to agree on an Accountant within such fourteen (14) day period, then Buyer and Seller shall each choose an accountant who will mutually select a third qualifying accountant who shall be the Accountant for purposes of this Section 2.2(d).  Buyer and Seller agree to share equally the fees and charges of the Accountant appointed hereunder for its services in resolving disputes within the scope of this Section 2.2(d).

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(e)           The provisions of Section 2.2(d) are not intended to and shall not be interpreted to require that the Parties refer to an Accountant (a) any dispute arising out of a breach by one of the Parties of its obligations under this Agreement, (b) any dispute the resolution of which requires a construction or interpretation of this Agreement other than this Section 2.2 and the definitions related hereto and any other Section of this Agreement as necessary to enable the Accountant to resolve the dispute submitted to it pursuant to this Section 2.2, or (c) any other dispute other than (in the case of this clause (e)) a dispute related to the mathematical calculation of the Payment Amount or the accounting treatment of any asset or liability, or item of income or expense, that affects the calculation of the Payment Amount, or both.  The Parties reserve all rights and remedies, including at law or in equity, to resolve disputes other than those within the scope of Section 2.2(d).

(f)           Any disputed amounts retained by a Party that are later found to be due to the other Party shall be paid to such other Party promptly upon resolution with interest thereon from the Closing Date to the date paid at the applicable Federal Funds Rate.

2.3           Allocation.

(a)           No later than thirty (30) calendar days after the determination of the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement (including the final resolution of any dispute related thereto pursuant to Section 2.2(d)), Buyer shall prepare and deliver to Seller a draft of a statement (the “Draft Allocation Statement”) setting forth the allocation of the total consideration paid by Seller to Buyer pursuant to this Agreement among the assets acquired pursuant to this Agreement for purposes of, and in accordance with, Section 1060 of the Code.  If, within forty-five (45) calendar days of the receipt of the Draft Allocation Statement, Seller shall not have objected in writing to such draft, the Draft Allocation Statement shall become the Final Allocation Statement, as defined below.  If Seller objects to the Draft Allocation Statement in writing within such 45-day period, Seller and Buyer shall negotiate in good faith to resolve any disputed items.  If, within ninety (90) calendar days after the receipt of the Draft Allocation Statement, Seller and Buyer fail to agree on such allocation, any disputed aspects of such allocation shall be resolved by an Accountant in accordance with the procedures set forth in Section 2.2(d).  The allocation of the total consideration, as agreed upon by Seller and Buyer (as a result of either Seller’s failure to object to the Draft Allocation Statement or of good faith negotiations between Seller and Buyer) or determined by the Accountant (the “Final Allocation Statement”) shall be final and binding upon the parties hereto.  If there is any adjustment to the consideration paid by Seller to Buyer pursuant to this Agreement for purposes of Section 1060 of the Code, any such adjustment shall be allocated, to the extent possible, to the asset(s) resulting in such adjustment, and Buyer shall prepare a revised Draft Allocation Statement reflecting such adjustment which shall, subject to the review and dispute resolution provisions set forth in this Section 2.3(a), replace the Final Allocation Statement.  Each of Seller and Buyer shall bear all fees and costs incurred by it in connection with the determination of the allocation of the total consideration, except that the Parties shall each pay one-half (50%) of the fees and expenses of the Accountant retained to resolve any disputed aspects of the allocation prepared pursuan t to this Section 2.3(a).

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(b)           Seller and Buyer shall report the transaction contemplated by this Agreement for federal and other applicable income Tax purposes (including income Tax reporting requirements imposed pursuant to Section 1060 of the Code) in accordance with the allocation specified in the Final Allocation Statement (including any adjustment thereof).  Each of Seller and Buyer agree to timely file, or cause to be timely filed, IRS Form 8594 (and any comparable form under state or local Tax law and including any amendment thereto) and any required attachment thereto in accordance with the Final Allocation Statement and provide the other Party with a copy of each such form as filed no later than ten (10) calendar days following the filing thereof.  Except as otherwis e required pursuant to a “determination” under Section 1313 of the Code (or any comparable provision of state or local Tax law), neither Seller nor Buyer shall take, or shall permit its Affiliates to take, a Tax position which is inconsistent with the Final Allocation Statement (including any adjustment thereof).  In the event any Party receives notice of an audit in respect of the allocation of the consideration paid for the Acquired Assets, such Party shall promptly notify the other Party in writing as to the date and subject of such audit.

2.4           Pro Rata Adjustment and Reimbursement.

(a)           Unless otherwise provided herein, it is the intention of the Parties that Seller will operate the Branches for its own account until the Effective Time and that Buyer shall operate and hold the Acquired Assets and assume the Assumed Liabilities for its own account after the Effective Time.  Thus, except as otherwise specifically provided herein, items of proration and other adjustments shall be prorated as of the Effective Timeand settled between Seller and Buyer as contemplated by Section 2.2 hereof whether or not such adjustment would normally be made as of such time; prov ided, however, that items of proration and other adjustments allocated to Buyer shall be allocated to Buyer solely to the extent such items shall apply to the Acquired Assets or the Deposits.  Items of proration and adjustment will be handled at Closing as an adjustment to the amount of funds to be delivered by Seller to Buyer, or Buyer to Seller, as appropriate, as contemplated by Section 2.2 hereof.

(b)           For purposes of this Agreement, items of proration and other adjustments with respect to the Acquired Assets and the Deposits shall include, without limitation: (i) personal and general real property taxes; (ii) FDIC deposit insurance assessments and prepayments; (iii) safe deposit rental payments; (iv) rent for any Acquired Leased Real Property, and (v) other prepaid expenses and items (including security deposits), if any, as of the Effective time on the Closing Date.  To the extent that the amount of the foregoing items is not known on the Closing Date, such proration shall be based on the amount of such items for the prior month or year, as appropriate; provided, however, the Parties shall apportion all general real estate taxes as provided in paragraph (c) below.

(c)           Buyer and Seller shall apportion pro rata all general real estate taxes (state, county, municipal, school and fire district) paid or payable in connection with the Acquired Owned Real Property and any special taxes or assessments, if any, upon the Acquired Owned Real Property assessed or becoming a lien in accordance with Section 2.4(e) hereof.  Such apportionment shall be based upon the fiscal year for which the same are assessed.  In the event that the applicable Tax bill, or other information reasonably

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necessary for computing any such apportionment, is not available on the Closing Date, the apportionment shall be made at Closing on the basis of the prior period’s general real estate taxes, and such apportionment shall thereafter be reconciled based on the final Tax bill as set forth in the remaining provisions of this clause (c).  Within thirty (30) days after receipt by the Parties of the applicable final Tax bill or other information reasonably necessary for computing such apportionment, Buyer and Seller shall apportion the actual general real estate taxes and, if either Party paid more than its proper share thereof at Closing, the other Party shall within seven (7) Business Days after written request therefore reimburse such Party for the amount so expended.

(d)           Notwithstanding anything to the contrary, to the extent that the FDIC imposes an assessment (special or otherwise) after the Closing Date, which assessment is applicable to deposits that were attributable to the Deposits prior to the Closing Date, then such assessment shall be appropriately apportioned between Seller and Buyer after the Closing Date within five (5) Business Days after payment of such assessment.

(e)           For purposes of this Agreement, in the case of any Straddle Period, (1) general real estate taxes for the Pre-Closing Tax Period shall be equal to the amount of such general real estate taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period, and (2) Taxes (other than general real estate taxes) for the Pre-Closing Tax Period shall be computed as if such taxable period ended as of the end of the Closing Date.

(f)           Notwithstanding anything to the contrary contained in the foregoing provisions of this Section 2.4 or otherwise contained in this Agreement, all excise, sales, use, transfer, recordingand similar Taxes that are payable or that arise as a result of the consummation of the purchase and sale contemplated by this Agreement (collectively, the “Transfer Taxes”) shall be borne and, when due, paid one-half by Seller and one-half by Buyer, whether such Transfer Taxes are imposed on Seller or Buyer.

2.5           Closing.

(a)           The closing of the Acquisition (the “Closing”) shall occur by facsimile or PDF, or in person at a mutually convenient location, or by such other method as shall be mutually agreed to by the Parties, and any Closing documents delivered by facsimile or PDF at the Closing shall be delivered in original execution form by the Parties by overnight courier promptly following the Closing.  Any executed Closing documents sent by a Party or its counsel to the other Party or its counsel prior to Closing shall be held in escrow by such other Party or its counsel until such executed documents are authorized to be released by a senior officer of the sending Party or by the sending Party counsel .  The Closing shall occur on such date on which the Parties mutually agree but in any event not later than three (3) Business Days after all conditions precedent to Closing as set forth in Sections 8.1 and 8.2 shall have been satisfied or waived; provided, however, that unless the Parties shall have otherwise mutually agreed, in no event shall the Closing occur prior

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to the latest of (i) ninety (90) days after the date of this Agreement, (ii) forty-five (45) days after the date on which all Regulatory Approvals shall have been obtained, and (iii) February 12, 2010 (the date on which the Closing shall have occurred, the “Closing Date”).

(b)           The effective time of the consummation of the Acquisition (the “Effective Time”) shall be at a mutually agreeable time after the close of business for the Branches on the Closing Date.

(c)           Promptly after the Closing Date Balance Sheet and the Final Payment Amount Statement have been finally determined in accordance with Section 2.2(c), but in no event later than five (5) Business Days following such final determination (the “Supplemental Closing Date”), the parties hereto shall hold a supplemental closing (the “Supplemental Closing”), either by telephone, or in person at a mutually convenient location.  On the Supplemental Closing Date, if the Payment Amount is less than the Estimated Payment Amount, Buyer shall refund to Seller cash having an aggregate value equal to the difference between the Estimated Payment Amount and the Payment Amount by wire transfer or other immediately available funds.  On the Supplemental Closing Date, if the Payment Amount is more than the Estimated Payment Amount, Seller shall deliver to Buyer, by wire transfer or other immediately available funds, an amount equal to the difference between the Payment Amount and the Estimated Payment Amount.

(d)           The post-closing settlement payment shall not bear interest.

(e)           In the event any bookkeeping omissions or errors are discovered in preparing the Acquisition Closing Date Balance Sheet for the Branches or in completing the transfer and assumptions contemplated hereby, the Parties agree to correct such errors and omissions, it being understood that no adjustments will be made that are inconsistent with the judgments, methods, policies, or accounting principles utilized by Seller in preparing and maintaining the accounting records of the Branches.

(f)           In the event that Buyer or Seller discovers any errors or omissions as contemplated by Section 2.5(e) above or any error with respect to the payments made under Section 2.5(c) above not later than six (6)months following the Supplemental Closing Date, Buyer and Seller agree to promptly correct any such error or omission, make any payments and effect any transfers or assumptions as may be necessary to reflect any such correction; provided, that interest shall not be paid with respect to any such payments.

2.6           Repurchase of Non-Conforming Loans.  If at any time on or prior to the Cut-Off Date Buyer shall have discovered a Non-Conforming Loan, Buyer may deliver written notice thereof to Seller not later than the Cut-Off Date (any such notice, a “Non-Conforming Loan Notice”), which notice shall include (i) such documentation as is reasonably available to Buyer in support of its discovery, and (ii) a statement of the then current Par Value of such Non-Conforming Loan.  If Buyer shall have given a Non-Conforming Loan Notice on or prior to the Cut-Off Date, Buyer shall have the right to cause Seller to purcha se, and Seller shall purchase from Buyer, such Non-Conforming Loan at the Par Value thereof as of the Non-Conforming

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Loan Closing Date (as defined below); provided that Buyer shall have represented to Seller as of the Non-Conforming Loan Closing Date that Seller owns such Non-Conforming Loan as of such date.  The closing of the purchase of the Non-Conforming Loan shall occur on a date specified in the applicable Non-Conforming Loan Notice, but in no event earlier than three (3) Business Days following Seller’s receipt of such Non-Conforming Loan Notice (the date of such closing, the “Non-Conforming Loan Closing Date”).  At the closing of the purchase and sale of the Non-Conforming Loan that is the subject of any Non-Conforming Loan Notice, Buyer and Seller shall enter into such standar d loan transfer documents customary for a loan transfer of this type and without recourse to Buyer, and the purchase price payable by Seller to Buyer on the applicable Non-Conforming Loan Closing Date shall be paid by wire transfer of immediately available funds to the account of Buyer specified by it in writing to Seller.  On the Non-Conforming Loan Closing Date in respect of a Non-Conforming Loan, Buyer shall deliver to Seller all loan documents relating to such Non-Conforming Loan, subject to Buyer’s retention obligations under applicable directions from law enforcement authorities.  The rights of Buyer hereunder shall be in addition to (but not in duplication of) any rights of Buyer under Article 11 hereunder, and nothing contained in this Section 2.6 shall be deemed to imply that a Non-Conforming Loan does not constitute an “Excluded Loan” ; for all purposes of this Agreement.  Any Non-Conforming Loan purchased by Seller under this Section 2.6 shall be treated as an adjustment to the purchase price paid by Buyer under this Agreement.  Notwithstanding anything to the contrary contained herein, Buyer shall have the right, without the consent of Seller, to assign and delegate Buyer’s rights and obligations under this Section 2.6 to any Person to whom Buyer shall have sold or otherwise transferred a Non-Conforming Loan; provided that not later than five (5) Business Days following such assignment and delegation Buyer shall give written notice thereof to Seller.  The Parties agree that Buyer shall be entitled to specific performance of the obligations of Seller under this Section 2.6 to the fullest extent permitted by applicable law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer that the statements contained in this Article 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then as though the Closing Date were substituted for the date of this Agreement throughout this Article 3).

3.1           Organization, Qualification, and Corporate Power.  Seller is a Missouri state chartered bank duly organized and validly existing under the laws of Missouri, with full corporate power and authority to conduct its business as now being conducted and to own or use the properties and assets that it purports to own or use.

3.2           Authorization of Transaction.  Seller has the full corporate power and authority to execute and deliver this Agreement and the other Seller Documents.  Subject to approval by any necessary federal or state banking regulatory authority, Seller has the corporate power and authority to perform Seller’s obligations hereunder and under the other Seller Documents, and to consummate the transactions contemplated hereby and thereby.  Each of this Agreement, and when executed and delivered, each of the other Seller Documents, constitutes the valid and legally binding obligation of Seller, enforceable in accordance with its terms and conditions,

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subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity.  Except for the Regulatory Approvals, the Landlord Consents and such other Consents as are listed on Schedule 3.2, Seller is not required to give any notice to, make any filing with, or obtain any authorization or Consent of any third party in order to execute and deliver this Agreement or consummate the Acquisition, including sale, transfer and assignment of the Acquired Assets and the Assumed Liabilities.  Seller has not received any indication from any federal or state governmental agency or authority that such agency would oppose or refuse to grant a Regulatory Approval, and to Seller’s Knowledge, there exists no fact or circumstance that would prevent or delay Seller’s ability to obtain promptly all Regulatory Approvals.

3.3           Noncontravention.  Subject to the required Consents described in Section 3.2 and the Landlord Consents, neither the execution and the delivery of this Agreement by Seller, nor the consummation of the Acquisition by Seller will, directly or indirectly:

(a)           Contravene, conflict with, or result in a violation of (i) any provision of the articles of incorporation or bylaws of Seller or (ii) any resolution adopted by the board of directors of Seller;

(b)           Contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge the Acquisition or to exercise any remedy or obtain any relief under, any Applicable Law or any Order to which Seller, or any of the assets or deposits owned or used by Seller, may be subject;

(c)           Except for matters which would not have a Seller Material Adverse Effect, contravene, conflict with, or result in a violation of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Seller or that otherwise relates to the Branches, the Acquired Assets or the Assumed Liabilities; or

(d)           Except for matters which would not have a Seller Material Adverse Effect, contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Contract relating to the Branches to which Seller is a party and included in the Acquired Assets or Assumed Liabilities.

3.4           Governmental Authorizations.  Seller has all Governmental Authorizations necessary for the lawful conduct of its business at each of the Branches as now conducted and, except as would not have a Seller Material Adverse Effect, all such Governmental Authorizations are valid and in good standing and (i) are not subject to any suspension, modification, revocation, or pending (or, to the Knowledge of Seller, threatened) proceedings related thereto, and (ii) no event has occurred or circumstance exists that may give rise to or serve as the basis for the commencement of any such proceeding.

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3.5           Brokers’ Fees. With the exception of Hovde Financial, Inc., Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the Acquisition, and Seller shall be solely liable for payment of any such fees or commission to Hovde Financial, Inc.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES CONCERNING THE BRANCHES

Seller represents and warrants to Buyer that the statements contained in this Article 4, as qualified by the Disclosure Schedules relating thereto, are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article 4, except for statements made as of a specific date, in which case such representations and warranties were correct and complete as of such specific date).

4.1           Title; Tangible Personal Property.  Seller has good and marketable title to or, in the case of any personal property lease, good and marketable leasehold interest in, all of the Acquired Tangible Personal Property and other Acquired Assets (other than the Owned Real Property and Leased Real Property, as to which Section 4.11 applies), in each case free and clear of all Encumbrances.  All Tangible Personal Property used by the Branches is in good condition, reasonable wear and tear excepted, and is usable in the Ordinary Course of Business.  Any Acquired Tangible Personal Property held under lease by Seller is held by Seller under a valid and enforceable lease with such exceptions as are not material and do not interfere in any material respect with the use made and proposed to be made of such property by Seller.

4.2           Deposits.

(a)           Seller has provided to Buyer a true and accurate data file of all deposits (including IRAs and Keogh Accounts), and related information, which are assigned to the Branches prepared as of a date within ten (10) days prior to the date of this Agreement, which data shall be updated at and as of a date first, not earlier than thirty (30) days prior to the Closing Date and, second, not earlier than five (5) days prior to the Closing Dateto list separately Deposits to be assumed under this Agreement and deposits that are not being assumed under this Agreement and which data shall be further updated on the date of delivery to Buyer by Seller of the Acquisition Closing Date Balance Sheet and on the Supplemen tal Closing Date, and, in each case as updated, shall be true and accurate as of such date.

(b)           The Deposits are insured to applicable limits by the FDIC in accordance with the Federal Deposit Insurance Act, 12 U.S.C. § 1813, and Seller has paid all assessments and opt-in fees and has filed all reports required to be paid or filed by it to or with the FDIC concerning the Deposits.

(c)           The Deposits were solicited and currently exist in material compliance with all applicable requirements of federal laws and regulations promulgated thereunder and to the extent, if any, that their applicability to Seller is not preempted by federal laws and regulations, state and local laws and regulations promulgated thereunder (for

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purposes of this clause, a Deposit would not be in material compliance if, among other things, the noncompliance subjects the depository institution to any penalty or liability other than the underlying liability to pay the Deposit).

(d)           Seller has the right to transfer or assign each of the Deposits to Buyer, subject to any pledges, liens, judgments, court orders and restrictions on transfer.

(e)           Except as otherwise disclosed by Seller on Schedule 4.2(e) hereof, each of the agreements relating to the Deposits has been duly authorized, executed, and delivered, and is valid, binding, and enforceable upon its respective parties in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights, and by the exercise of judicial discretion in accordance with general principles applicable to equitable and similar remedies.

(f)           Unless otherwise disclosed by Seller on Schedule 4.2(f) hereof, all agreements relating to the Deposits other than certificates of deposit legally permit Buyer to unilaterally terminate or modify such agreements within thirty (30) days after the Closing Date without the consent of the depositor or depositors and without penalty, subject to applicable law, delivery of any notice as may be specified in such agreements and any applicable provisions in such agreements.

4.3           Undisclosed Liabilities.  The Branches have no Liabilities except for (a) Liabilities set forth on the face of the Pre-Closing Balance Sheet (rather than in any notes thereto), (b) Liabilities which have arisen in the Ordinary Course of Business after the Pre-Closing Balance Sheet, and (c) Commitments made in the Ordinary Course of Business.

4.4           Tax Matters.

(a)           With respect to all interest bearing accounts assigned to Buyer, the records of Seller transferred to Buyer contain all information and documents (including, without limitation, properly completed Forms W-9) necessary to comply with all information reporting and Tax withholding requirements under federal and state laws, rules and regulations, and such records identify with specificity all accounts subject to backup withholding under the Code.

(b)           All Tax Returns required to be filed on or before the Closing Date by Seller and its Affiliates with respect to any Taxes payable in respect of the Acquired Assets or Assumed Liabilities or related to the Branches have been timely filed with the appropriate governmental agencies in all jurisdictions in which such Tax Returns are required to be filed and are true and correct in all material respects.

(c)           All Taxes owed by Seller and its Affiliates with respect to the Acquired Assets or Assumed Liabilities or related to the Branches (whether or not shown on any Tax Return) that are required have been timely paid in full.

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(d)           Seller and its Affiliates have withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid to any employee, independent contractor, creditor, stockholder, or other third party with respect to the Acquired Assets or the Assumed Liabilities or related to the Branches.

(e)           There are no claims, assessments, levies, administrative proceedings or lawsuits pending or, to the Knowledge of Seller, threatened by any taxing authority with respect to the Acquired Assets or Assumed Liabilities or related to the Branches; and no audit or investigation of any Tax Return of Seller or its Affiliates with respect to the Acquired Assets or Assumed Liabilities or related to the Branches is currently underway or, to the Knowledge of Seller, threatened.

(f)           As used in this Agreement, the term “Taxes” shall mean all taxes, charges, fees, levies or other like assessments, however denominated, including any interest, penalties or other additions to tax that may become payable in respect thereof and including any obligation to indemnify or otherwise assume or succeed to the tax liability of another Person, imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including, but not limited to, federal income taxes and state income taxes), real property gains taxes, pa yroll and employee withholding taxes, unemployment insurance taxes, social security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers’ compensation, and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which the Seller or its subsidiaries or Affiliates is required to pay, withhold or collect.  As used in this Agreement, the term “Tax Returns” shall mean all reports, estimates, declarations of estimated tax, information statements and returns relating to, or required to be filed in connection with, any Taxes, including any schedule or attachment thereto, and including any amendment thereof, and including information returns or reports with respect to backup withholding and other payments to third parties.

4.5           Employee Benefits.  There are no liens or other claims which affect or could affect the Acquired Assets of any nature, whether at law or in equity, asserted or unasserted, perfected or unperfected, arising out of or relating to any employee, officer, or director of Seller, or the operation, sponsorship or participation of any such persons or by Seller in any employee benefit plan, program, procedure or other employee benefit practice, whether or not subject to the Employee Retirement Insurance Security Act of 1974 (ERISA).  There are no liabilities, breaches, violations or defaults under any “Employee Welfare Benefit Plan” or “Employee Pension Benefit Plan” (a s such terms are defined in Section 3(1) and Section 3(2) of ERISA, respectively) or any other compensatory or benefit arrangement, plan, or program or contract, whether or not subject to ERISA, sponsored, maintained or contributed to by Seller or any of its Affiliates that would subject the Acquired Assets, Buyer, its employee benefit plans, or any fiduciaries thereof to any Tax, penalties or other liabilities.  Seller will retain all liabilities and assume all obligations with regard to all Employee Pension Benefit Plans, Employee Welfare Benefit Plans, deferred compensation plans, early retirement plans, bonus or incentive programs,

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severance pay plans, arrangements or programs, or any similar plans, programs or obligations sponsored by the Seller or its Affiliates.

4.6           Compliance with Applicable Laws.  The Branches are in compliance with Applicable Laws in all material respects, including, without limitation, all applicable Environmental Laws.  No event has occurred or circumstance exists that constitutes a material violation by the Seller in the operation of the Branches, or a failure on the part of the Seller with respect to the Branches to comply with, any Applicable Law in any material respect, including, without limitation, any Environmental Law.  Except for normal examinations conducted in the ordinary course of Seller’s banking business, no Governmental Body has initiated any formal proceeding or investigation into the busine ss or operations of the Seller or the conditions or operations at the Branches and no Governmental Body has initiated any regulatory proceeding or investigations into the business or operations of the Branches.  There is no unresolved violation, criticism or exception by any Governmental Body with respect to any report or statement relating to any examinations of the Seller relating to the Branches, the Acquired Assets or the Assumed Liabilities.

4.7           Legal Proceedings; Orders.

(a)           Except as set forth on Schedule 4.7(a) hereof, there is no pending Proceeding that has been commenced by or against Seller that relates to or arises from the business conducted by the Branches.  To the Knowledge of Seller, (i) no such Proceeding has been threatened and (ii) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding.

(b)           There is no Order to which Seller, or any of the assets owned or used by Seller, is subject that would have a Seller Material Adverse Effect.  Seller is not subject to any Order that relates to the business of, or any of the assets owned or used by, the Branches.

4.8           Employees.

(a)           Seller has provided Buyer a complete list, prepared as of a date within ten (10) days prior to the date of this Agreement, of the employees of the Branches and the Select Remote Employees identifying positions held, exempt or non-exempt status (for purposes of the Fair Labor Standards Act and comparable local wage hours law), current annual salaries or wage rates, target incentive opportunity and projected incentive pay-out for 2009 (if any), actual incentive compensation for 2008 (if any), period of service, and whether such employee is a part-time or full-time employee, and the information contained in such list remains true and complete as of the date hereof.

(b)           Except as set forth on Schedule 4.8(b) hereof, no employee of the Branches or Select Remote Employee is a party to, or is otherwise bound by, any employment contract, agreement or arrangement, including any confidentiality, noncompetition, or proprietary rights agreement, between such employee and Seller, or to Seller’s Knowledge, between any such employee and any third party.

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(c)           No employee at the Branches or Select Remote Employee is represented, for purposes of collective bargaining, by a labor organization of any type.  There is no labor strike, arbitration, dispute, or slowdown or stoppage pending, or to Seller’s Knowledge, threatened, involving the employees of the Branches or the Select Remote Employees, and Seller is unaware of any efforts during the past three (3) years to unionize or organize any employees at the Branches.

(d)           In relation to the Branches and except as set forth on Schedule 4.8(d) hereof, no causes of action, complaints, claims, charges or administrative investigations for unfair labor practices, wrongful discharge, violation of employment contract or employment claims based upon any state or federal law, statute, public policy, order or regulation is pending, or to Seller’s Knowledge, threatened against Seller or its Affiliates.  There are no suits, claims, grievances, or causes of action pending, or, to Seller’s Knowledge, threatened, against Seller (whether in court or before an administrative agency) arising out of or related to Seller’s employment, termination of employment, o r consideration for employment of individuals at the Branches or Select Remote Employees.

(e)           In relation to the Branches, Seller and its Affiliates have complied in all material respects with all laws (including reporting and disclosure requirements) relating to the employment of labor, including provisions relating to wages, hours, collective bargaining, occupational safety, discrimination, classification of employees as exempt or non-exempt for purposes of the Fair Labor Standards Act and comparable local wage and hour laws, and the payment of social security or other taxes, and worker’s compensation or other insurance premiums, and Seller has not received any notice alleging that it has failed to comply in any respect with such laws.

(f)           Buyer will not incur any liability under any severance agreement, deferred compensation agreement, employment agreement, or similar agreement or plan as a result of the transaction contemplated by this Agreement of which Seller is a party or to which it is bound in respect of any employees of the Branches or the Select Remote Employees.  Seller agrees that Buyer will not be bound to the terms of any employment, management, consulting, reimbursement, retirement, early retirement or similar agreement, whether active on the Closing Date or in discussion or negotiation, with any employees of the Branches or Select Remote Employee as to which Seller is a party or to which Seller is bound.

4.9           Environmental Matters.

(a)           Except as disclosed on Schedule 4.9(a) hereof or as discovered during the investigations conducted pursuant to Section 6.15, during Seller’s ownership or operation of the Branches: (i) Seller has not been notified in writing that either Seller or any of the Branches were or are now in violation of any Environmental Law, and (ii) the Branches and the Seller in connection with the Branches have been and are in material compliance with all applicable Environmental Laws.

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(b)           Except as discovered during the investigations conducted pursuant to Section 6.15, during Seller’s ownership or operation of the Branches, Seller has not been notified in writing that any of the Real Estate Interests, or Seller in connection with the Real Estate Interests, were or are in violation of any Environmental Law.  To Seller’s actual knowledge, none of the Branches or the Real Estate Interests, or the Seller in connection with the Real Estate Interests, are in material violation of Environmental Laws as a result of conditions, acts, or omissions existing or occurring prior to Seller’s ownership or operation of the Branches.

(c)           Except as discovered during the investigations conducted pursuant to Section 6.15, there are no Proceedings pending or, to Seller’s actual knowledge, threatened, nor have there been any past Proceedings (or, in the case of Proceedings during any period prior to Seller’s ownership or operation, any past Proceedings to Seller’s actual knowledge) relating to the Real Estate Interests, or Seller in connection with the Real Estate Interests, under any Environmental Law, including, without limitation, any notices, demand letters or requests for information from any federal or state Governmental Body.

(d)           Seller has not received any written notice of any violation of or liability or lien pursuant to any Environmental Laws with regard to the Branches.

(e)           Except as discovered during the investigations conducted pursuant to Section 6.15, Seller has not generated, stored, released, or disposed of any Hazardous Materials at, in, from, on, under or about any of the Branches except in full compliance with Environmental Laws.  To Seller’s actual knowledge, prior to Seller’s ownership or operation of the Branches, no Hazardous Materials were generated, stored, released, disposed or are otherwise present at, in, on, under or about any of the Branches or from any of the Branches except in full compliance with Environmental Laws.

(f)           Except as discovered during the investigations conducted pursuant to Section 6.15, during Seller’s ownership or operation of the Branches, no release (as defined at CERCLA, 42 U.S.C. 9601(22)) of Hazardous Materials has occurred at or from any Branch.  To Seller’s actual knowledge, prior to Seller’s ownership or operation of the Branches, no release (as defined at CERCLA, 42 U.S.C. 9601(22)) of Hazardous Materials has occurred at or from any Branch.  To Seller’s actual knowledge, no condition exists at or in connection with any Branch for which applicable Environmental Laws required or require notice to any third party, further investigation, or response acti on.

(g)           To Seller’s actual knowledge and except as disclosed on Schedule 4.9(g) hereof or as discovered during the investigations conducted pursuant to Section 6.15, no asbestos, mold or lead-based paint is contained in any Branch or property owned, leased or operated by the Seller in connection with the Branches.

(h)           Except as discovered during the investigations conducted pursuant to Section 6.15, to Seller’s Knowledge, there are no underground storage tanks on or under any Branch, nor any Hazardous Material at, in, on, or under or emanating from any

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Branch in any quantity or concentration in violation of any standard or limit established pursuant to Environmental Laws.

(i)           Seller is not required to have any Governmental Authorization under Environmental Laws in connection with any of the Branches.

(j)           To Seller’s actual knowledge and except as discovered during the investigations conducted pursuant to Section 6.15, during Seller’s ownership or operation of the Branches, no Hazardous Materials generated at any Branch have been treated, stored, or disposed of at a location that has been identified by a Governmental Body as a facility that is subject to any existing or potential claim under Environmental Laws.  To Seller’s actual knowledge, prior to Seller’s ownership or operation of the Branches, no Hazardous Materials generated at any Branch have been treated, stored, or disposed of at a location that has been identified by a Governmental Body as a facility that is s ubject to any existing or potential claim under Environmental Laws.

(k)           Seller has delivered to Buyer on or prior to the date hereof (or, at the latest, within ten (10) days following the date of this Agreement), true and complete copies of all documents, records, and information in its possession or control that identify environmental liabilities and other environmental matters, including, without limitation, previously conducted environmental site assessments, reports, studies, surveys and other similar documents or information, including, without limitation, related correspondence, relating to each of the Real Estate Interests.

4.10           Loans.  Seller has provided to Buyer a true and accurate data file of all Loans, including the outstanding principal balance of and the amount of accrued and unpaid interest and fees on such Loans, prepared as of a date within ten (10) days prior to the date of this Agreement, which data shall be updated at and as of the Closing Date, and, in each case as updated, shall be true and accurate in all material aspects as of such date.

(a)           Each Loan included in the Acquired Assets was made or acquired by Seller or its predecessor in the Ordinary Course of Business.  Except as set forth on Schedule 4.10(a) hereof, none of the loans of the Branches (including the Loans) consist of loans between Seller, on the one hand, and any employee or Affiliate of Seller or any of Seller’s Affiliates.

(b)           None of the Loans are presently serviced by third parties, and there are no obligations, agreements or understandings whatsoever that could result in any Loan becoming subject to any such third party servicing.

(c)           There are no misrepresentations of material facts made by officers or employees of Seller in the credit files relating to the Loans, provided that the term “facts” shall not include judgments or opinions of such officers or employees which were in good faith or information which is reflective of information supplied by the borrower or other third parties.

(d)           With respect to each Loan:

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(i)           Such Loan was solicited, originated, administered, serviced and currently exists in material compliance with all applicable requirements of federal laws and regulations promulgated thereunder, including, as applicable, any written SBA service guidelines, and to the extent, if any, that their applicability to Seller is not preempted by federal laws and regulations, state and local laws and regulations promulgated thereunder (for purposes of this clause (i), a Loan would not be in material compliance if the noncompliance adversely affects the value or collectibility of the Loan or subjects the lender to any penalty or liability);

(ii)           Each note, agreement or other instrument evidencing a Loan and any related security agreement and other document securing, governing or otherwise relating to such Loan (including, without limitation, any guaranty or similar instrument) is true, genuine and, in all material respects, complete, and constitutes a valid, legal and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium, laws governing fraudulent conveyance or equitable subordination principles and other laws of general applicability relating to or affecting creditors’ rights generally, and all actions necessary to perfect any related security interest in favor of Seller have been dul y taken;

(iii)           Such Loan (A) to the extent secured or purported to be secured by a lien in favor of Seller, is secured by a valid and enforceable, and duly perfected, lien in favor of Seller in the collateral therefor, which lien is assignable, and (B) contains customary and enforceable provisions such that the rights and remedies of the holder thereof shall be adequate for the practical realization against any collateral therefor;

(iv)           There has been no material modification, amendment or supplement to or material waiver of the terms of the applicable loan documents except as reflected in writing in the loan file made available to Buyer in respect of such Loan;

(v)           Such Loan is accruing interest in accordance with its terms;

(vi)           Such Loan is not pledged to a third party or otherwise encumbered, and no other party has filed a UCC financing statement in connection therewith;

(vii)           Seller is in possession of all (A) original notes or lost note affidavits, or (B) mortgages or certified copies of such mortgages and financing statements (or other lien filing documents), provided that such mortgages and financing statements (or other lien filing documents) have been returned by the local recording office;

(viii)           There is no valid claim or valid defense (including the defense of usury) to the enforcement of such Loan or a valid right of setoff or rescission;

(ix)           No claim or defense (including the defense of usury) to the enforcement of a Loan or a valid right of setoff or rescission has been asserted

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with respect to any Loan by the applicable borrower(s) under such Loan or, to the Knowledge of Seller, by any other Person;

(x)           Neither Seller nor any predecessor has taken or failed to take any action that would entitle any obligor or other party to assert successfully any claim against Seller or Buyer (including, without limitation, any right not to repay any such obligation or any part thereof);

(xi)           Such Loan was made substantially in accordance with Seller’s or Seller’s predecessor’s standard underwriting and documentation guidelines as in effect at the time of its origination, and has been administered substantially in accordance with Seller’s or Seller’s predecessor’s standard loan servicing and operating procedures as in effect from time to time;

(xii)           Seller may transfer or assign such Loan to Buyer without the approval or consent of any obligor thereunder;

(xiii)           Such Loan is not as of the date hereof, or is or has not been during the period beginning on the date hereof and ending on and as of the Closing Date, thirty (30) calendar days or more delinquent (without giving effect to any grace period, waiver, forbearance, reservation of rights, extension, modification or amendment);

(xiv)           Neither the borrower nor any guarantor of the Loan is in bankruptcy and, to Seller’s Knowledge, there are no facts, circumstances or conditions with respect to such Loan, the collateral therefor or the borrower’s credit standing, that could reasonably be expected to cause such Loan to become delinquent or adversely affect the collectibility, the value or the marketability of such Loan;

(xv)           No notice of default has been given or received by Seller with respect to any Loan and Seller has not received any notice of any violation of law with respect to any Loan or any collateral for any Loan;

(xvi)           There is no pending, or to Seller’s Knowledge, threatened, litigation or claims which may affect in any way the title or interest of the Seller or the borrower in and to such Loan, the collateral for such Loan and the promissory note or the mortgage or deed of trust;

(xvii)           There are no threatened or pending foreclosures, total or partial condemnation (to Seller’s Knowledge) or repossession proceedings or insurance claims (to Seller’s Knowledge) with respect to such Loan or the collateral for such Loan; and

(xviii)           Seller has not directed, controlled or overseen the management of environmental matters of any borrower or any real estate in which the Seller in connection with the Branches holds or has held a security interest and which

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constitutes a Loan so as to cause the Seller to act outside the exclusion under 42 U.S.C. § 9601(20)(E) or any other analogous provisions under applicable Environmental Laws.

4.11           Owned Real Property, Leased Real Properties and Tangible Personal Property.

(a)           Schedule 4.11(a)(i) hereof lists and describes briefly all real property owned by Seller and used as Branch premises (the “Owned Real Property”).  With respect to each parcel of the Owned Real Property, Seller has good and marketable fee title to such parcel of Owned Real Property free and clear of any Encumbrance except for Permitted Encumbrances.  With respect to each Leased Real Property, Seller has a good and valid leasehold interest in such Leased Real Property on and subject to the terms of its applicable Lease, it being understood that Seller makes no representations or warranties about matters affec ting the respective landlords’ fee title to the Leased Real Properties).  Except as set forth on Schedule 4.11(a)(ii), there are no tenants or other parties claiming by, through or under Seller that have a possessory right in and to any space in respect of the Owned Real Property (all such agreements listed on Schedule 4.11(a)(ii), the “Tenant Leases”).  Seller has delivered to Buyer a true, correct and complete copy of each Tenant Lease as amended, modified or supplemented.  Each Tenant Lease is an existing legal, valid and binding obligation of Seller and, to Seller’s Knowledge, each other party thereto, subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity; and there does not exist with respect to Seller’s obligations thereunder, or, to Seller’s Knowledge, with respect to the obligations of the tenant thereunder, any default, or event or condition which constitutes or, after notice or passage of time or both, would constitute a default, on the part of Seller or the tenant under any such Tenant Lease.

(b)           Except as set forth in Schedule 4.11(b) hereof, with respect to the Acquired Tangible Personal Property, the Owned Real Property and the Leased Real Properties (it being understood that Seller is not the fee owner of any Leased Real Property and so, notwithstanding anything to the contrary herein, to the extent the representations relating to the real property parcel of which a Leased Real Property is a part set forth below are qualified to the “Seller’s Knowledge,” such knowledge shall be limited to the actual knowledge (without inquiry or investigation) of Seller’s officers or directors or senior managers or Branch managers; provided, however, that Seller shall be deemed to have knowledge of any matter, fact, event, default, violation, breach, noncompliance, notice, consent or other circumstance if any of the same shall have been delivered in writing to Seller at anytime prior to the Closing):

(i)           there are no pending or, to Seller’s Knowledge, threatened, condemnation proceedings, claim of violation of zoning laws, governmental investigation, lawsuits, or administrative actions relating to the Owned Real Property, Seller’s interest in the Leases or the Leased Real Properties, or the Acquired Tangible Personal Property, or, to Seller’s Knowledge, in the case of each Leased Real Property, the real property parcel of which such Leased Real

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Property forms a part, affecting, or which might affect, adversely in any material respect, the current use, occupancy, or value thereof;

(ii)           there are no outstanding options or rights of first refusal to purchase any parcel of the Owned Real Property, the Leases or Seller’s interest in the Leased Real Properties, or the Acquired Tangible Personal Property, or any portion thereof or interest therein, or, to Seller’s Knowledge, in the case of any Leased Real Property, the real property parcel of which such Leased Real Property forms a part, or any portion thereof or interest therein except, in the case of the Leased Real Properties, such options or rights as set forth in the Leases;

(iii)           no written notice of any violation of zoning laws, building or fire codes or other statutes, ordinances, or regulations or of restrictive covenants relating to the use or operation of the Real Estate Interests has been received by Seller which has not been corrected and, if required, accepted in writing by the applicable Governmental Body, and Seller has not undertaken or completed any construction or improvements on the Real Estate Interests within the past one hundred fifty (150) days which could result in the imposition of any mechanics, materialmen or other similar liens on the Real Estate Interests (other than minor repairs made in the Ordinary Course of Business, all of which have been paid in full);

(iv)           there is no pending or, to Seller’s Knowledge, contemplated rezoning proceeding or special assessment affecting the Real Estate Interests or, to Seller’s Knowledge, in the case of each Leased Real Property, the real property parcel of which such Leased Real Property forms a part;

(v)           to Seller’s Knowledge, the Real Estate Interests are not subject to any special tax valuation or special tax exemption, which upon a change in use or ownership of the Real Estate Interests will result in a “rollback tax” or similar assessment, and to Seller’s Knowledge, with respect to any real property parcel of which any Leased Real Property forms a part, such parcel is not subject to any special tax valuation or special tax exemption, which upon a change in use or ownership of such parcel will result in a “rollback tax” or similar assessment that would be payable by Seller under any Lease;

(vi)           to Seller’s Knowledge, (A) access to each of the Owned Real Property and each the Leased Real Property (or in the case of any Leased Real Property, the real property parcel of which such Leased Real Property forms a part) is available over public streets, (B) all water, sewer, gas, electric, telephone, cable, drainage and other utility equipment, facilities and services required by applicable laws and regulations or necessary for the current operation of the Real Estate Interests are installed, connected and adequate to serve the Real Estate Interests for their current use, and (C) all utility lines servicing the Real Estate Interests are located either within the boundaries of the applicable Owned Real Property or Leased Real Properties (or in the case of any Leased Real Property,

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the real property parcel of which such Leased Real Property forms a part), within lands dedicated to the public use or within recorded easements for such purpose, and are serviced and maintained by the appropriate public or quasi-public entity;

(vii)           to Seller’s Knowledge, Seller possesses all rights, privileges, licenses, franchises, permits and other authorizations (including certificates of occupancy, if applicable) that are material to the current use, occupancy, and operation of the Real Estate Interests;

(viii)           all permits that are material to the current use, occupancy and operation of the Real Estate Interests and, to Seller’s Knowledge, in the case of any Leased Real Property, the real property parcel of which such Leased Real Property forms a part, are in full force and effect and Seller has not received written notice of any pending or threatened revocation, suspension or termination proceedings concerning such permits;

(ix)           all improvements located on the Owned Real Property and, to Seller’s Knowledge, on the Leased Real Properties, the roofs thereon, and all mechanical systems (including, without limitation, all HVAC, plumbing, electrical, elevator, security, utility, sprinkler and safety systems) therein, are in good working order, and, to Seller’s Knowledge, are in sound structural condition and free from material defect or deficiency;

(x)           Seller has not received any written notice (which remains outstanding) from a Governmental Body or other party alleging the existence of such defect or deficiency as set forth in subclause (ix) of this Section 4.11(b); and

(xi)           there has been no casualty damage affecting all or any material portion of the Owned Real Property or the Leased Real Properties which has not been restored except for any damage for which either adequate insurance proceeds will be transferred to Buyer at Closing, with Seller being responsible for deductibles or, in the case of any Leased Real Property, the landlord under the Lease is responsible to restore under the terms of such Lease and which damage has been disclosed to Buyer.

4.12           Leased Real Property.  Schedule 4.12 attached hereto lists all leases, subleases, occupancy agreements or similar agreements under which Seller occupies (or has the right to occupy) pursuant to a lease, license or similar arrangement any real property interest (i) used as a Branch, or (ii) used in connection with the operation of such Branch if such real property interest is incidental to and located at or in immediate and close proximity to such Branch (including any separate parking lot leases where customers of such Branch are permitted to park) (collectively, the “Leases”), and Seller is entitled to possession of the Leased Real Properties as lessee in accordance with the terms of the respective Leases.  The Leases are accurately described on Schedule 4.12 attached hereto and, except as shown on Schedule 4.12, have not been amended, modified or supplemented.  Seller has delivered to Buyer a true, correct and complete copy of each Lease as amended, modified or supplemented.  Each Lease is an existing legal, valid and

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binding obligation of Seller and, to Seller’s Knowledge, each other party thereto, subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity; and there does not exist with respect to Seller’s obligations thereunder, or, to Seller’s Knowledge, with respect to the obligations of the lessor thereof, any default, or event or condition which constitutes or, after notice or passage of time or both, would constitute a default, on the part of Seller or the lessor under any such Lease.  There are no tenants or other parties claiming by, through or under Seller that have a possessory right in and to any space in respect of the Leased Real Properties.  As used in thi s Section 4.12, the term “lessor” includes any sub-lessor of the property to Seller.  There are no subleases relating to any Leased Real Property created or suffered to exist by Seller, or to Seller’s Knowledge, created or suffered to exist by any other Person.  Subject to Seller obtaining any consents necessary for the valid assignment to Buyer of the Leases, which consents are listed on Schedule 4.12 (the “Landlord Consents”), the assignment of such Leases will transfer to Buyer on the Closing Date all of Seller’s rights under the Leases.

4.13           Acquired Contracts.  Seller has delivered to Buyer a correct and complete copy of each written Acquired Contract (as amended to date) and a written summary setting forth the terms and conditions of each oral Acquired Contract, if any.  With respect to each such Acquired Contract:  (i) it is a legal, valid, binding and enforceable contract, and in full force and effect, as against Seller and, to the Knowledge of Seller, each other party thereto, subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity; (ii) it will conti nue to be such a legal, valid, binding and enforceable contract, and in full force and effect, as against Seller and, to the Knowledge of Seller, each other party thereto on identical terms following the consummation of the transactions contemplated hereby, (iii) neither Seller nor, to the Knowledge of Seller, each other party thereto is in breach or default thereunder and  no event has occurred that with notice or lapse of time, or both, would constitute a breach or default thereunder or permit termination, modification, or acceleration thereunder, and (iv) neither Seller, nor to Seller’s Knowledge, any other party thereto has repudiated any provision thereof.

4.14           Absence of Certain Changes and Events.  Since October 1, 2009 Seller has not:

(a)           suffered any change which would have a Seller Material Adverse Effect;

(b)           except in the Ordinary Course of Business and consistent with prudent banking practices, (i) sold, transferred, leased, pledged, mortgaged, or otherwise encumbered or (except for this Agreement) agreed to sell, transfer, lease, pledge, mortgage or otherwise encumber, any of the Acquired Assets or rights with respect thereto, (ii) canceled, waived, compromised or agreed to cancel, waive or compromise any debts, claims or rights with respect to the Acquired Assets or the Assumed Liabilities,or (iii) amended, modified or supplemented any of the terms or conditions governing the Loans;

(c)           made or permitted any amendment, termination or lapse of any contract, lease, agreement, license or permit, if such amendment, termination or lapse (individually

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or in the aggregate) would reasonably be expected to have a Seller Material Adverse Effect;

(d)           made any change in any method of management or operation of the Branches not in the Ordinary Course of Business or any accounting change, except as may be required by generally accepted accounting principles or general regulatory requirements;

(e)           except as set forth in Schedule 4.14(e) hereof, granted any general increase in the compensation (including bonuses) of its officers or employees located at the Branches or the Select Remote Employees (including any increase pursuant to any bonus, pension, profit sharing or other plan or commitment), except for, to the extent permitted by Section 6.1(b)(i) hereof for the period between the date hereof and the Closing Date, normal periodic increases made pursuant to established compensation policies applied on a basis consistent with that of the prior year, and increases and payments necessary, in the Seller’s reasonable discret ion, to maintain and preserve the operation of the Branches, all of which increases that relate to employees located at the Branches or the Select Remote Employees shall be promptly disclosed in writing to Buyer by Seller within forty-five (45) days prior to the Closing Date;

(f)           caused the Branches to transfer to Seller’s other operations any deposits other than deposits that are not Deposits for purposes of this Agreement, except in the Ordinary Course of Business at the unsolicited request of depositors, or caused any of Seller’s other operations to transfer to the Branches any deposits, except in the Ordinary Course of Business at the unsolicited request of depositors;

(g)           made any change to its customary policies for setting rates on deposits offered at the Branches, including any increase in interest rates paid except as otherwise contemplated by Section 6.1(b)(v) hereof; or

(h)           entered into any other transaction or agreement, incurred any capital expenditures, or conducted its affairs, in each case as related to the Acquired Assets or the Assumed Liabilities, other than in the Ordinary Course of Business and consistent with prudent banking practices except as contemplated by this Agreement.

4.15           Escheat Deposits.  All of the deposits and other property (including the contents of safe deposit boxes) held or maintained at the Branches that would constitute escheated deposits or property at any time prior to the Closing were properly reported and transmitted to the applicable Governmental Body.

4.16           Books and Records.  The Books and Records accurately reflect in all material respects as of their respective dates the Book Value of the Acquired Assets and Assumed Liabilities being transferred to Buyer hereunder.  The Books and Records are true and complete in all material respects and fairly reflect and also include all customary Branch, customer and customer-related information reasonably necessary to service the Deposits and Loans on an ongoing basis, and to otherwise operate the business in respect of the Acquired Assets and Assumed Liabilities being acquired or assumed under this Agreement in substantially the manner

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currently operated by Seller.  The Books and Records, including, but not limited to, IRA and Keogh Account documentation, are in compliance in all material respects with all requirements of applicable law.

4.17           Insurance.  Seller maintains in full force and effect insurance on the Acquired Assets in such amounts and against such risks and losses as are (based on advice of its insurance broker) customary and adequate for comparable entities engaged in the same business and industry.

4.18           Disclosure.  No representation or warranty of Seller contained herein, when read together with the Disclosure Schedule, is false or misleading in any material respect or omits to state a fact herein or therein necessary in order to make the statements contained herein or therein not false or misleading in any material respect.

4.19           Community Reinvestment Act Designations.  As of the date of this Agreement, each of the subsidiaries or Affiliates of Seller that is an insured depository institution was rated “Satisfactory” or “Outstanding” following its most recent Community Reinvestment Act examination by the regulatory agency responsible for its supervision.  To Seller’s Knowledge, Seller has not received any notice of and has not been made aware of any planned or threatened objection by any community group to the transaction contemplated hereby.

4.20           No Knowledge of Fraud.  Seller is not aware (based on Seller’s Knowledge) of: (i) any Loan, Deposit, lending relationship or deposit relationship held or maintained at the Branches that is or may reasonably be considered to be fraudulent in nature, notwithstanding that any Loan may be current and performing; or (ii) any device, artifice or scheme, whether by customers or Seller’s employees, to commit fraud with respect to any activities conducted at the Branches, including but not limited to deposit or lending functions conducted at the Branches.

4.21           Limitation on Warranties.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE OWNED REAL PROPERTY, LEASED REAL PROPERTIES, OR THE ACQUIRED TANGIBLE PERSONAL PROPERTY OR WITH RESPECT TO ANY ACQUIRED ASSETS OR ASSUMED LIABILITIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller that the statements contained in this Article 5 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then as though the Closing Date were substituted for the date of this Agreement throughout this Article 5).

5.1           Organization, Qualification, and Corporate Power.  Buyer is a national banking association duly organized and validly existing under the laws of the United States, with full

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corporate power and authority to conduct its business as now being conducted and to own or use the properties and assets that it purports to own or use.

5.2           Authorization of Transaction.  Buyer has the full corporate power and authority to execute and deliver this Agreement and the other Buyer Documents.  Subject to approval by any necessary federal or state banking regulatory authority, Buyer has the corporate power to perform Buyer’s obligations hereunder and under the other Buyer Documents, and to consummate the transactions contemplated hereby and thereby.  Each of this Agreement, and when executed and delivered, each of the other Buyer Documents, constitutes the valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms and conditions, subject to bankruptcy, insolvency, reor ganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity.  Except for the Regulatory Approvals or as otherwise provided herein, Buyer is not required to give any notice to, make any filing with, or obtain any authorization, or Consent of any Governmental Body in order to execute and deliver this Agreement or consummate the Acquisition.

5.3           Noncontravention. Subject to the required Consents described in Section 5.2, neither the execution and the delivery of this Agreement by Buyer, nor the consummation of the Acquisition by Buyer, will directly or indirectly:

(a)           Contravene, conflict with, or result in a violation of (i) any provision of the charter or bylaws of Buyer or (ii) any resolution adopted by the board of directors or the shareholders of Buyer;

(b)           Contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge the Acquisition or to exercise any remedy or obtain any relief under, any Applicable Law or any Order to which Buyer, or any of the assets owned or used by Buyer may be subject;

(c)           Except for matters which would not have a Buyer Material Adverse Effect, contravene, conflict with, or result in a violation of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Buyer or that otherwise relates to the business of, or any of the assets owned or used by, Buyer; or

(d)           Except for matters which would not have a Buyer Material Adverse Effect, contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Contract to which Buyer is a party.

5.4           Brokers’ Fees.  Except for fees payable to RBC Capital Markets Corporation, Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the Acquisition, and Buyer shall be solely liable for payment of any such fees or commissions payable to RBC Capital Markets Corporation.

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5.5           Legal Proceedings; Orders.  There are no pending proceedings or an Order pending against Buyer that would prohibit Buyer’s fulfillment of obligations agreed to in this Agreement.

5.6           Financial Condition.  The financial condition of Buyer is sufficient to enable Buyer to consummate the Acquisition without any external financing.

5.7           Regulatory Condition.  Buyer has not received any indication from any federal or state governmental agency or authority that such agency would oppose or refuse to grant a Regulatory Approval, and to Buyer’s Knowledge, there exists no fact or circumstance that would prevent or delay Buyer’s ability to obtain promptly all Regulatory Approvals.

ARTICLE 6

PRE-CLOSING COVENANTS

The Parties agree as follows with respect to the period from and after the execution of this Agreement.

6.1           Operation of Business.

(a)           From the date of this Agreement through the Closing Date, Seller shall use Commercially Reasonable Efforts to maintain the level of customer accounts of the Branches existing on the date hereof.

(b)           From the date of this Agreement through the Closing Date, Seller will not, and will not cause or allow the Branches to, engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business, and, without the prior written consent of Buyer, Seller shall not with respect to the Branches:

(i)           increase the rate of compensation of any of the Branches officers or employees or Select Remote Employees, or enter into any employment contracts with any Potential Employee except in the Ordinary Course of Business; provided, however, prior to or on the Closing Date, Seller shall pay in full to the Retained Employees the performance, incentive or other bonuses required to be paid to them pursuant to Section 6.7(c) hereof;

(ii)           authorize or make any capital expenditure(s) which, individually or in the aggregate, exceeds $5,000 for any single Branch;

(iii)           extend any new, or renew any existing, loan (or Commitment), credit, lease, or other type of financing or renew any such type of financing in which the maximum principal amount thereunder would pursuant to the terms thereof exceed $1,000,000;

(iv)           extend any new, or renew any existing, loan, credit, lease, or other type of financing or renew any such type of financing, or purchase any loan

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participation interest, which does not meet Seller’s loan policy requirements as of the date of this Agreement;

(v)           make any change to (A) the interest rates or price or rates of fees, (B) the policies or programs, or (C) the period of time applicable to any promotional period, in each case as in existed on the date of this Agreement with respect to the loans or deposits of, or offered by, the Branches other than in the Ordinary Course of Business and as determined to be necessary or advisable by Seller in the reasonable bona fide exercise of its discretion based on changes in market conditions applicable to the Branches; provided, however, that (1) an interest rate increase on any deposit in excess of  25 basis points or a decrease in the interest rate of any loan in excess of 50 basis points shall not be deemed to be in the Ordinary Course of Business and shall require Buyer’s prior written consent (it being understood that Buyer shall not unreasonably withhold or delay its consent with respect to such actions), and (2) Seller shall be permitted to offer interest rates on any certificates of deposits or money market deposit accounts at rates that are lower than the rates offered as of the date of this Agreement without the prior written consent of Buyer;

(vi)           authorize or allow Potential Employees to take vacation or other voluntary leaves of absence during the five (5) Business Day periods preceding or following the Closing Date, other than any leave of absence that is required to be granted pursuant to the Family Medical Leave Act;

(vii)           deliver or distribute, in writing or electronically, to any customer of the Seller, any notice, letter or other correspondence that is related to the Acquisition or matters of transition related thereto, including the status of such customer’s accounts or loans with Seller (it being understood that Buyer shall not unreasonably withhold or delay its consent with respect to such actions);

(viii)           forward to vendors of Seller the names and other contact information of depositors and other customers of the Branches if such vendors are permitted to use such information to solicit credit card, debit card or prepaid card business, or brokerage, investment or insurance business or any other business customarily conducted by a bank, from such depositors and other customers, except that nothing contained in this clause (viii) shall restrict Seller from forwarding such names to First Brokerage America, LLC (or its insurance company subsidiary) to enable them to carry on the brokerage and insurance business carried on by them out of the Branches consistent with past practices;

(ix)           make any material changes to the terms and conditions governing the Deposit accounts, other than as required by applicable law, rule or regulation;

(x)           enter into any interest rate swap, collar, floor or other hedging or derivative agreement or amend, modify or supplement any thereof, or agree to any provision in any Loan entered into after the date hereof under which the borrower

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under such Loan shall be required or permitted, with respect to such Loan, to enter into any interest rate swap, collar, floor or other hedging or derivative agreement;

(xi)           amend, terminate, extend or waive any right in any material respect, or sell, assign or transfer, any Lease or Acquired Contract; provided, however, that (A) in the case of any Lease, Seller may, without the consent of Buyer, exercise any renewal option on the renewal terms expressly set forth under such Lease as of the date hereof (and without modification, for the avoidance of doubt, to the payment amount or obligations thereunder) if such Lease shall expire prior to the Closing Date unless Buyer shall have delivered written notice instructing Seller not to renew or extend such Lease within ten (10) Business Days following notice from Seller of its intention to extend or renew such Lease (and Seller hereby agrees to give notice to Buyer of its intention to so extend or renew any such Lease), and (B) in the case of any Acquired Contract, Seller may, without the consent of Buyer, amend, terminate or extend such Acquired Contract that involves the payment or receipt of not more than $2,500 during any one (1) year period;

(xii)           except as required by law or the terms of the documents governing any Loan, (A) release any collateral or any party from any liability on or with respect to such Loan, (B) compromise or settle any material claims of any kind or character with respect to such Loan, or (C) amend or waive any of the material rights or other terms of such Loan as set forth in the Loan documents; provided, however, that Buyer agrees not to unreasonably withhold or delay its consent to any of the actions described in clause (C) above provided that such actions are taken in accordance with the underwriting standards, pricing levels and other par ameters or terms of Seller as in effect on the date hereof or as mutually agreed upon by the Buyer and Seller in writing from time to time;

(xiii)           sell, transfer, assign, encumber or otherwise dispose of, or enter into any contract, agreement or understanding to sell, transfer, assign, encumber or dispose of, any of the assets or deposits of the Branches, except in the Ordinary Course of Business consistent with past practice; provided, however, in no event shall Seller take any of the foregoing actions with respect to (A) any of the Owned Real Property, (B) any of the Leases, (C) any of the Deposits, or (D) any Loan;

(xiv)           except as permitted by this Section 6.1(b), knowingly take, or knowingly permit its Affiliates to take, any action (A) impairing Buyer’s rights in any Deposit or Acquired Asset, (B) impairing in any way the ability of Buyer to collect upon any Loan, or (C) waiving any material right, whether in equity or at law, that it has with respect to any Loan; or

(xv)           directly or indirectly agree or commit to take any of the foregoing actions.

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(c)           From the date of this Agreement through the Closing Date, Seller will not, and will not cause or allow the Branches to, distribute or deliver any marketing materials to the customers of the Branches without consulting with the Buyer other than customary marketing materials in the Ordinary Course of Business.

6.2           Notice of Potential Material Adverse Effect.  Seller will give prompt written notice to Buyer of any fact or circumstance which would result in a Seller Material Adverse Effect, or cause a breach or threatened breach of any of the representations and warranties in Article 3 or 4 above.  Buyer will give prompt written notice to Seller of any fact or circumstance which would result in a Buyer Material Adverse Effect or cause a breach or threatened breach of any of the representations and warranties in Article 5.

6.3           Reasonable Access.  Buyer, its vendors and agents shall be given onsite access to the Branches, both during and outside of normal business hours, as reasonably necessary or appropriate beginning within five (5) calendar days following the execution of this Agreement to investigate the Branches’ properties, books, contracts, commitments, records, operations and conditions (financial or otherwise) and inspect, among other things, the Seller’s Books and Records; provided that such investigation shall be related to the Acquisition and shall not interfere materially or unnecessarily with the Branches’ normal operatio ns.  Buyer shall, and shall cause its advisors and agents to, maintain the confidentiality of all confidential information furnished to it and shall not use such information for any purpose except in furtherance of the Acquisition.  Within five (5) calendar days of the execution of this Agreement, Buyer shall be permitted, at its expense, to install and test voice and data communication lines and WAN, both internal and external, from each Branch and prepare for the installation of hardware and software; provided that such installation and testing shall be conducted at mutually agreeable times and so as to minimize, to the extent reasonably practicable, interference with Seller’s operation of its business.  If this Agreement is terminated, Buyer shall promptly return or certify the destruction of all documents and copies thereof and all work papers containing confidential information received pursuant to this Section 6.3 concerning the Branches.  Seller shall allow Buyer to remove the Seller’s Books and Records for purposes related to the Acquisition, subject to such reasonable restrictions and limitations for confidentiality or security or other purposes as required by Seller.

6.4           Press Releases.  Prior to the Closing Date, the Parties will consult with each other as to the form and substance of any press release or other public disclosure materially related to the Acquisition; provided that no Party is prohibited from making any disclosure which its counsel deems necessary or advisable in order to satisfy any requirements of Applicable Law or the rules of any national securities exchange on which securities of a Party or Affiliate of a Party are listed, in which case the Party making such public announcement or disclosure shall give prior written notice to the other Party promptly after the disclosing Par ty is notified of the disclosure requirement.  Neither Party will be required to seek the other Party’s approval of any public notice required for any required regulatory filing.

6.5           Exclusivity.  From the date of this Agreement through the Closing Date, Seller will not and will cause its Affiliates not to, directly or indirectly, (a) solicit, initiate, or encourage the submission of any proposal or offer from any Person other than Buyer relating to the

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acquisition of any Branch or any of the assets, properties or deposits thereof, except as otherwise permitted by Section 6.l(b) hereof (it being understood that Seller shall have the right to sell, without the consent of Buyer, any Excluded Loan provided such Excluded Loan was originated prior to the date hereof as contemplated by Section 6.18 hereof) or (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing.  Seller will notify Buyer immediately if any Person makes any proposal, offer, inquiry, or contact with respec t to any of the foregoing.

6.6           Regulatory Matters and Approvals.  Each of the Parties will cooperate and use Commercially Reasonable Efforts to promptly prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary Governmental Authorizations.  Buyer shall file all requisite applications with the applicable Governmental Bodies no later than thirty (30) calendar days after the date of this Agreement (and shall use its Commercially Reasonable Efforts to file such applications not later than twenty (20) calendar days after the date of this Agreement); provid ed that Seller has supplied to Buyer all necessary Seller information required for such applications and Buyer shall have provided to Seller a copy of each such application (excluding confidential sections thereof) not less than three (3) Business Days prior to the date on which such application is to be filed.  Buyer shall respond (and Seller shall assist Buyer in responding) to all requests for information from a Governmental Body in a timely manner and shall use their respective Commercially Reasonable Efforts to respond to any request within three (3) Business Days.  Each of the Parties will (i) permit the other to review in advance and, to the extent practicable, will consult with the other Party on all characterizations of the information relating to the other Party which appear in any filing made with, or written materials submitted to, any Governmental Body in connection with the Acquisition; and (ii) consult with the other with respect to obtaining all Government al Authorizations necessary or advisable to consummate the Acquisition (unless prohibited by the applicable Governmental Body) and will keep the other Party apprised of the status of matters relating to completion of the Acquisition.  Each of the Parties will promptly furnish the other Party with copies of all written communications received by it, from, or delivered to, any Governmental Body in connection with and material to the Acquisition, except for any confidential portions thereof and shall update the other party on any non-written correspondence with Governmental Bodies relating to Governmental Authorizations.

6.7           Employment.

(a)           Buyer may, but shall be under no obligation to, extend offers of employment as of the Closing Date to (i) employees of Seller at the Branches and (ii) the Select Remote Employees (such employees and Remote Select Employees, collectively, the “Potential Employees”).  Seller shall assist, and shall cause its Affiliates to assist, Buyer’s solicitation of Potential Employees to accept employment with Buyer and/or Affiliates of Buyer.  From and after the date hereof through the Closing Date, Buyer may initiate contact and engage in reasonable communication with Potential Employees, including, without limitation, via electronic mail, physical delivery by mail o r facsimile, or telephone or in-person contact, and Seller shall use its reasonable efforts to assist in the facilitation of such communications.  Without limiting the foregoing, Seller shall permit

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Buyer to contact and solicit the Potential Employees promptly after the date of this Agreement and shall cooperate with Buyer to establish procedures for Buyer to interview the Potential Employees and to provide Buyer with appropriate information relating to the Potential Employees (including a copy of each such Potential Employee’s most recent performance review and access to each such Potential Employee’s entire personnel and employment file, excluding medical information unless such Potential Employee shall have otherwise consented to the disclosure thereof to Buyer).

(b)           Buyer shall notify Seller at least thirty (30) days prior to the Closing which Potential Employees Buyer desires to employ following Closing.  Buyer agrees that, with respect to each such Potential Employee to whom Buyer so desires to make an offer of employment, Buyer shall (i) make such offer at least fifteen (15) days prior to the Closing Date, and (ii) in the case of each Potential Employee receiving an offer and subject to the other provisions of Section 7.13 hereof, offer to such individual (A) base salary that is comparable to his or her base salary as of the date hereof and (B) incentive compensation and health and welfare benefits that are substantially comparable to the incentive compensation and health and welfare benefits offered by Buyer to similar level employees within Buyer’s workforce as of the date of Buyer’s offer to such Potential Employee.  Potential Employees who accept offers of employment by Buyer prior to the Closing Date and become employees of Buyer by reporting for work with Buyer on the first Business Day following the Closing Date or within five (5) Business Days after the Closing Date as may be applicable to Potential Employees shall be referred to herein as “Retained Employees.”  All Retained Employees will be removed from Seller’s payroll effective as of the Closing Date.

(c)           At Closing, (i) all wages and salaries, workers’ compensation payments, accrued and unused vacation pay and social security and unemployment taxes of employees at the Branches and Select Remote Employees (including Retained Employees) shall be paid by Seller for the period prior to and including the Closing Date, and (ii) Seller will make all severance and other payments and perform all obligations to Seller’s employees under any and all severance or stay-pay agreements executed between Seller and the employees of the Branches.  In addition, on the Closing Date, Seller shall (X) compute all performance and incentive bonuses and annual bonuses that a Retained Employee would otherwise be entitled to under any existing formula-based performance or incentive agreement or other existing formula-based bonus policy or arrangement applicable to such Retained Employee as though such Retained Employee shall have completed his or her service for the current annual or other period as to which such bonus relates (and a copy of such computation shall be delivered to Buyer at least five (5) Business Days prior to the Closing Date), and (Y) pay to such Retained Employee such bonus or incentive in an amount equal to the full amount of such bonus or incentive for such annual or other period multiplied by a fraction, the numerator of which shall be the number of days from the beginning of such annual or other period and ending on the Closing Date and the denominator of which shall be the total number of days in such annual or other period.

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(d)           Nothing contained herein shall (i) confer upon any former, current or future employee of Seller or its Affiliates or Buyer or its Affiliates or any legal representative or beneficiary thereof any rights or remedies, including, without limitation, any right to employment or continued employment of any nature, for any specified period, or (ii) cause the employment status of any former, present or future employee of Buyer or its Affiliates to be other than terminable at will.

(e)           Prior to the Closing Date, Seller and Buyer shall cooperate in order to permit Buyer to train Potential Employees, and Seller shall, as scheduled by Buyer for reasonable periods of time and subject to Seller’s reasonable approval, excuse such employees from their duties at the Branches for the purpose of training and orientation by Buyer.  Buyer agrees to reimburse Seller for any out-of-pocket overtime expenses of Seller for Potential Employees if such training is not available during Seller’s normal business hours for the Branches.

(f)           If for any reason the Acquisition is not consummated, in consideration of the access to and information regarding Seller’s employees, for a period of two (2) years following date of this Agreement, Buyer and its Affiliates shall not solicit for employment any Potential Employee or any of Seller’s other employees, without the prior consent of Seller; provided, however, that the foregoing shall not apply to responses to or follow-up hiring in respect of general solicitations or advertisements for job positions not specifically directed to the Potential Employees or Seller’s other employees.

6.8           Conveyance of Customer Accounts.

(a)           Deposit and Loan Accounts.  The Parties specifically acknowledge that Buyer has the regulatory duty for all communications regarding any change in terms of Deposit and Loan agreements.  In the event Buyer desires to change any such terms effective as of the Closing Date, Buyer shall have the right to distribute written communications to such customers prior to the Closing; provided, however, that Buyer shall provide proposed written communications for the Loan and Deposit customers of the Branches to Seller five (5) Business Days prior to Buyer’s sc heduled mailing or other provision of such notices for Seller’s review and approval.  Such written communications shall be mailed at Buyer’s expense and shall be mailed or otherwise provided to Loan and Deposit customers of the Branches at Buyer’s sole discretion.

(b)           Loans.  On the Closing Date, title to the Loans shall be transferred from Seller to Buyer by a Bill of Sale, together with an assignment of notes and liens for real estate and other secured loans. Seller shall provide Buyer with a Limited Power of Attorney, in the form of Exhibit C, to effectuate the assignment of the Loans (including the security interest in all collateral therefor). Seller will also endorse or execute an allonge with respect to each note to Buyer, “without recourse” and, except as otherwise specifically provided in this Agreement, without warranties except for warranties regarding title thereto and right and authority to transfer.  Seller will cooperate with Buyer and shall execute any other assignment documents (including mortgage assignment and UCC financing statement assignment documents and forms) that Buyer

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may reasonably request that are acceptable for filing or recording in accordance with any applicable law. Preparation of such additional documents shall be Buyer’s responsibility and at Buyer’s expense; all recording fees and expenses related to the recordation of the assignments shall be the responsibility of Buyer.

(c)           Other Notices Provided by Seller to Customers.  Notices provided by Seller to customers of the Branches after the date of this Agreement until the Closing related to the transaction contemplated by this Agreement shall be provided by Seller to Buyer prior to distribution for Buyer’s prior written approval, which approval shall not be unreasonably withheld.  For purposes of this Agreement, the term “customers” includes borrowers under the Loans.

(d)           General Communications by Buyer to Customers.  In addition to the duties and rights of Buyer under clause (a) of this Section 6.8 to communicate with customers, from and after the date of this Agreement, Buyer shall have the right to deliver communications to the customers of the Branches, by mail or electronically or otherwise, one or more communications regarding the pending Acquisition and the transition of ownership of the Branches (including a general introductory letter welcoming such customers to banking with Buyer), subject to the prior written approval of Seller (which approval shall not be unreasonably withheld, delaye d or conditioned).

6.9           Branch Access.  Seller shall provide physical access to space within each Branch facility to Buyer at least thirty (30) days prior to the Closing Date for equipment staging inside the Branch relating to the conversion; such access not to be unduly disruptive to the Branch.

6.10           Maintenance of Properties.  From the date of this Agreement and until the Effective Time, Seller will maintain the Branches in their current condition, ordinary wear and tear excepted consistent with the standard of maintenance Seller uses in its Non-Divested Branches.

6.11           Conversion Planning and Execution.  From the date of this Agreement until the Effective Time, Seller will provide reasonable cooperation with and assist Buyer in planning a conversion to transition the business of the Branches from Seller to Buyer including the transition of Seller’s electronic data (including data delivered pursuant to ancillary delivery channels, such as internet banking and bill pay, debit card and credit card and all other systems determined beyond the CBS/Signature system) to an electronic file format mutually agreeable to both Parties on the Closing Date.  Each Party shall pay its own cost relating to such conversion.  Within seven (7) Business Days (or, in the case of Buyer’s initial request as contemplated by this sentence, three (3) Business Days except with respect to commercial online banking customers on the Fundtech system) of up to each of four (4) separate requests of Buyer, Seller agrees to provide Buyer a complete set of data files/conversion tapes prior to the final set of data files/conversion tapes for the purposes of implementing the conversion as of the Closing Date (such conversion data files to include, among other things, the loan, deposit, CIF and other application systems processed on CBS/Signature and in the native CBS/Signature file format and other data files for systems other than the CBS/Signature System, including, but not limited to, internet banking and bill pay, debit card and credit card).  On the Closing Date, Seller shall

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provide a final set of data files/conversion tapes contemplated in this Section 6.11 to Buyer as of such date regardless of the number of requests for such information and material made by Buyer pursuant to this Section 6.11.  Further, Seller agrees that it will inform Buyer of required changes to record layouts that may be necessary in the Ordinary Course of Business, and Buyer and Seller agree to cooperate on timely making such required modifications; provided, however, that in the event such changes are made by Seller, Seller shall provide to Buyer any additional file s required by Buyer to support Buyer's testing of such changes not later than three (3) Business Days following Buyer’s request therefor (except with respect to commercial online banking customers on the Fundtech system).The Parties shall comply with their respective conversion-related responsibilities as set forth on Schedule 6.11; provided that such schedule may be revised and updated as reasonably requested by Buyer from time to time as necessary to effect the intent of this Section 6.11.

6.12           General Third Party Consents.  From the date of this Agreement until all Landlord Consents and other Consents are obtained, Seller and Buyer shall cooperate with all reasonable requests of each other, and Seller shall use Commercially Reasonable Efforts, to obtain (i) all Landlord Consents to transfer Seller’s rights as lessee to each Leased Real Property (including those rights that are personal to Seller pursuant to the respective Lease) to Buyer, and (ii) all other Consents (other than Regulatory Approvals, as to which the provisions of Section 6.6 shall apply) as shall be required under the terms of any Contr act or applicable law to transfer and assign to Buyer on the Closing Date the Acquired Assets and the Assumed Liabilities.  If Seller is unable to obtain a Landlord Consent with respect to a Lease, and Buyer and Seller fail to reach an agreement within thirty (30) calendar days after receipt of the landlord’s indication that a Landlord Consent will not be granted in form and substance reasonably satisfactory to Buyer and Seller, then Buyer may elect to exclude the applicable Leased Real Property (and the Lease thereto) from the Acquisition, and the Payment Amount shall be reduced accordingly.  Buyer agrees to assume the Deposits for any Branch excluded from the Acquisition pursuant to this Section 6.12, subject to Buyer’s or Seller’s ability to satisfy all applicable regulatory requirements.

6.13           Title Insurance and Surveys.  Within forty-five (45) days after the date of this Agreement, Seller will provide Buyer, at Seller’s expense, with an ALTA 2006 standard form owner’s commitment (containing the endorsements described in Section 8.1(e) below) for title insurance with respect to each parcel of real property comprising the Owned Real Property (including legible copies of all documents, instruments or agreements evidencing or creating the exceptions referenced in such commitment to the extent available from the public records) from Chicago Title Insurance Company and an ALTA/ACSM Land Title Survey prepared i n accordance with the 2005 minimum requirements therefor as adopted by American Land Title Association and the National Society of Professional Surveyors (prepared and certified, in form reasonably acceptable to Buyer as to all matters shown thereon, by a surveyor licensed by the State of Illinois and reasonably acceptable to Buyer, which shall include a notation stating whether or not a portion of the premises are located in a 100 year flood plain, flood-prone area of special flood hazard and if so, depicting the location of such flood-prone area of special flood hazard).  With respect to any such parcel or parcels of real property collectively comprising the Owned Real Property used for any single Branch location (each, an “Owned Location”), Buyer shall have fifteen (15) Business Days after the receipt of the commitment for title insurance and

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the land title survey applicable to any such Owned Location to object, in writing, to the exceptions or other matters contained therein if and only if such exceptions or matters would, in Buyer’s reasonable discretion, (i) materially impair the use or occupancy (consistent with current use or occupancy) of the applicable Owned Location as a banking branch, or (ii) cost, at such Owned Location, more than $150,000 to remediate, cure or correct (it being agreed that if such exception or matter is not capable of being cured, remediated or corrected, the cost to cure, remediate or correct such exception or matter shall be deemed to exceed $150,000) (any of item (i) or (ii), an “Objectionable Title Matter”).  Buyer shall not have the right to object to any exceptions or other matters contained in the commitment for title insurance and/or the land title survey applicable to any such Owned Location, except for Objectionable Title Matters; by way of clarification and not limitation, Objectionable Title Matters shall not include exceptions for current taxes not delinquent, printed exceptions in the commitment generally contained in any owner’s standard coverage policy of title insurance (except to the extent that the same may be removed by a customary owner’s affidavit from Seller or any other customary delivery reasonably requested by the title company), or rights of government entities to make cuts and fills in connection with construction and/or maintenance of any public roadways adjoining the real property and easements and reservations of record that do not prevent or materially impair the use of such parcel of real property for general banking purposes.  If Buyer gives timely notice of its objection to any Objectionable Title Matter, Seller shall have the opportunity (but not the obligation) for ten (10) days from the date of Buyer’s notice to cure such objection (which cure may include, to the extent expressly consented to by Buyer in its sole discretion, a written undertaking (with collateral, if required) on the part of Seller to cure such objection prior to Closing).  If the Seller shall have failed to cure, to the reasonable satisfaction of Buyer, any Objectionable Title Matter to which Buyer’s objections were timely made as provided in this Section 6.13 with respect to any such Owned Location, then Buyer may elect to exclude the applicable parcel or parcels of Real Estate Interests from the Acquisition (along with, if such parcel of Real Estate Interests is material to the operation of any Owned Location as determined in the sole, reasonable discretion of Buyer, any other parcel of Real Estate Interests applicable to such Owned Loc ation), and the Payment Amount shall be reduced accordingly.  Buyer agrees to assume the Deposits for any Branch excluded from the Acquisition pursuant to this Section 6.13, subject to Buyer’s or Seller’s ability to satisfy all applicable regulatory requirements.

6.14           Insurance Proceeds and Casualty Payments.  In the event of any damage, or destruction affecting the Acquired Assets between the date hereof and the time of the Closing, Seller shall deliver to Buyer notice of such damage or destruction and, at Buyer’s election, shall either fix or repair such damage or destruction (which repair must be completed prior to the Closing Date in accordance with Applicable Laws and in a workmanlike manner, using materials consistent with the quality of the damaged or destroyed materials) or pay to Buyer the insurance proceeds, to the extent of the applicable amount set forth in Section 2.2(a) hereof with respect to the Owned Real Property and Leasehold Improvements, and the replacement cost with respect to the Acquired Tangible Personal Property as the case may be, received (or with respect to insurance proceeds, which would be received assuming Seller’s insurance policy had no deductible) by Seller as a result thereof; provided, however, that Buyer shall have the right to terminate this Agreement in the event that the Book Value of such Acquired Assets so damaged or destroyed is in excess of $100,000, unless Seller agrees to pay Buyer the difference between the Fair Market Value of such Acquired Assets and the insurance proceeds.  The terms and

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conditions of this Section 6.14 shall supersede entirely the provisions of the Uniform Vendor and Purchaser Risk Act, as enacted in Illinois; Buyer hereby waives any termination rights that it may have under said Uniform Vendor and Purchaser Risk Act.

6.15           Environmental Reports and Investigations.  Consistent with Section 4.9(k) hereof, within ten (10) Business Days following the date of this Agreement, Seller will furnish Buyer with true and complete copies of all environmental assessments, reports, studies, surveys and other similar documents or information, including, without limitation, related correspondence, in its possession or control relating to each of the Real Estate Interests.  Buyer shall be entitled to conduct a Phase I Environmental Assessment and an assessment of Hazardous Materials and compliance w ith Environmental Laws (collectively, “Phase I Environmental and Hazardous Materials Assessment”), at Buyer’s sole expense, for any of the Owned Real Properties upon one (1) Business Day’s notice to Seller.  Buyer shall also be entitled to conduct a Phase I Environmental and Hazardous Materials Assessment, at Buyer’s sole cost and expense, of any Leased Real Property, only upon receipt of written approval from the landlord for that Leased Real Property.  In addition, if a Phase I Environmental Assessment identifies any Recognized Environmental Conditions for any Owned Real Property, Buyer shall have the right, at any time prior to Closing, to conduct, at Buyer’s sole cost and expense, a Phase II Environmental Assessment to investigate any Recognized Environmental Conditions identified in any Phase I Environmental Assessment report for such Owned Real Property.  Buyer’s work plans for any Phase I Environmental and Hazardous Materials Assessment or any Phase II Environmental Assessment conducted pursuant to this Section 6.15 shall be subject to Seller’s approval, which approval shall not be unreasonably withheld, delayed or conditioned, and Buyer shall, at its sole cost and expense, repair and/or correct any damage to the subject property resulting from the work conducted by Buyer or its contractors in connection with any such assessment.  If a Phase I Environmental Assessment identifies any Recognized Environmental Conditions for any Leased Real Property upon the written consent by the landlord, Buyer shall have the right, at any time prior to Closing, to conduct, at Buyer’s sole cost and expense, a Phase II Environmental Assessment to investigate any Recognized Environmental Conditions identified in any Phase I Environmental Assessment report for any Leased Real Property.  All such Phase II Environmental Assessments shall be conducted by an independent environmental investigation and testing firm selected by the Buyer.  Buyer will notify Seller no fewer than five (5) Business Days in advance of its desire to conduct a Phase II Environmental Assessment at any Owned Real Property, and upon receipt of such notice Seller will grant Buyer access to the Owned Real Property for such investigation.  With respect to the Leased Real Properties, Buyer will notify Seller no fewer than five (5) Business Days in advance of its desire to conduct either a Phase I Environmental and Hazardous Materials Assessment or a Phase II Environmental Assessment at any Leased Real Property and Seller shall use its Commercially Reasonable Efforts to obtain written permission from the landlord for that Leased Real Property for Buyer to conduct such investigations.  If any Phase I Environmental and Hazardous Materials Assessment or any Phase II Environmental Assessment confirms the exis tence of a condition which could be subject to Liability under applicable Environmental Laws, and the aggregate costs of remediating such conditions are reasonably estimated by Buyer’s consultant not to exceed $25,000 with respect to any single Branch, then Buyer shall purchase the Owned Real Property, or accept an assignment of the Leases, relating to such Branch on the terms set forth in Section 2.2 and shall assume liability for such condition except as otherwise contemplated by Section 2.1(c)(iv) hereof.  If

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(i) the costs of remediation any such condition with respect to any single Branch are reasonably estimated by Buyer’s consultant to exceed $25,000 for such single Branch and Buyer and Seller fail to reach an agreement with respect to such remediation within thirty (30) calendar days after receipt of the estimated remediation costs (or, if less, within the period beginning on the date of receipt of the report regarding the estimate of such costs and ending ten (10) Business Days prior to the Closing Date), or (ii) access to conduct a Phase I Environmental and Hazardous Materials Assessment or a Phase II Environmental Assessment is not given to Buyer or its representatives, in the case of a Phase I Environmental and Hazardous Materials Assessment, at least forty-five (45) Business Days prior to the Closing Date, and in th e case of a Phase II Environmental Assessment, at least twenty (20) Business Days prior to the Closing Date, then, in each case, Buyer may elect to exclude the applicable parcel or parcels of Real Estate Interests from the Acquisition (along with, if such parcel of Real Estate Interests is material to the operation of any single Branch as determined in the sole, reasonable discretion of Buyer, any other parcel of Real Estate Interests applicable to such single Branch, whether Owned Real Property or Leased Real Property), and the Payment Amount shall be reduced accordingly.  Buyer agrees to assume the Deposits for any Branch excluded from the Acquisition pursuant to this Section 6.15, subject to Buyer’s or Seller’s ability to satisfy all applicable regulatory requirements.  During the period between the date hereof and the Closing Date (and, if the Closing shall not occur, at all times thereafter), Buyer and its e mployees, agents and representatives shall hold all contents of any Phase I Environmental Assessment and Phase II Environmental Assessment reports confidential and disclose the contents thereof only with prior written consent of Seller or as may be required under applicable law.  During the period between the date hereof and the Closing Date (and, if the Closing shall occur, at all times thereafter), Seller and its employees, agents and representatives shall hold all contents of any Phase I and Phase II reports confidential and disclose the contents thereof only with prior written consent of Buyer or as may be required under applicable law.  Buyer shall deliver to Seller a true, correct and complete copy of the results of any Phase I Environmental and Hazardous Materials Assessment and any Phase II Environmental Assessment conducted by Buyer pursuant to this Section 6.15 in respect of any Owned Real Property or Leased Real P roperty (together with any attachments thereto) not later than five (5) Business Days following receipt thereof by Buyer.  Buyer shall not disclose to or solicit any Governmental Body regarding the investigation or remediation of Hazardous Materials identified in Buyer’s Phase I Environmental Assessments or Phase I Environmental and Hazardous Materials Assessments, Phase II Environmental Assessments, or items, reports or conditions identified on Schedule 4.9(a) or 4.9(g) hereof or the documents (or attachments to the documents) referenced on Schedule 4.9(a) or 4.9(g) hereof unless such disclosure is made in response to a written or oral request from a Governmental Body or such disclosure is required by Applicable Law.

6.16           Condemnation.  If prior to Closing all or any portion of the Real Estate Interests is taken or is made subject to eminent domain or other governmental acquisition proceedings, then Seller shall promptly notify Buyer thereof, and on the Closing Date pay to the Buyer all payments received in respect thereto (or to be received after the Closing Date in the event payment has not been made by the applicable Governmental Body prior to the Closing Date); provided, however, that the Buyer shall have the right to terminate this Agreement in the event that the Book Value of the portion of the Real Estate Interests and improvements so taken or

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made subject to eminent domain is in excess of $50,000, unless Seller agrees to pay Buyer the difference between the Fair Market Value of such portion and the condemnation award.

6.17           Exclusion of Non-Core Deposits.  Buyer may, at anytime prior to the Closing, exclude in its sole discretion from the Deposits to be assumed any Non-Core Deposit.  On or before the fortieth (40th) day prior to the Closing Date, Seller shall provide to Buyer a list of all Non-Core Deposits originated on and prior to the date of delivery of such list, and Seller shall send to Buyer a supplemental list (i) on the fifteenth (15th) day prior to the Closing Date and (ii) on the day prior to the Closing Date (prepared as of the close of business on such day), which supplemental lists shall list all Non- Core Deposits originated since the cut-off date of the Non-Core Deposit list most recently delivered to Buyer pursuant to this Section 6.17.  On or before the date that is ten (10) days prior to the Closing Date, Buyer shall deliver to Seller a list of excluded Non-Core Deposits as of such date and shall, no later than 9:00 a.m. on the morning of the Closing, deliver to Seller a final list of all excluded Non-Core Deposits.

6.18           Additions to Loans; Removal of Certain Loans.  Prior to the Closing Date, Buyer may, in its sole discretion, include on Schedule 1.1 any loan, loan participation or Commitment originated by Seller and attributable to the Branches (“New Loan”), whether such New Loan was originated prior to the date hereof and not included on Schedule 1.1 as of the date hereof or originated after the date hereof.  Any such New Loan added to Schedule 1.1 shall be deemed a Loan for purposes of this Agreement.  Buyer will notify Seller on or before the 30th day prior to the Closing Date of any New Loan that Buyer intends to add to Schedule 1.1; provided, however, the Parties agree that New Loans may be added to Schedule 1.1 after the 30th day prior to the Closing Date.  In addition, Buyer may, (i) by the giving of written notice to the Seller at least five (5) Business Days prior to the Closing Date, remove from Schedule 1.1 any Loan that Sel ler determines, in its reasonable good faith judgment, constitutes as of such date or will constitute as of the Closing Date a Non-Conforming Loan, in which case such Non-Conforming Loan shall be deemed removed from Schedule 1.1 and for all purposes of this Agreement shall be deemed to constitute an Excluded Loan, and (ii) by the giving of written notice (the “Special Acceptance Notice”) to Seller at least five (5) Business Days prior to the Closing Date, agree to accept and purchase any Loan that constitutes as of such date or will constitute as of the Closing Date a Non-Conforming Loan, in which case such Non-Conforming Loan shall be deemed to be a Loan for all purposes of this Agreement and included on Schedule 1.1 (it being understood that Seller has the right to sell, without Buyer’s conse nt, to any third party any Excluded Loan that was originated prior to the date hereof as contemplated by Section 6.5 hereof unless Buyer shall have delivered a Special Acceptance Notice with respect thereto prior to the date Seller shall have agreed to sell such Excluded Loan to such third party).  Notwithstanding anything to the contrary contained herein, any Non-Conforming Loan that Buyer accepts pursuant to the Special Acceptance Notice shall remain subject to the provisions of Section 2.6 from and after the Closing Date to and including the Cut-Off Date, and Buyer shall have the right, at its election, to put back to Seller such Non-Conforming Loan during such period pursuant to the provisions of Section 2.6.

6.19           Subordination, Non-Disturbance and Attornment Agreements.  Seller shall use its Commercially Reasonable Efforts to obtain subordination, non-disturbance and attornment

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agreements (“SNDAs”) from the Landlord’s lenders holding mortgages, deeds of trust or other liens against the Leased Real Property superior to the applicable Leases (except that no such SNDA shall be required for any such Lease which is, as of the date hereof, subject to an SNDA affording customary non-disturbance protection and which contains successor and assigns provisions entitling Buyer to enjoy, as reasonably determined by Buyer upon the advice of counsel, the benefits thereof upon the assignment to Buyer of such Lease), which SNDAs shall be on forms provided by Landlord’s lenders; provided, however, that Buyer may , at its sole cost and expense, elect to negotiate SNDAs on forms other than those provided by the Landlord’s lenders.

6.20           Assumption of IRA and Keogh Account Deposits.

(a)           With respect to Deposits in IRAs, Seller will use Commercially Reasonable Efforts and will cooperate with Buyer in taking any action reasonably necessary to invite depositors of IRAs to accomplish the appointment of Buyer as successor custodian of all such IRA deposits (except self-directed IRA deposits), including, but not limited to, sending to the depositors thereof appropriate notices, cooperating with Buyer in soliciting consents from such depositors, and filing any appropriate applications with applicable Governmental Bodies.  The expenses payable to third parties associated with Buyer’s efforts to assume IRAs shall be borne by Buyer.

(b)           With respect to Deposits in Keogh Accounts, Seller shall use Commercially Reasonable Efforts and cooperate with Buyer to invite depositors thereof, at Buyer’s sole expense, to direct a transfer of each such depositor’s Keogh Account and the related Deposits to Buyer (or an Affiliate of Buyer), as trustee thereof, and to adopt Buyer’s (or such Affiliate’s) form of Keogh Master Plan as a successor to that of Seller.  Buyer (or such Affiliate) will not be required to assume a Keogh Account unless Buyer (or such Affiliate) has received the documents reasonably necessary for such assumption at or before the Closing.  With respect to any owner of a Keogh Account who does no t adopt Buyer’s form of Keogh Master Plan, Seller will use Commercially Reasonable Efforts in order to enable Buyer (or such Affiliate) to retain such Keogh Accounts at the Branches.  The expenses payable to third parties associated with Buyer’s efforts to assume Keogh Accounts shall be borne by Buyer.

(c)           If, notwithstanding the foregoing, as of the Closing Date Buyer shall be unable to retain deposit liabilities in respect of an IRA or Keogh Account, such deposit liabilities, which shall be set forth on Schedule 6.20(c) and delivered on, and prepared as of, the Closing Date, shall be excluded from Deposits for purposes of this Agreement and shall constitute “Excluded IRA/Keogh Account Deposits.”

6.21           Naperville Branch.  Buyer shall have the right, by the giving of written notice to Seller at least thirty (30) days prior to the Closing Date, to reject and exclude from the Acquisition the Branch located at 3020 State Route 59 in Naperville, Illinois (the “Naperville Branch”), in which case the Owned Real Property and all other Leased Real Properties associated with the Naperville Branch shall be excluded from the Acquisition and the Payment

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Amount shall be reduced accordingly.  Buyer agrees to assume the Deposits for the Naperville Branch subject to Buyer’s or Seller’s ability to satisfy all applicable regulatory requirements.

6.22           Post-Signing Selection of Certain Excluded Tangible Personal Property.  Not later than thirty (30) days following the execution and delivery hereof, Buyer shall have the right, by the giving of written notice to Seller, to select for purchase at net book value by Buyer at the Closing any item of Excluded Tangible Personal Property described in clause (B) or (C) of Section 2.1(b)(i).  In the event that Buyer selects to purchase any such Excluded Tangible Personal Property, Buyer and Seller shall enter into an amendment of this Agreement, including an amendment to Schedule 2.1(b)(i) hereof, for purposes of including the Excluded Tangible Personal Property so selected by Buyer pursuant to such notice among the Acquired Assets to be purchased hereunder.

ARTICLE 7

POST-CLOSING COVENANTS

7.1           Continued Cooperation.  The Parties agree in case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as the other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless such expense is otherwise allocated in this Agreement or the requesting Party is entitled to indemnification therefore under Article 11 below).

7.2           Transitional Matters Concerning Deposits.

(a)           Following the Effective Time and without limiting the generality of the other provisions of this Agreement, Buyer will pay in accordance with law, customary banking practices, and the respective terms of the Deposits and related Acquired Contracts all properly drawn and presented checks, drafts and withdrawal orders (including, in all cases under this Section 7.2, transactions initiated with debit cards used by the Branches) with respect to the Deposit accounts presented to Buyer by mail, over the counter, through the check clearing system of the banking industry or any other method of general acceptance within the banking industry, whether such checks, drafts and withdrawal orders are on forms provide d by Buyer or Seller, and in other respects to discharge, in the usual course of the banking business, the duties and obligations of Seller with respect to the Deposits.

(b)           Buyer agrees, at its cost and expense, to assign new account numbers effective as of the Effective Time to all deposits of the Branches assumed by Buyer pursuant to the terms of this Agreement and to furnish such depositors with checks on the forms of Buyer, and to instruct such depositors to utilize Buyer’s newly furnished checks, drafts and withdrawal order forms and cease using Seller’s checks, drafts and withdrawal forms previously supplied by Seller.

(c)           Seller agrees that it will reimburse Buyer for the amount of any uncollectible check, draft, or withdrawal order drawn on a Deposit to the extent such

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amount is incurred by Buyer as a result of any failure by Seller after the Closing Date to expeditiously return, revoke any prior settlement of, give notice of dishonor or nonpayment of, or otherwise reject, before the applicable midnight deadline or other applicable deadline, any check, draft or withdrawal order drawn on Seller with regard to the deposit account and presented to Seller before the Closing Date, that is not properly payable due to insufficient funds in the applicable deposit account, an outstanding stop payment order, or a forged check. Should any of the Branches “due from” accounts be charged any sums with respect to any of the Deposits by reason of a forged endorsement or otherwise (hereinafter the “Reclaimed Amount”), then Buyer as assignee of such Deposit shall forthwith upon request by Seller assert a right of setoff against such Deposit for the whole amount of the Reclaimed Amount or such portion thereof that may be on deposit with Buyer in such Deposit account from time to time, and shall remit such sums to Seller forthwith thereafter, in accordance with this Section 7.2.

(d)           Buyer agrees that it will reimburse Seller for the amount of any uncollectible check, draft, or withdrawal order drawn on a Deposit to the extent such amount is incurred by Seller as a result of any failure by Buyer after the Closing Date to expeditiously return, revoke any prior settlement of, give notice of dishonor or nonpayment of, or otherwise reject, before the applicable midnight deadline or other applicable deadline, any check, draft or withdrawal order drawn on Seller with regard to the Deposit account and presented any date after the Closing Date, that is not properly payable due to insufficient funds in the applicable deposit account, an outstanding stop payment order or otherwise.

(e)           With respect to any Deposit that has a negative balance as of the close of business on the Closing Date due to an overdraft caused by Seller’s final payment and settlement, on or before the Closing Date, of one or more checks, drafts or other items drawn against such account, other than any Deposit account that has been excluded as an asset or liability being acquired or assumed under the terms of this Agreement (the “Overdraft Items”), which negative balance continues to exist at the close of business on the fifth day after the Closing Date after exercise by Buyer of any setoff rights of which Buyer is aware, Buyer shall be entitled to reimbursement in immediately available funds fro m Seller for the amount of any such negative balance of which Buyer gives Seller notice within fifteen (15) days after the Closing Date.  Thereafter, Buyer shall continue as Seller’s agent, for a period of sixty (60) days after the Closing Date, or such shorter period as Seller shall request, to assert set off rights and promptly forward the amount set off to Seller in immediately available funds.  Buyer shall immediately deliver to Seller all Overdraft Items in Buyer’s possession (if any) for which it demands reimbursement and any payments or amounts received in respect thereof from time to time, and Seller shall be vested with all rights, title and interest in, to and in connection with such Overdraft Items which Buyer otherwise would have had, and Seller shall be entitled to enforce and collect all rights, remedies, claims, and causes of action against all persons and entities, including, without limitation, the drawer and depositor(s) which Seller or Buyer shall have or wo uld have had in connection with the Overdraft Item.

(f)           Seller and Buyer shall make arrangements to provide for the daily settlement with immediately available funds by Buyer of checks, drafts, withdrawal

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orders, debit card trailing activity and returns presented and paid by Seller for the period between the Closing Date and sixty (60) days following the Closing Date drawn on or chargeable to accounts in respect of Deposits assumed by Buyer hereunder; provided, however, Seller shall be held harmless and indemnified by Buyer for funds not reimbursed by Buyer for Seller acting in accordance with such arrangements. Buyer shall be responsible for any costs incurred for courier or overnight shipping of information related to the daily settlements.  At any time prior to the expiration of the sixty (60) days referenced herein, Seller shall discontinue such payments on behalf of Buyer upon written request by Buyer. Any checks, drafts, withdrawal orders, trailing debit card activity and returns presented to Seller following the expiration of the sixty (60) day period, shall be returned by Seller.

(g)           Starting on the Business Day following the Closing Date or as otherwise expressly agreed by the Parties, Seller, at its expense, shall notify all Automated Clearing House (“ACH”) originators of the transfers and assumptions and retention of deposits made pursuant to this Agreement by sending a notification of change (NOC) as transactions are presented; provided, however, that Buyer may, at its option, notify all such originators itself (on behalf of Seller), also at Seller’s expense.  For the sixty (60) day period immediately following the Closing Date, Seller will, without any obligation to investigate the accuracy of such request or the balance in the accuracy of such request or the balance in the underlying account, honor all ACH items related to accounts assumed under this Agreement that are routed or presented to Seller, and Buyer will reimburse Seller for all such ACH payments on a daily basis.  Seller will not charge any fee to Buyer for honoring such items and will electronically transmit such ACH to Buyer.  If Buyer cannot receive such electronic transmissions, Seller will make available to Buyer, at Seller’s operation center, receiving items from the ACH tapes containing such ACH data.  Following the sixty (60) day period referenced herein, Seller will not honor any ACH item presented to Seller unless Buyer has requested that Seller extend the time for clearing ACH items.  Upon such request, in the event that Seller agrees to such an extension of time, Buyer shall pay Seller a One Dollar ($1.00) fee per transaction cleared during the extension period and Buyer and Seller must agree, in writing, to the duration period; provided, however, any extension period will not be greater than sixty (60) days. If no extension period is agreed to by the Parties, items mistakenly routed or presented to Seller after the sixty (60) day period will be returned to the presenting party.  At any time prior to the initial sixty (60) days or prior to the ending date of any extension period, Seller shall discontinue honoring ACH items upon the written request of Buyer.

(h)           On the Closing Date, Seller shall provide Buyer with a written listing and electronic data file of each stop payment order, tax lien, levy, garnishment, pledge, guardianship agreement, or other hold or restriction then in effect with respect to any of the Deposits (the “Holds”), and Buyer shall honor and comply with the terms of all valid Holds described in the above list.  If, following receipt of such list, Buyer makes any payment in violation of any such Hold, then it shall be solely liable for such payment and shall indemnify, hold harmless, and defend Seller from and against all claims, losses and liabilities, including reasonable attorneys’ fees and expenses, arising o ut of any such payment.  In the event that Buyer shall make any payment in violation of a Hold initiated prior to the Closing Date but not reflected in the above list, then Seller shall be solely

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liable for such payment and shall indemnify, hold harmless and defend Buyer from and against all claims, losses, and liabilities, including reasonable attorneys’ fees and expenses, arising out of any such payment.

(i)           On the Closing Date, Seller shall cycle, prepare and pay all accrued interest for each checking, savings or money market account constituting a Deposit.  Seller shall mail such closing statements within five (5) Business Days following the Closing Date, and contemporaneously therewith provide Buyer with a true and correct copy thereof.  Interest on time deposits shall be accrued and included in the data conversion files.

(j)           Within thirty (30) days from this Agreement, Seller and Buyer shall establish a mutually agreeable post-conversion trailing activity process for settlement of converted account activities relating to trailing transactions.

7.3           Transitional Matters Concerning Loans.  As soon as reasonably practicable following the Closing, Buyer, at its expense, will issue new coupon or payment books for the Loans and will instruct customers to destroy any coupons furnished by Seller; Buyer will also notify customers of any applicable change in terms and provide Buyer’s information for payment remittance.  For a period of sixty (60) days following the Closing, Seller will forward to Buyer on a daily basis all loan payments received by Seller, in the form received by Seller, or as established in the post-conversion activity process referenced in Section 7.2(i).  After such sixty day period, Seller will forward any loan payments received on a weekly basis.

7.4           Transitional Matters Concerning Real Estate Interests.  For a period of sixty (60) days following the Closing, Seller will forward to Buyer on a daily basis all material correspondence, notices, documents or other instruments received by Seller relating to the Real Estate Interests within two (2) Business Days following receipt thereof.  After such sixty (60) day period, Seller will forward any such material correspondence, notices, documents or other instruments received on a weekly basis.

7.5           Transfer of Books and Records.  As soon as commercially reasonable following the Closing Date, but in no event later than five (5) Business Days after the Closing Date, Seller shall provide the following documents which are in possession of Seller in connection with or relating to the Acquired Assets and the Assumed Liabilities (the “Books and Records”):

(a)           Loan Documents and Records:

(i)           Originals (or in alternative form, if originals are unavailable) of all documents retained by Seller in its Ordinary Course of Business or otherwise in its possession evidencing or supporting each Loan, including recorded mortgages and deeds of trust, recorded assignments, promissory notes, loan applications, loan closing statements, extension agreements, financing statements, security agreements, loan agreements, guaranties and guaranty agreements, loan commitments, letters of credit, title insurance commitments and policies, environmental survey reports, flood certifications, borrower financial statements, motor vehicle and trailer titles, appraisals, evidence of receipt by the debtor or

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mortgagor of disclosure statements, material correspondence, all default notices given or received and any notices from a Governmental Body; and

(ii)           An electronic database (or paper records, if an electronic database is not available) reflecting the payment history, balances and other relevant information respecting all Loans.

(b)           Deposit Records:  Originals (or an alternative form, if originals are unavailable) of all documents retained by Seller in its Ordinary Course of Business or otherwise in its possession evidencing or supporting each Deposit, including signature cards, taxpayer identification number certifications, deposit account agreements, account opening documentation, and trust or other legal documentation gathered as supporting evidence of authorization to establish a Deposit account.

(c)           Other Records:  Originals (or an alternative form, if originals are unavailable) of all documents retained by Seller in its Ordinary Course of Business or otherwise in its possession that may be reasonably related to the Acquired Assets or the operation of the Branches that are located on the Branch premises either in paper or electronic form, including investment customer records, safe deposit records, currency transaction reports, suspicious activity reports, and debit card transaction records and, including, without limitation, all notices given or received in connection with any Real Estate Interest.

(d)           Buyer Review of Records:  Within one hundred eighty (180) days of receipt of such records by Buyer, Buyer shall notify Seller of any deficiencies in the information provided.  Seller will cure such deficiencies at Seller’s expense.  For requests more than one hundred eighty (180) days after Seller has provided such records to Buyer, Seller will permit Buyer, for reasonable cause, at Buyer’s expense, to examine, inspect, copy and reproduce files, documents or records retained by Seller relating to the assets and liabilities transferred under this Agreement.

(e)           Form of Records:  Buyer acknowledges that some of Seller’s documents (except with respect to the Loans, as to which Seller’s representations and warranties contained in Section 4.10(d)(vii) apply) and records may be available only in the form of photocopies, file copies or other non-original and non-paper media, and represents and warrants to Buyer that the failure to provide Buyer with such originals will not result in any material diminution in value of the asset or other item as to which such non-original shall relate.

7.6           Electronic Records, Conversion, and Servicing.

(a)           From and after the Effective Time, Buyer shall service customer account inquiries and other third party requests for historical information owned by Seller and transferred to Buyer in a physical or electronic form on or after the Closing Date (the “Transferred Records”).

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(b)           From and after the Effective Time, each party to this Agreement agrees to cooperate with the other party in responding to any reasonable request for information regarding or contained in the Books and Records.  Buyer shall make available the Transferred Records and Seller shall make available the retained records, for inspection by the other Party, as applicable, during normal business hours of each, after reasonable prior notice, and each Party may, at their respective expense, have copies made of excerpts from the retained records or the Transferred Records, as each may deem necessary.  The requesting Party shall be responsible for any expenses relating to such request, including reasonable research fees charged by the other Party; provided, however, that Buyer shall not be responsible for any such expenses incurred by Seller pursuant to this provision until sixty-one (61) days or more after Closing.

(c)           From and after the Effective Time, Buyer and Seller each agrees to permit the Governmental Bodies with authority over Buyer or Seller, as the case may be, to access the Books and Records of which Buyer or Seller has custody, after the Closing Date, and to use, inspect, make extracts from or request copies of any such records in the manner and to the extent requested, and to duplicate, in the discretion of such Governmental Bodies, any record in the form of microfilm or microfiche pertaining to such Books and Records.

(d)           From and after the Effective Time, Buyer shall not destroy any of the Transferred Records unless Buyer complies with the retention requirements of applicable law or it receives the prior consent of Seller. Seller shall not destroy, or allow the destruction of any of the retained records, unless Seller complies with the retention requirements of applicable law or it receives the prior consent of Buyer.  If requested by Seller, the Transferred Records shall be delivered to Seller in lieu of being destroyed.

7.7           Tax Reporting Obligations.

(a)           Seller will report to applicable taxing authorities and holders of Deposits, with respect to the period from January 1 of the year in which the Closing occurs through the Closing Date, all interest (including dividends and other distributions with respect to money market accounts) credited to, withheld from and any early withdrawal penalties imposed upon the Deposits.  Buyer will report to the applicable taxing authorities and holders of Deposits, with respect to all periods from the day after the Closing Date, all such interest credited to, withheld from and any early withdrawal penalties imposed upon the Deposits.

(b)           Any amounts required by any governmental agencies to be withheld from any of the Deposits through the Closing Date will be withheld by Seller in accordance with applicable law or appropriate notice from any governmental agency and will be remitted by Seller to the appropriate agency on or prior to the applicable due date.  Any such withholding required to be made subsequent to the Closing Date will be withheld by Buyer in accordance with applicable law or appropriate notice from any governmental agency and will be remitted by Buyer to the appropriate agency on or prior to the applicable due date.

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(c)           Within five (5) calendar days after the date hereof, Seller shall provide Buyer in an electronic format a file setting forth (i) the names, addresses, account numbers and federal tax identification numbers of each holder of Deposits for which Seller has received a certification of such holder’s tax identification number, and (ii) the names, addresses and account numbers of each holder of Deposits which is subject to back-up withholding.

(d)           Within five (5) calendar days after the Closing Date, Seller shall deliver to Buyer all original forms, records and documents in its possession (or copies thereof if originals are not in Seller’s possession) regarding tax identification number certification and back-up holding requests, including, without limitation, all Forms W-8 and Forms W-9 related to the Deposits, provided that Seller shall be entitled to retain a copy of all such forms, records and documents for its files.

(e)           Seller shall be responsible for delivering to payees all IRS notices with respect to information reporting and tax identification numbers required to be delivered through the Closing Date with respect to the Deposits, and Buyer shall be responsible for delivering to payees all such notices required to be delivered following the Closing Date with respect to the Deposits.

(f)           Seller will make all required reports to applicable taxing authorities and to obligors on Loans purchased on the Closing Date, with respect to the period from January 1 of the year in which the Closing occurs through the Closing Date, concerning all interest and points received by Seller.  Buyer will make all required reports to applicable taxing authorities and to obligors on Loans purchased on the Closing Date, with respect to all periods from the day after the Closing Date, concerning all such interest and points received.

7.8           Credit Life Insurance Refunds.  Seller, or its successor, agrees to refund to Buyer the portion of premiums on the accident and health insurance and/or credit life insurance (the “Insurance”) that may be required to be refunded by banking and insurance regulations on the Loans transferred by Seller to Buyer upon presentation on a monthly basis by Buyer of such premium refunds.  This Section 7.8 shall survive until all Loans upon which the Insurance has been purchased shall mature. &# 160;Buyer shall have all legal rights under Missouri law or Illinois law, as applicable, including the right to recoup legal fees incurred, in collecting such funds from Seller or its successor.

7.9           Non-Solicitation of Employees.  From the date hereof until the Closing Date, Seller and its Affiliates shall not relocate, or agree to relocate, any Potential Employee to another branch or office of Seller or any Affiliate of Seller unless Buyer has notified Seller that Buyer does not intend to make an offer of employment to such Potential Employee.  From and after the Closing, and for a period of four (4) years following the Closing Date, Seller and its Affiliates and their respective successors and assigns shall not directly or indirectly hire any Retained Employee, without the prior consent of Buyer, unless such person’s employment was terminated by Buyer.

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7.10           Non-Solicitation of Business.  In consideration of the purchase of the Acquired Assets and the assumption of Assumed Liabilities by Buyer, neither Seller nor its Affiliates (including the directors, officers, employees or principal shareholders), successors or assigns will, for a period of four (4) years after the Closing Date, solicit or service, on behalf of itself or others, deposits, loans, brokerage, credit or debit or prepaid card, or other business from customers whose Deposits are assumed or whose Loans, safe deposit or any other business are acquired by Buyer hereunder; provided, however, that nothing contained in this Section 7.10 shall be deemed to prohibit general solicitations in major metropolitan (i) newspapers, (ii) television or (iii) radio and not specifically directed or targeted to customers of the Branches, but no direct mail or local market solicitation or advertising shall be permissible.  Notwithstanding the provisions of this Section 7.10 and subject to the provisions of Section 7.11(d) hereof, Seller or any Affiliate thereof may (X) continue to engage in all customary communications, including distribution of loan solicitations and loan promotional materials, with and service any former customers of the Branches with whom Seller or any Affiliate thereof maintains a banking, lending, brokerage or other financial relat ionship on the date hereof not otherwise prohibited by the terms of this Agreement after the Closing Date, (Y) maintain an office and employees for the purposes of servicing any non-performing loan originated prior to the date of this Agreement or any other Commitment, overdraft or other extension of credit that is not a Loan and is originated prior to Closing (in each case which may include renewing, extending the maturity of, or restructuring such extensions of credit), and servicing deposits of the Branches that are excluded as Deposits, and (Z) maintain an office and employees with respect to any Branch that Buyer has excluded from the Acquisition pursuant to Section 6.12, 6.13, 6.15 or 6.21 hereof and is not able to acquire the Depos its of which on the Closing Date due to regulatory requirements.

7.11           Covenant Not to Compete.

(a)           From and after the Closing, and for a period of four (4) years following the Closing Date, Seller and its Affiliates, successors or assigns shall not, and shall not enter into any agreement to, (i) acquire, lease, purchase, own, operate or use any building, office or other facility or premises located within the 100 mile radius of the City of Chicago (the “Geographic Region”) for the purpose of making loans, accepting deposits, cashing checks, issuing credit cards, debit cards, or prepaid cards, or engaging in all of the businesses in which the Branches are engaged at the Closing Date, which shall be deemed to include, without limitation, provision of brokerage, investment and insuranc e services, or (ii) use, authorize, license or permit any other Person to use the name “First Bank” (or any variation thereof) for any purpose within the Geographic Region.  Notwithstanding the foregoing and subject to the provisions of Section 7.11(d) hereof, the Parties agree that (i) Seller may maintain an office and employees for the purposes of servicing any loan, Commitment, overdraft or other extension of credit that is not a Loan and is originated prior to the Closing (which may include renewing, extending the maturity of, or restructuring such extension of credit), and the Loans that are repurchased from Buyer in accordance with Section 2.6 hereof, and servicing deposits of the Branches that are excluded as Deposits, and (ii) maintain an office and employees with respect to any Branch that Buyer has excluded from the Acquisition p ursuant to Section 6.12, 6.13, 6.15 or 6.21 hereof and is not able to acquire the Deposits of which on the Closing Date

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due to regulatory requirements; provided, however, that Buyer agrees that (A) the prohibitions contained in this Section 7.11 shall not be applicable to a Person that is not an Affiliate of the Seller on the date hereof and that becomes the successor in interest to Seller after the Closing Date if such Person’s banking activities at least one (1) year prior to becoming such successor would, upon becoming such successor, result in such successor being in breach of this Section 7.11(a), and (B) the prohibitions contained in this Section 7.11 shall not apply to the asset-based lending activities (and only the asset-based lending activities) of First Bank Business Capital, Inc. (it being understood that nothing contained herein shall limit any covenant not to compete or other restrictive covenant of First Bank Business Capital, Inc. under the ABL Purchase Agreement).  Nothing contained in this Section 7.11 shall be construed to prevent Buyer from seeking and recovering from Seller damages sustained by it as a result of any breach or violation by Seller of the covenants or agreements contained herein.

(b)           It is recognized and hereby acknowledged by the Parties hereto that a breach or violation by Seller of any or all of the covenants and agreements contained in this Section 7.11 may cause irreparable harm and damage to Buyer in a monetary amount which may be virtually impossible to ascertain.  As a result, Seller recognizes and hereby acknowledges that Buyer shall be entitled to an injunction from any court of competent jurisdiction enjoining and restraining any breach or violation by Seller or any of its Affiliates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other rights or remedies Buyer may possess her eunder, at law or in equity.

(c)           The restrictions against competition set forth above are considered by the Parties to be both reasonable and essential to protect the business and goodwill of the Branches being acquired by Buyer pursuant to this Agreement.  If any such restriction is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too broad a range of activities or over too large a geographic area, such restriction shall be interpreted and reformed to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

(d)           The rights of Seller under the last sentence of Section 7.10 and the penultimate sentence of Section 7.11(a) hereof shall be subject to the following limitations:  Not later than sixty (60) days following the Closing Date, Seller shall apply to, and use its Commercially Reasonable Efforts to obtain from, each Governmental Body as shall be necessary to authorize Seller to close the Rejected Branches and any other banking branch maintained by Seller within the Geographic Region for the purpose of (i) engaging in the activities described in clauses (X), (Y) and (Z) of the last sentence of Section 7.10 or (ii) the activities described in the penultimate sentence of Section 7.11(a).  Not later than the later to occur of (A) the date that is one (1) year following the Closing Date and (B) the granting of authorization from the applicable Government Body to close the applicable Rejected Branch or other banking branch within the Geographic Region, Seller shall close such Rejected Branch or other branch and cease conducting such activities.  Nothing contained in this clause (d) shall restrict the Seller seeking another buyer for a Rejected Branch or other banking branch within the Geographic

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Region during the one-year period subsequent to the Closing Date or from maintaining one or more offices within the Geographic Region not open to the general public for banking business in order to administer and wind down the Excluded Assets and the Excluded Liabilities or any other purpose not expressly prohibited by this Agreement.

7.12           Legal Inquiries.  The Parties hereby agree to the following with respect to subpoenas and certain process matters: Following the Closing, Seller will handle and process all civil and criminal subpoenas, IRS summons, court-ordered or government or agency or regulatory demands for documents and all similar legal notices or other information, and all notices, claims, demands of any kind from customers or third parties (collectively, “Subpoenas”) served on Seller prior to the Closing Date that relate to the Acquired Assets or the Deposits.  Following the Closing Date, each party shall use good faith efforts to promptly forward any such Subpoenas that relate to the Acquired Assets or the Deposits to the other party, as applicable, to the following addresses: FirstMerit Bank, N.A., III Cascade Plaza, CAS 81, Akron, Ohio 44308; and shall also send a facsimile of same to (330) 384-7133, Attention: Legal Department, and First Bank, Deposit Services, 600 James S. McDonnell Blvd., Hazelwood, Missouri 63042, Mail Stop M1-199-042, Attention Kurt Eisleben.

7.13           Employment.

(a)           Retained Employees shall be employed by Buyer after the Closing Date upon terms and conditions of employment offered by Buyer as provided by Section 6.7(b) hereof (except as otherwise provided in Section 7.13(b) below).  However, for purposes of Buyer’s defined contribution Employee Pension Benefit Plan (“Buyer’s 401(k) plan”) and any Employee Welfare Benefit Plans (including paid time off (PTO) policies), time of service with the Seller prior to the Closing Date will be credited to the Retained Employees (based on, in the case of a Retained Employee, such person’s date of hire by Seller) for purposes of determining eligibility and calculating vesting (if applicable) to the greatest extent permitted under such plans and applicable law, provided that, for elective benefits, the Retained Employee elects to enroll in the plan on or before thirty-one (31) days from the date such Retained Employee first becomes eligible to participate in the plan.  Each Retained Employee shall be permitted, to the extent permitted by law and the provisions of Buyer’s 401(k) plan, to participate in Buyer’s 401(k) plan and to roll over any eligible rollover contributions into such plan.  Furthermore, to the extent permitted by any applicable insurer, Buyer will waive any pre-existing condition exclusions, evidence of insurability provisions, waiting period requirements or any similar provision under the Buyer’s health benefit plans, provided that the Retained Employee elects to enroll in the plan on or before thirty-one (31) days from the date such Retained Employee first becomes eligible to participate in the plan.

(b)           Notwithstanding anything to the contrary in this Agreement, for the period commencing on the Closing Date and ending at the end of the last day of the calendar month in which the Closing Date occurs, Seller shall, at its expense, continue to provide medical, dental and vision benefits under Seller’s Employee Welfare Benefit Plans to the Retained Employees at the same level provided to such Retained Employees prior to the Closing.

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(c)           Buyer shall have no liability to any current or former employees of Seller and/or its Affiliates for any accrued wages, sick leave, vacation time, pension obligations or any other employee benefits accrued as employees of Seller and/or its Affiliates.  Buyer will have no liability and will not assume obligations under any Employee Pension Benefit Plan or Employee Welfare Benefit Plan sponsored, maintained or contributed to by Seller or its Affiliates or any other obligations (including, without limitation, health continuation coverage, severance obligations, fringe benefit or deferred compensation arrangements, bonus plans, incentive programs, or retiree medical coverage) to the employees or former employees at any of the Branches.  Seller and/or its Affiliates will be solely responsible for fulfilling, and resolving any disputes concerning, its liabilities or obligations (including, without limitation, health continuation coverage, bonus, incentive, severance obligations, fringe benefit or deferred compensation arrangements, bonus plans, incentive programs, or retiree medical coverage) to the employees at the Branches under any such employee benefit plan or with regard to any similar plans, programs, or arrangements.

(d)           Nothing contained herein shall (i) confer upon any former, current or future employee of Seller or its Affiliates or Buyer or its Affiliates or any legal representative or beneficiary thereof any rights or remedies, including, without limitation, any right to employment or continued employment of any nature, for any specified period, or (ii) cause the employment status of any former, present or future employee of Buyer or its Affiliates to be other than terminable at will.

7.14           Removal of Seller’s Name from Signs.  As soon as reasonably practicable following the Closing, but in no event later than thirty (30) days following the Closing Date, Seller shall either remove and discard all signs at the Branches incorporating Seller’s name (or, at the request of Seller in the case of Seller’s logo boxes and channel letter sets, make available for return to Seller such logo boxes and channel letter sets) or cause Seller’s name contained in such signs (other than such logo boxes and channel letter sets, which are to be made available for return to Seller) to be replaced with Buyer’s name.

ARTICLE 8

CONDITIONS TO OBLIGATION TO CLOSE

8.1           Conditions to Obligation of Buyer.  Buyer’s obligation to purchase the Acquired Assets and assume the Assumed Liabilities as provided in Article 2 and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part):

(a)           Buyer and Seller shall have procured all of the Consents (including all Regulatory Approvals) required to consummate the Acquisition (other than any approvals of the Board of Directors, shareholders or lenders of Buyer or Seller as necessary to authorize the Buyer or Seller, as the case may be, to enter into this Agreement and consummate the transactions contemplated hereby, all of which having been obtained prior to the date hereof) and all applicable waiting periods (and any extensions thereof) shall have expired or otherwise been terminated, unless such regulatory approval imposes

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any condition or requirement which in the reasonable judgment of Buyer would materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement or otherwise would in the reasonable judgment of the Buyer be so burdensome as to render inadvisable the consummation of the transactions contemplated by this Agreement.

(b)           The representations and warranties of Seller set forth in Article 3 and Article 4 above shall be true and correct in all material respects (or in all respects, as to any representation or warranty qualified by a standard of materiality) on the date of this Agreement and at and as of the Closing Date (except for representations and warranties made as of a specific date, which shall be true and correct in all material respects (or in all respects, if qualified by a standard of materiality) as of such specific date and except for such breaches of representations and warranties as of the date of this Agreement that have been cured on or prior to the earlier to occur of (i) the 30th day after written notice to the effect of any breach, and (ii) the fifth calendar day prior to the Closing Date).

(c)           Seller shall have performed and complied with all of the covenants and agreements required by the terms hereof to be performed or complied with by Seller on or prior to the Closing Date.

(d)           Buyer shall have received all of the documents described in Section 9.1.

(e)           Subject to the satisfaction of Buyer’s obligations set forth in Section 9.2(c), Seller shall have caused Chicago Title Insurance Company to have irrevocably committed to issue to Buyer title policies in favor of Buyer for each Acquired Owned Real Property in the amount of the Book Value of such Acquired Owned Real Property in accordance with the procedures set forth in Section 6.13, together with endorsements for same as survey zoning (insuring the use of the property as a commercial banking branch and the current us e of the property, if different), comprehensive, contiguity (if applicable), location, access, separate tax lot, subdivision (if applicable), and arbitration deletion, to the extent available in the State of Illinois.

(f)           No court or other Governmental Body of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits or makes illegal the consummation of the transaction contemplated hereby.

(g)           Buyer shall have received Landlord Consents with respect to the Leases (except Leases associated with a Rejected Branch as contemplated by Section 6.12 hereof), which Landlord Consents must be in form and substance reasonably satisfactory to Buyer.

(h)           There shall not have occurred a Seller Material Adverse Effect unless such Seller Material Adverse Effect has been cured on or prior to the earlier to occur of (i) the 30th day after written notice to the effect of any breach and (ii) the fifth calendar day prior to the Closing Date.

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(i)           The Book Value of the Loans included in the Acquired Assets as of the Closing Date shall be not less than $315,000,000 (or $335,000,000 if Buyer shall not have purchased from First Bank Business Capital, Inc. pursuant to the ABL Purchase Agreement at least $100,000,000 at “Par Value” (as defined in the ABL Purchase Agreement) of asset-based loans as determined on the closing date thereunder).

(j)           The Book Value of all Deposits included in the Assumed Liabilities as of the Closing Date shall be not less than $1.0 billion; provided that for purposes of the computation contemplated by this clause (j) 20% of the Deposits of the Rejected Branches shall be excluded.

(k)           Seller will be a “well capitalized” institution pursuant to Federal banking regulations, as determined by Seller in good faith and in consultation with Buyer on a pro forma basis after giving effect to the Acquisition.

(l)           Buyer shall not have excluded from this Acquisition pursuant to the provisions of Section 6.12 (which relates to Landlord Consents), Section 6.13 (which relates to title insurance and land surveys) and Section 6.15 (which relates to environmental liabilities) more than one (1) Branch.

(m)           The employment agreements between Buyer and the persons listed on Schedule 8.1(m), which employment agreements have been executed on or prior to the date hereof and made effective as of the Closing Date, shall remain in full force and effect on and as of the Closing Date and Buyer shall be satisfied that such person intends to honor and not rescind such employment agreement.

(n)           At least eighty percent (80%) of the total number of commercial lenders and business bankers who are Potential Employees to whom Buyer has made an offer of employment shall have accepted Buyer’s offer of employment.

(o)           Seller shall have terminated or amended to Buyer’s satisfaction all agreements and arrangements pursuant to which any other Person is required or permitted to use the name “First Bank” or any variation thereof in connection with issuing credit cards, debit cards, or prepaid cards within the Geographic Region.

(p)           FB Parent shall have delivered to Buyer (i) a guaranty, pursuant to which it shall have guaranteed the obligations of Seller under this Agreement, and (ii) a pledge agreement, pursuant to which it shall have pledged and delivered to Buyer $2,000,000 in cash for a period of two (2) years as collateral security for FB Parent’s obligations under such guaranty, which guaranty and pledge agreement shall be in form and substance reasonably acceptable to Buyer.

(q)           Buyer shall have received the funds, if any, and documents described in Section 9.1 below.

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8.2           Conditions to Obligation of Seller.  The obligation of Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(a)           Buyer and Seller shall have procured all of the Regulatory Approvals required to consummate the Acquisition and all applicable waiting periods (and any extensions thereof) shall have expired or otherwise been terminated.

(b)           The representations and warranties of Buyer set forth in Article 5 above shall be true and correct in all material respects (or in all respects, as to any representation or warranty qualified by a standard of materiality) on the date of this Agreement and at and as of the Closing Date(except for such breaches of representations and warranties as of the date of this Agreement that have been cured on or prior to the earlier to occur of (i) the 30th day after written notice to the effect of any breach, and (ii) the fifth calendar day prior to the Closing Date).

(c)           Buyer shall have performed and complied with all of the covenants and agreements required by the terms hereof to be performed or complied with by Buyer on or prior to the Closing Date.

(d)           Seller shall have received the funds, if any, and documents described in Section 9.2 below.

ARTICLE 9

ITEMS TO BE DELIVERED AT OR PRIOR TO CLOSING

9.1           By Seller.  Seller shall execute and/or deliver, as applicable, to Buyer (or shall have caused to be executed and/or delivered to Buyer) prior to or at the Closing:

(a)           A certificate duly executed by an authorized officer of Seller stating that as of the Closing Date, each of the conditions specified in Section 8.1(a) through Section 8.1(c) are satisfied in all respects;

(b)           A Bill of Sale with respect to the Acquired Assets in a form mutually acceptable to Buyer and Seller;

(c)           Special warranty deeds conveying the Acquired Owned Real Property, together with such instruments and documentation that may reasonably be requested to transfer the Acquired Owned Real Property in a form mutually acceptable to Buyer and Seller;

(d)           Subject to Buyer’s compliance with the provisions of Section 9.2(c) hereof, title policies issued by Chicago Title Insurance Companyin the Book Value of the Acquired Owned Real Property in accordance with the procedures set forth in Section 6.13;

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(e)           Assignment of the Leases in respect of the Leased Real Property in a form mutually acceptable to Buyer and Seller;

(f)           Such other instruments, documents or certificates as may be reasonably requested by Buyer in order to effect or carry out the intent of this Agreement, including a certificate of the Secretary of Seller certifying as to Seller’s corporate authorizations, organizational documents, good standing and the incumbency of the officers of Seller executing the Seller Documents;

(g)           Contents, keys, documents and other records maintained at the Acquired Branches directly pertaining to the safe deposit boxes maintained at the Acquired Branches (whether rented or unrented) as the same may exist as of the close of business on the Closing Date;

(h)           All funds required to be paid to Buyer pursuant to the terms of this Agreement in immediately available funds;

(i)           A certificate of non-foreign status pursuant to Treasury Regulations Section 1.1445-2(b)(2) from Seller;

(j)           For Loans that are a portion of the Acquired Assets:

(i)           The Limited Power of Attorney, attached hereto as Exhibit C; and

(ii)           Endorsement of, or allonge for, the applicable notes; and

(iii)           Execution of any additional assignment documents provided by Buyer pursuant to Section 6.8(b); and

(k)           Such other Acquired Assets as shall be capable of physical delivery.

9.2           By Buyer.  Buyer shall deliver to Seller at or prior to the Closing:

(a)           Any funds required to be paid to Seller pursuant to the terms of this Agreement in immediately available funds;

(b)           A certificate duly executed by an authorized officer of Buyer stating that, as of the Closing Date, each of the conditions specified in Section 8.2(a) through Section 8.2(c) is satisfied in all respects;

(c)           Such other documents or instruments as may be reasonably required by Chicago Title Insurance Company as customarily delivered by buyers (as opposed to sellers or other third parties) in connection with its commitments to issue the title policies described Section 8.1(e) including, without limitation any documents or information required pursuant to any requirements set forth in the title commitments; and

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(d)           Such other instruments, documents or certificates as may be reasonably requested by Seller in order to effect or carry out the intent of this Agreement, including a certificate of the Secretary of Buyer certifying as to Buyer’s corporate authorizations, organizational documents, good standing and the incumbency of the officers of Buyer executing the Buyer Documents.

ARTICLE 10

TERMINATION

10.1           Termination of Agreement.

(a)           The Parties may terminate this Agreement by mutual written consent at any time prior to the Closing Date.

(b)           Buyer may terminate this Agreement by giving written notice to Seller any time prior to the Closing Date (i) in the event Seller has breached any representation, warranty, or covenant contained in this Agreement in any material respect, Buyer has notified Seller of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach, (ii) if the Closing shall not have occurred on or before February 28, 2010, by reason of the failure of any conditions precedent under Section 8.1 (unless the failure results primarily from Buyer breaching any representation, warranty, or covenant contained in this Agreement); or (iii) there shall h ave occurred a Seller Material Adverse Effect and such Seller Material Adverse Effect has not been cured on or before the earlier to occur of (Y) the 30th calendar day following receipt by Seller of written notice from Buyer of a Seller Material Adverse Effect, and (Z) the fifth calendar day prior to the Closing Date.

(c)           Seller may terminate this Agreement by giving written notice to Buyer at any time prior to the Closing Date (i) in the event Buyer has breached any representation, warranty, or covenant contained in this Agreement in any material respect, Seller has notified Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach; (ii) if the Closing shall not have occurred on or before February 28, 2010, by reason of the failure of any condition precedent under Section 8.2 hereof (unless the failure results primarily from Seller breaching any representation, warranty, or covenant contained in this Agreement), or (iii) there sha ll have occurred a Buyer Material Adverse Effect and such Buyer Material Adverse Effect has not been cured on or before the earlier to occur of (Y) the 30th calendar day following receipt by Seller of written notice thereof from Buyer of a Buyer Material Adverse Effect, and (Z) the fifth calendar day prior to the Closing Date.

10.2           Effect of Termination.  If any Party terminates this Agreement pursuant to Section 10.1 above, all rights and obligations of the Parties hereunder shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach); provided, however, that the provisions contained in Section 6.3 (confidentiality) and Section 6.7(f) (n on-solicitation) shall survive termination.

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ARTICLE 11

REMEDIES FOR BREACH OF THIS AGREEMENT

11.1           Survival.  The Parties agree for all purposes of this Agreement that the representations and warranties made by a Party are strictly relied upon by the Party to whom they are made and may be relied upon and enforced by the Party to whom they are made, and shall survive (in accordance with the provisions hereof), regardless of any investigation made or to be made by or on behalf of the Party to whom they are made or whether such Party or its representatives or advisors knew or should have known that such representations and warranties were inaccurate.  All representations and warranties of the Parties contained in this Agreement shall survive the Closing and continue in full force an d effect thereafter for a period of two (2) years following the Closing Date, except for those representations and warranties (a) of Seller (i) contained in Section 4.9 herein, which shall survive the Closing Date for a period of eight (8) years, (ii) contained in Section 4.4 herein, which shall survive the Closing Date for a period of sixty (60) days following the expiration of the statute of limitations (including any extension thereof) for the Taxes giving rise to such claim, and (iii) contained in Sections 3.1, 3.2, 3.3, 3.4, 4.1 and 4.11, which shall survive the Closing Date without end or termination, and (b) of Buyer contained in Sections 5.1, 5.2, 5.3 and 5.4, which shall survive the Closing Date without end or termination, and thereafter neither Party (or other Indemnitee) may claim any Loss in relation to a breach of any representation and warranty made by the other Party hereunder unless a claim for indemnification arising out of such breach shall have been properly made on or prior to such expiry date, in which case the obligation of the Indemnifying Party hereunder to indemnify the Indemnitee hereunder for such claim shall survive until such time as such claim shall have been resolved and fully satisfied. 0; After the end of such expiry period, Seller’s obligation to indemnify the Buyer Indemnitees, and Buyer’s obligation to indemnify the Seller Indemnitees, with respect to such representations and warranties shall expire except with respect to a matter set forth in a claim notice that shall have been properly given on or prior to such expiry date.  It is further agreed by the Parties that each Buyer Indemnitee’s rights to indemnification set forth in clauses (b) through (f) of Section 11.2 hereof, and each Seller Indemnitees rights to indemnification set forth in clauses (b) and (c) of Section 11.3 hereof, shall remain in full force and effect indefinitely; provided, however, that the obligation of Seller to indemnify th e Buyer Indemnities pursuant to Section 11.2(d) hereof on account of an Excluded Liability provided under Section 2.1(d)(ii) hereof shall survive the Closing and remain in full force and effect for a period of eight (8) years following the Closing.  The Parties agree that, notwithstanding anything to the contrary contained herein, the rights and remedies of an Indemnitee on account of the breach of or noncompliance with a representation, warranty, covenant or agreement made herein in favor of such Indemnitee shall not be limited due to the fact that the statement, fact, omission, conduct or occurrence upon which any claim of such breach of or noncompliance with such representation, warranty, covenant or agreement is based shall be the subject of any other representation, warranty, covenant or agreement contained herein that is not breached or inaccurate.

11.2           Indemnification by Seller.  Subject to the provisions of this Article 11, Seller shall indemnify, defend and hold harmless Buyer, its Affiliates and the respective officers, directors, employees, agents and representatives of Buyer and its Affiliates (each of whom may be an Indemnitee pursuant to this Article 11) (collectively, the “Buyer Indemnitees”) from and against, and pay and reimburse each such Buyer Indemnitee for, any and all Losses, whether or not any

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such Losses arise out of any Third Party Claim, directly or indirectly arising out of, from or in connection with:

(a)           any breach of any representation or warranty made by Seller under this Agreement (including in the case of any Third Party Claim any Losses suffered by such Buyer Indemnitee in the event that any third party unrelated to Buyer alleges facts that, if true, would constitute or result in a breach by Seller of any such representation or warranty);

(b)           any default or breach of any covenant, obligation or agreement on the part of Seller under this Agreement (including in the case of any Third Party Claim any Losses suffered by such Buyer Indemnitee in the event that any third party unrelated to Buyer alleges facts that, if true, would constitute or result in a breach by Seller of any such covenant, obligation or agreement);

(c)           any Excluded Asset;

(d)           any Excluded Liability;

(e)           any check or other instrument drawn on or deposited into a Branch Deposit account (i) on or prior to the Closing Date upon which a forgery (signature or endorsement) or alteration claim is asserted against Buyer or as to which a proper endorsement is lacking, or (ii) prior to or after the Closing Date that involves a check kiting scheme that was initiated on or prior to the Closing Date;

(f)           any chargeback occurring after the Closing Date on a Deposit account to the extent that such chargeback exceeds the funds in the account on the date of such chargeback but solely to the extent that such chargeback resulted from a violation of Seller’s expedited funds availability policy in effect on the date such funds were deemed collected on the account (provided that Buyer shall reimburse Seller for any sums so indemnified to the extent that Seller recoups any funds so charged back from subsequent deposits into the Deposit account so transferred); or

(g)           the ownership or operation of the Branches or their business and properties (including the Acquired Assets and the Deposits) on or prior to the Closing Date, but excluding all Assumed Liabilities.

11.3           Indemnification by Buyer.  Subject to the provisions of this Article 11, Buyer shall indemnify, defend and hold harmless Seller, its Affiliates and the respective officers, directors, employees, agents and representatives of Seller and its Affiliates (each of whom may be an Indemnitee pursuant to this Article 11) (collectively, the “Seller Indemnitees”) from and against, and pay and reimburse each such Seller Indemnitee for, any and all Losses, whether or not any such Losses arise out of a ny Third Party Claim, directly or indirectly arising out of, from or in connection with:

(a)           any breach of any representation or warranty made by Buyer under this Agreement (including in the case of any Third Party Claim any Losses suffered by such

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Seller Indemnitee in the event that any third party unrelated to Seller alleges facts that, if true, would constitute or result in a breach by Buyer of any such representation or warranty);

(b)           any default or breach of any covenant, obligation or agreement on the part of Buyer under this Agreement (including in the case of any Third Party Claim any Losses suffered by such Seller Indemnitee in the event that any third party unrelated to Seller alleges facts that, if true, would constitute or result in a breach by Buyer of any such covenant, obligation or agreement);

(c)           any physical damage to Seller’s Real Estate Interests caused by Buyer or its agent in connection with any Phase II Environmental Assessments conducted by Buyer; or

(d)           any of the Acquired Assets or the Assumed Liabilities, except in each case to the extent that indemnification for any thereof would be required by Seller pursuant to Section 11.2.

11.4           Limitations on Indemnity.

(a)           Seller will have no Liability to the Buyer Indemnitees for indemnification for any breach of any of Seller’s representations and warranties pursuant to Section 11.2(a) hereof (i) until the total of all Losses with respect to such matters exceeds $150,000 in the aggregate (the “Loss Threshold”), at which point Seller will be obligated to indemnify the Buyer Indemnitees from and against all such Losses relating back to the first dollar, and (ii) to the extent such Losses shall exceed sixty percent (60%) of the dollar amount of the premium computed on the Closing Date pursuant to Section 2.2(a)(i) hereof (the “Cap”); provided, however, that the obligation of Seller to indemnify the Buyer Indemnitees pursuant to Section 11.2(a) hereof on account of the breach by Seller of any representation and warranty made by Seller pursuant to Sections 3.1, 3.2, 3.3, 3.4, 4.1 (except as to that portion of the representation contained in Sections 4.1 relating to the physical condition of Acquired Tangible Personal Property), 4.10 (to the extent such Losses relate to Excluded Loans), 4.11 and 4.12 hereof shall not be subject to the Loss Threshold or the Cap.  Buyer will have no Liability to the Seller Indemnitees for indemnification for any breach of any of Buyer’s representations and warranties pursuant to Section 11.3(a) hereof (i) until the total of all Losses with respect to such matters exceeds the Loss Threshold, at which point Buyer will be obligated to indemnify the Seller Indemnitees from and against all such Losses relating back to the first dollar, and (ii) to the extent such Losses shall exceed the Cap; provided, however, that the obligation of Buyer to indemnify the Seller Indemnitees pursuant to Section 11.3(a) hereof on account of the breach by Buyer of any representation and warranty made by Buyer pursuant to Sections 5.1, 5.2, or 5.3 hereof shall not be subject to the Loss Threshold or the Cap.

(b)           If an Indemnitee desires to seek indemnification for any Loss for which it is entitled to be indemnified pursuant to this Article 11, such Indemnitee shall deliver written notice of its claim for indemnification to the Party against whom such

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indemnification is being sought, provided, however, no Indemnitee shall be entitled to be indemnified pursuant to Section 11.2(a) or 11.3(a) hereof in respect of the breach of any representation or warranty made by a Party unless the Indemnitee seeking indemnification shall have given such written notice to the indemnifying Party prior to the expiration of the survival period for such representation or warranty as set forth pursuant to Section 11.1 hereof.  Such written notice shall set forth in reasonable detail the basis (to the extent actually known by the Indemnitee) upon which such claim for indemnity is made.  In the event that any such claim is made within such prescribed period, the indemnity relating to such claim shall survive until such claim is resolved and fully satisfied.

(c)           The Buyer Indemnitees may seek payment and full and complete indemnity from Seller in respect of any and all Losses or Third Party Claims under Sections 11.2(b), 11.2(c), 11.2(d), 11.2(e) and 11.2(f), and the Seller Indemnitees may seek payment and full and complete indemnity from Buyer in respect of any and all Losses or Third Party Claims under Sections 11.3(b), 11.3(c) and 11.3(d), and such indemnity shall not be subject to the Loss Threshold or the Cap.

(d)           Notwithstanding anything to the contrary contained in this Agreement, the Parties agree that in the event that there shall arise or exist one or more Pre-Closing Environmental Liabilities for which the Buyer Indemnitees are otherwise entitled to be indemnified pursuant to Section 11.2(d) hereof, Buyer agrees to share with Seller, and remain liable for and not seek from Seller indemnification for, fifty percent (50%) of the first One Million Dollars ($1,000,000) of Losses arising out of all such Pre-Closing Environmental Liabilities unless, with respect to any Pre-Closing Environmental Liability, (i) such Pre-Closing Environmental Liability is attributable or related to a breach or violation of the representations and warranties made by Seller pursuant to Article 4 hereof, (ii) such Pre-Closing Environmental Liability was disclosed on Schedule 4.9(a) or 4.9(g) or in the documents (or attachments to the documents) referred to on Schedule 4.9(a) or 4.9(g), or (iii) such Pre-Closing Environmental Liability was revealed during or in connection with the Phase I Environmental and Hazardous Materials Assessment or Phase II Assessments conducted by Buyer pursuant to Section 6.15 hereof (other than any such Pre-Closing Environmental Liability so revealed on any such assessment to the extent that the remediation costs in respect thereof constitute an Assumed Liability pursuant to Section 2.1(c)(iv) hereof).

11.5           Third Party Claims.

(a)           In no event shall any Indemnifying Party under this Agreement be liable with respect to any Third Party Claim against any Indemnitee unless the following conditions are satisfied:

(i)           Except as provided in clause (ii) of this Section 11.5(a), no right to indemnification under this Article 11 for a Third Party Claim shall be available to an Indemnitee unless the Indemnitee shall have delivered to the Indemnifying Party within the Notice Period a notice describing in reasonable detail the facts (to the extent reasonably known by such Indemnitee) giving rise to such Third Party

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Claim (a “Claim Notice”) and stating that the Indemnitee intends to seek indemnification for such Third Party Claim from the Indemnitor pursuant to this Article 11.

(ii)           If, in the case of a Third Party Claim, a Claim Notice is not given by the Indemnitee within the Notice Period, the Indemnitee shall nevertheless be entitled to be indemnified under this Article 11 except to the extent that the Indemnifying Party can establish that the Indemnifying Party has been actually and materially prejudiced by such time elapsed.

(b)           Upon receipt of a Claim Notice from an Indemnitee with respect to a Third Party Claim and so long as the Indemnifying Party shall have acknowledged in writing its unconditional obligation to indemnify the Indemnitee for all Losses arising out of such Third Party Claim, the Indemnifying Party will have the right, at its expense, to assume and thereafter conduct the defense of the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnitee; provided, however, that the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prio r written consent of the Indemnitee (such consent not to be withheld or delayed unreasonably) unless the judgment or proposed settlement (i) involves only the payment of money damages pursuant to which each plaintiff or other claimant shall have agreed to unconditionally release the Indemnitee from all liability in respect thereof, and (ii) does not impose an injunction or other equitable relief upon the Indemnitee and does not relate to a claim under or related to any Environmental Laws.  The Indemnitee shall have the right to employ separate counsel at such Indemnitee’s expense in connection with any such Third Party Claim and to participate in the defense thereof; provided, however, that the reasonable fees and expenses of counsel employed by the Indemnitee shall be at the expense of the Indemnifying Party if (i) such counsel is retained pursuant to clause (c) of this Section 11.5, (ii) the named parties to any such Third Party Claim include both the Indemnitee and the Indemnifying Party and in the reasonable judgment of the Indemnitee, representation of the Indemnitee and the Indemnifying Party by the same counsel would be inadvisable due to actual or potential differing defenses or counterclaims or conflicts of interests between them, or (iii) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party.  Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume and control (but shall have the right to participate at its own expense in the defense of), and the Indemnitee shall be entitled to have sole control over (with counsel of its own choosing reasonably satisfactory to and at the expense of the Indemnifying Party), the defense or settlement of any Third Party Claim (without prejudicing the rig ht of the Indemnitee to enforce its claim for indemnification against the Indemnifying Party under this Agreement) to the extent such Third Party Claim seeks an order, injunction, non-monetary or other equitable relief against the Indemnitee which, if successful, could result in a material adverse effect upon the business, financial condition, results of operations or assets of the Indemnitee.

(c)           If the Indemnifying Party does not assume the defense of such Third Party Claim within twenty (20) days after receipt of the Claim Notice, the Indemnitee shall have the right (including prior to the time the Indemnifying Party shall have assumed

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such defense), with counsel of its own choosing reasonably satisfactory to and at the expense of the Indemnifying Party, to assume and control the defense of, and settle or agree to pay in full, such Third Party Claim; provided, however, that, so long as the Indemnifying Party has acknowledged in writing its unconditional obligation to indemnify the Indemnitee for such Third Party Claim, the Indemnitee shall not consent to the entry of a judgment or enter into any settlement with respect to such Third Party without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed) unless such Third Party Claim seeks an order, injunction, non-monetary or other e quitable relief against the Indemnitee which, if successful, could result in a material adverse effect upon the business, financial condition, results of operations or assets of the Indemnitee; and, provided, further, that the assumption of the defense of, and the consent to the entry of a judgment or entering into any settlement with respect to, such Third Party Claim as provided in this clause (c) shall be without prejudice to the right of the Indemnitee to enforce its claim for indemnification against the Indemnifying Party under this Agreement.

(d)           Notwithstanding anything to the contrary contained in this Section 11.5, if a Third Party Claim includes or would reasonably be expected to include both a claim for Taxes that are not Excluded Liabilities pursuant to Section 2.1(d) (“Buyer Taxes”) and a claim for Seller Taxes, and such claim for Seller Taxes is not separable from such a claim for Buyer Taxes, Buyer (if the claim for Buyer Taxes exceeds or reasonably would be expected to exceed in amount the claim for Seller Taxes) or otherwise Seller (Seller or Buyer, as the case may be, the “Controlling Party”) shall be entitled to control the defense of such Third Party Claim (such Third Party Claim, a “Tax Claim”).  In such case, the other party (Seller or Buyer, as the case may be, the “Non-Controlling Party”) shall be entitled to participate fully (at the Non-Controlling Party’s sole expense) in the conduct of such Tax Claim and the Controlling Party shall not settle such Tax Claim without the consent of such Non-Controlling Party (which consent shall not be unreasonably withheld, conditioned or delayed).  The costs and expenses of conducting the defense of such Tax Claim shall be reasonably apportioned based on the relative amounts of the Tax Claim that are Seller Taxes and that are Buyer Taxes.

(e)           After the Closing Date, Buyer and Seller shall (i) each cooperate fully with the other as to all Third Party Claims involving them, shall make available to the other, as reasonably requested, all information, records and documents relating to all Third Party Claims involving them and shall preserve all such information, records and documents until the termination of any Third Party Claim involving them, and (ii) make available to the other, as reasonably requested and at the reasonable cost and expense of the requesting party, personnel, agents and other representatives who are responsible for preparing or maintaining information, records or other documents, or who may have particular knowledge, with respect to any Third Party Claim involving them.< /div>

11.6           Losses Computed Without Giving Effect to Materiality.  The determination of whether there shall have occurred a breach of a representation or warranty for which indemnification is available under Section 11.2(a) or 11.3(a), as the case may be, and the amount of any Losses or Third Party Claims for which an Indemnitee is entitled to seek indemnification under such sections, as applicable, shall be made, determined and calculated without regard to

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any material adverse effect or other materiality qualification set forth in the relevant representation or warranty.

11.7           Indemnity Payments Treated as Adjustments to Purchase Price.  Buyer and Seller agree to treat any indemnification payments made by Buyer or Seller pursuant to this Article 11 as an adjustment to the purchase price unless Buyer or Seller receives a written opinion, reasonably satisfactory in form and substance to the other, of a law firm with appropriate experience and expertise to the effect that it is not or is not likely to be permissible to treat such payments in that manner on a federal, state or local income tax return.

11.8           After-Tax Nature of Indemnity Payments.  In the event that pursuant to Section 11.7 the Parties are unable to treat any indemnification payments as an adjustment to the purchase price, any such payment or indemnity required to be made pursuant to Section 11.2 or 11.3 hereof shall include any amount necessary to hold the Indemnitee harmless on an after-tax basis from all Taxes required to be paid with respect to the receipt of such payment or indemnity.  In determining the amount necessary to be added to any payment or indemnity in order to accomplish the foregoing, the parties hereto agree to treat all Taxes required to be paid by any Indemnitee as if such Indemnitee were subject to tax at the highest marginal tax rates (for both federal and state, as determined on a combined basis) applicable to such Indemnitee (or such ultimate taxpayers).

11.9           Third Party Beneficiaries.  All Persons included within the terms “Buyer  Indemnitees” and “Seller Indemnitees” are intended third party beneficiaries of this Article 11 and shall have the right to enforce the benefits intended to be conferred upon each of them under this Article 11 as though they were parties to this Agreement.

ARTICLE 12

MISCELLANEOUS

12.1           Governing Law.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Illinois without giving effect to any choice or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

12.2           Consent to Jurisdiction; Waiver of Jury Trial.

(a)           Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of any State or Federal court sitting in the State and City of Akron, Ohio and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Federal court.  Each of the parties hereto agrees that a final, non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other j urisdictions by suit on the judgment in any other manner provided by law.

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(b)           Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in any State or Federal court sitting in the State and City of Akron, Ohio.  Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by law, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such court.

(c)           Each of the parties hereto irrevocably consents to service of process in the manner provided for notices in Section 12.6 hereof.  Notwithstanding the foregoing, each of the parties hereto shall have the right to serve process in any other manner permitted by law.

12.3           Waiver of Punitive Damages and Jury Trial.

(a)           EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE DEFINITION OF LOSSES, THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO RECOVER PUNITIVE, EXEMPLARY, CONSEQUENTIAL OR SIMILAR DAMAGES IN ANY LAWSUIT, LITIGATION, ARBITRATION OR PROCEEDING ARISING OUT OF OR RESULTING FROM ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(b)           EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(c)           EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVERS SET FORTH IN CLAUSE (a) OF THIS SECTION 12.3, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN SUCH SECTION.

12.4           Successors and Assigns; No Third-Party Rights.  No Party may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other Parties.  This Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the Parties.  Except as otherwise provided in Article 11 hereof, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties any legal or equitable rig ht, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.  This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the Parties to this Agreement and their successors and permitted assigns.

12.5           Entire Agreement; Amendment.  This Agreement and the other documents delivered pursuant to this Agreement at the Closing and the Non-disclosure Agreement constitute the full and entire understanding and agreement between the Parties with regard to the subjects hereof and thereof, and supersede all prior agreements and merge all prior discussions, negotiations, proposals and offers (written or oral) between them, and no Party shall be liable or bound to any other Party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.  In the event of a conflict between the terms and provisions of the Non-disclosure Agreement and the ter ms and provisions of this Agreement, the terms and provisions of this Agreement shall be controlling.

12.6           Notices.  All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, postage prepaid, by telecopier or by national overnight delivery service, and addressed to the intended recipient as set forth below:

If to Seller:	With a Copy to:
Terrance M. McCarthy	Walt G. Moeling, IV, Esq.
President	Bryan Cave, LLP
First Bank	1201 West Peachtree St, NW
135 N. Meramec	Fourteenth Floor
Clayton, Missouri  63105	Atlanta, Georgia  30309
Facsimile:  (314) 854-5690	Facsimile:  (404) 420-0038
and	and
Peter D. Wimmer	B.T. Atkinson, Esq.
Senior Vice President and General Counsel	Bryan Cave, LLP
First Bank	One Wachovia Center
135 N. Meramec, Suite 410	301 S. College Street, Suite 3700
Clayton, Missouri  63105	Charlotte, North Carolina  28202
Facsimile:  (314) 854-4617	Facsimile:  (704) 749-9354

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If to Buyer:	With a Copy to:
FirstMerit Bank, N.A.	Jeffrey M. Werthan, Esq.
Paul G. Greig	Katten Muchin Rosenman LLP
Chairman, President and CEO	2900 K Street, NW, Suite 200
III Cascade Plaza, CAS 80	Washington, DC  20007
Akron, Ohio  44308	Facsimile:  (202) 339-8281
Facsimile:  (330) 384-7271
and	and
Judith A. Steiner, Esq.	Steven C. Schnitzer, Esq.
Executive V.P., Secretary & General Counsel	Katten Muchin Rosenman LLP
FirstMerit Bank, N.A.	2900 K Street, NW, Suite 200
III Cascade Plaza, CAS 80	Washington, DC  20007
Akron, Ohio  44308	Facsimile:  (202) 339-8293
Facsimile:  (330) 384-7271

Any notice given in the manner aforesaid shall be deemed to have been served, and shall be effective for all purposes hereof on the date of its receipt by the party to be notified.  Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth.

12.7           Amendments and Waivers.  Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Party against whom enforcement of any such amendment, waiver, discharge or termination is sought.  No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

12.8           Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.  A signature on a counterpart may be a facsimile or an electronically transmitted signature, and such signature shall have the same force and effect as an original signature.

12.9           Severability.  In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

12.10           Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement.

12.11           Construction.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this

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Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  All plural nouns and pronouns shall be deemed to include the singular case thereof where the context requires, and vice versa.  All pronouns shall be gender neutral unless the context otherwise requires.  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context otherwise requires.  The word “including” shall mean including without limitation.  Whenever the word “indemnification”, “indemnify” or “indemnified” is used herein with respect to any Indemnitee’s right to indemnification (or words of correlative meaning) from an Indemnifying Party hereunder, including as provided in Article 11 hereof or any other Article or Section hereof, then such Indemnitee’s right to “indemnification” or to be “indemnified” (or words of correlative meaning) shall be deemed to include the right to be defended or held harmless, and paid and reimbursed, with respect to such matter or claim or Loss or Liability as to which the word “indemnification” or “indemnified” or “indemnify” shall apply, unless otherwise expressly provided to the contrary.

12.12           Expenses.  Other than expressly provided herein, each Party will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement, filing any regulatory notices or applications, and the Acquisition, including all fees and expenses of agents, representatives, counsel, and accountants.  In the event of termination of this Agreement, the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement by another Party.

12.13           Waiver of Compliance with Bulk Sales Laws.  Buyer and Seller hereby waive compliance by them in connection with the transactions contemplated by this Agreement with the provisions of Article 6 of the Uniform Commercial Code as adopted in states where any of the Acquired Assets are located, and any other applicable bulk sales laws with respect to or requiring notice to any of Seller’s creditors or taxing authorities and any related withholding requirements, in effect as of the date of the Closing.  Seller shall fully indemnify, reimburse and hold harmless Buyer against all Liabilities, damages or expenses which Buyer may suffer or incur due to Seller’s failure to so comp ly.

12.14           Next Business Day.  In the event that either Party is required by this Agreement to perform any action or delivery on a Saturday, Sunday or any holiday observed by the Federal Reserve, such Party may perform the action or delivery on the following Business Day.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written.

FIRSTMERIT BANK, N.A.
By:	/s/	Terrence E. Bichsel
Name:		Terrence E. Bichsel
Title:		Executive Vice President and Chief
		Financial Officer
FIRST BANK
By:	/s/	Terrance M. McCarthy
Name:		Terrance M. McCarthy
Title:		Chairman, President and Chief Executive
		Officer

FIRST AMENDMENT

TO

PURCHASE AND ASSUMPTION AGREEMENT

FIRST AMENDMENT TO PURCHASE AND ASSUMPTION AGREEMENT, dated as of January 5, 2009 (the “Amendment”), by and between FIRSTMERIT BANK, N.A., a national banking association ("Buyer"), and FIRST BANK, a Missouri state chartered bank ("Seller").

RECITALS:

WHEREAS, Buyer and Seller are parties to that certain Purchase and Assumption Agreement, dated as of November 11, 2009 (as amended, modified or supplemented to date, the “Purchase Agreement”); and

WHEREAS, Buyer and Seller desire to further amend the Purchase Agreement, upon the terms provided herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as follows:

Section 1.                      Amendment to Section 2.5(a) of the Purchase Agreement.  Section 2.5(a) of the Purchase Agreement is hereby amended by deleting the proviso at the end of the last sentence of Section 2.5(a) and inserting the following proviso in substitution therefor:

“; provided, however, that unless Buyer shall have otherwise agreed by written notice to Seller, in no event shall the Closing occur prior to February 19, 2010 (the date on which the Closing shall have occurred, the “Closing Date”).”

Section 2.                      Ratification.  Except as expressly amended by this Amendment, the terms, covenants, conditions and agreements of the Purchase Agreement are in all respects ratified and confirmed and, except as amended hereby, shall continue in full force and effect.

Section 3.                      Miscellaneous.  This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.  A signature on a counterpart may be a facsimile or an electronically transmitted signature, and such signature shall have the same force and effect as an original signature.  This Amendment shall be governed by and construed in accordance with the domestic laws of the State of Illinois without giving effect to any choice or conflic t of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

IN WITNESS WHEREOF the parties hereto have executed this First Amendment as of the day and year first above written.

BUYER:
FIRSTMERIT BANK, N.A.
By:	/s/	Terrence E. Bichsel
	Name:	Terrence E. Bichsel
	Title:	Executive Vice President
		and Chief Financial Officer
SELLER:
FIRST BANK
By:	/s/	Terrance M. McCarthy
	Name:	Terrance M. McCarthy
	Title:	Chairman, President and Chief
		Executive Officer

2

SECOND AMENDMENT

TO

PURCHASE AND ASSUMPTION AGREEMENT

SECOND AMENDMENT TO PURCHASE AND ASSUMPTION AGREEMENT, dated as of February 19, 2010 (the “Amendment”), by and between FIRSTMERIT BANK, N.A., a national banking association ("Buyer"), and FIRST BANK, a Missouri state chartered bank ("Seller").

RECITALS:

WHEREAS, Buyer and Seller are parties to that certain Purchase and Assumption Agreement, dated as of November 11, 2009 (as amended by that certain First Amendment, dated as of January 5, 2010, and as further amended, modified or supplemented to date, the “Purchase Agreement”); and

WHEREAS, Buyer and Seller desire to further amend the Purchase Agreement, upon the terms provided herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as follows:

Section 1.                      Amendment to Definition of Deposits Set Forth in Article 1 of the Purchase Agreement.  The definition of Deposits set forth in Article 1 of the Purchase Agreement is hereby amended by deleting clause (c) contained in the proviso thereof and inserting the following in substitution therefor:  “(c) intentionally omitted;”.

Section 2.                      Amendment to Definition of Loans Set Forth in Article 1 of the Purchase Agreement.  The definition of Loans set forth in Article 1 of the Purchase Agreement is hereby amended by deleting the words “(b) overdrafts of less than $1,000 in deposit accounts of the Branches;” and inserting the following in substitution therefor:  “(b) intentionally omitted;”.

Section 3.                      Additional Excluded Tangible Personal Property.  Buyer and Seller hereby agree that the ATM machines specifically listed on Appendix A hereto, together with the encoder machines and the cash advance machines or terminals specifically listed on Appendix B hereto (all such items listed on Appendix A and Appendix B hereto, co llectively, the “Additional Excluded Equipment”), shall be and constitute “Excluded Tangible Personal Property” for all purposes of the Purchase Agreement, and Schedule 2.1(b)(i) to the Purchase Agreement is hereby automatically amended and supplemented to include thereon the Additional Excluded Equipment.

Section 4.                      Additional Acquired Contracts.  Buyer and Seller hereby agree that the contracts listed on Appendix C hereto shall be and constitute “Acquired Contracts” for all purposes of the Purchase Agreement, and Schedule 2.1(a)(vii)(B) to the Purchase Agreement is

hereby automatically amended and supplemented to include thereon such additional Acquired Contracts.

Section 5.                      Amendment to Section 2.1(a)(ix) of the Purchase Agreement.  Section 2.1(a)(ix) of the Purchase Agreement is hereby amended by deleting such Section 2.1(a)(ix) in its entirety and inserting the following in substitution therefor:

“(ix)           all rights of Seller relating to pre-paid expenses (other than, for the avoidance of doubt, any FDIC deposit insurance assessments) associated with the foregoing Acquired Assets or any of the Deposits, as contemplated by Section 2.4 hereof; and”.

Section 6.                      Amendment to Section 2.4 of the Purchase Agreement.

(a)           The first sentence of Section 2.4(b) of the Purchase Agreement is hereby amended by deleting clause (ii) thereof in its entirety and inserting the following words in substitution therefor:  “(ii) intentionally omitted,”.

(b)           The first sentence of Section 2.4(b) is hereby further amended by inserting the following words at the end thereof but immediately before the period, as follows:  “; provided, however, that Buyer and Seller agree that any FDIC deposit insurance assessments, including any pre-paid FDIC deposit insurance assessments, shall not be prorated”.

(c)           Section 2.4(d) is hereby deleted in its entirety and the following is inserted in substitution therefor:

“(d)           intentionally omitted.”

Section 7.                      Reduction in Book Value of Naperville Branch.  Buyer and Seller hereby acknowledge that Buyer has objected to a certain negative covenant in the vesting deed relating to Seller’s owned Branch located in Naperville, Illinois (the “Naperville Branch”).  Accordingly, (i) for purposes of computing the Payment Amount pursuant to Section 2.2(a) of the Pu rchase Agreement, the purchase price of the Acquired Real Property relating to the Naperville Branch shall be reduced by an amount equal to $400,000, and (ii) Buyer hereby waives and terminates its right to exclude any Real Estate Interests from the Acquisition pursuant to the provisions of Section 6.13 of the Purchase Agreement.

Section 8.                      Amendment to Section 8.1 of the Purchase Agreement.   Section 8.1 of the Purchase Agreement is hereby amended as follows:

(a)           Section 8.1(i) of the Purchase Agreement is hereby deleted in its entirety and the following new Section 8.1(i) is inserted in substitution therefor:

“(i)           The Book Value of the Loans included in the Acquired Assets as of the  Closing Date shall be not less than $300,000,000; provided, however, that if the Book Value of the Loans included in the Acquired Assets as of the Closing Date is less than

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$315,000,000 but equal to or greater than $300,000,000 (such deficit, the “Loan Deficit Amount”), then Seller shall pay and deliver to Buyer at the Closing, by wire transfer of immediately available funds to the account of Buyer specified by it in writing, the following amount:  a sum of money equal to the amount of interest that would accrue on a notional amount of principal indebtedness equal to the Loan Deficit Amount over a twenty-seven (27) month period at an interest rate equal to three percent (3.0%) per annum, without compounding and assuming no principal curtailments or repayments during such twenty-seven (27) month period (the “Loan Deficit Adjustment Amount ”).  Buyer and Seller agree that the amount required to be paid to Buyer under this Section 8.1(i) shall be, for purposes of the Closing, estimated based on the estimate of the Book Value of the Loans as set forth in the Estimated Payment Amount Statement (which has been prepared as of January 31, 2010) and that such estimated sum of money (the “Estimated Loan Deficit Adjustment Amount”) shall be reconciled and adjusted as contemplated by Section 2.5(c) hereof on the Supplemental Closing Date.”

(b)           Section 8.1(o) of the Purchase Agreement is hereby deleted in its entirety and the following new Section 8.1(o) is inserted in substitution therefor:

“(o)           Seller shall have ceased any direct or indirect marketing of credit cards, debit cards, or prepaid cards in the Geographic Region under any agreements and arrangements pursuant to which any other Person is required or permitted to use the name “First Bank” or any variation thereof in connection with issuing any credit cards, debit cards, or prepaid cards.”

Section 9.                      Amendment to Section 2.5(c) of the Purchase Agreement.  Section 2.5(c) of the Purchase Agreement is hereby amended by adding the following sentence at the end of Section 2.5(c):

“In addition and in connection with the Supplemental Closing, if the Estimated Loan Deficit Adjustment Amount is higher or lower than the actual Loan Deficit Adjustment Amount, as computed in the same manner contemplated by Section 8.1(i) using the final Book Value of the Loans included on the Final Payment Amount Statement as finally determined pursuant to Section 2.2(c) (such higher or lower amount, the “Final Loan Deficit Adjustment Amount”), then, at the Supplemental Closing, (i) if the Final Loan Deficit Adjustment Amount is higher than the Estimated Loan Deficit Adjustment Amount, Seller shall pay to Buyer the absolute difference thereo f, and (ii) if the Estimated Loan Deficit Adjustment Amount is higher than the Final Loan Deficit Adjustment Amount, Buyer shall pay to Seller the absolute difference thereof, in each case by wire transfer of immediately available funds; provided, however, that in no event shall Buyer be required to pay to Seller under clause (ii) of this sentence an amount that exceeds the Estimated Loan Deficit Adjustment Amount paid to Buyer on the Closing Date.”

Section 10.                      Waiver of Right to Reject Branches Pursuant to Section 6.15, and  Further Amendment to Section 8.1.  Buyer and Seller acknowledge that Buyer conducted environmental assessments of the owned Branches prior to Closing and, under certain circumstances, has the

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right to elect to exclude from the Acquisition certain Branches.  Accordingly, Buyer hereby waives and terminates its right to exclude any Branch (and the Real Estate Interests in respect thereof) from the Acquisition pursuant to the provisions of Section 6.15 of the Purchase Agreement, and to induce Buyer to waive and terminate such rights, the parties hereto agree that Section 8.1 of the Purchase Agreement is hereby amended by inserting at the end thereof the following new clause (r):

“(r)           Seller shall pay and deliver to Buyer at the Closing, by wire transfer of immediately available funds to the account of Buyer specified by it in writing, $493,570.00 (the “Environmental Remediation Amount”) as compensation for the environmental conditions revealed in the Phase I Environmental and Hazardous Materials Assessment reports and the Phase II Environmental Assessment reports prepared by Buyer’s consultant pursuant to Section 6.15 with respect to the owned Branches listed on Exhibit A hereto and identified thereon as: (i) Zion Branch, (ii) Villa Park Branch, (iii) West 47th Street Branch and (iv) Lee Street Main Branch.”

Section 11.                      Amendment to Article 7 of the Purchase Agreement.  Article 7 of the Purchase Agreement is hereby amended by inserting at the end thereof the following new Sections:

“7.15           Certain Environmental Remediation Matters.  On the Closing Date, Seller is delivering to Buyer the Environmental Remediation Amount.  Buyer shall use the Environmental Remediation Amount to pay all costs and expenses (including the costs of site security, oversight, restoration, operation and maintenance plans, OSHA compliance and relocation of employees and equipment, as appropriate) incurred by Buyer to remove and, in Buyer’s good faith and commercially reasonable judgment, otherwise abate, to the extent practicable, the friable asbestos containing materials at the owned Branches listed on Exhibit A hereto and identified thereon as: (i) Zion Branch, (ii) Villa Park Branch, (iii) West 47th Street Branch and (iv) Lee Street Main Branch (collectively, the ”ACM Branches”, and the activities associated with all such removal and abatement activities, the “ACM Abatement Activities”).  Buyer shall use its commercially reasonable efforts to cost-effectively perform the ACM Abatement Activities (which shall include seeking and retaining qualified low-bidder removal contractors) and shall complete the ACM Abatement Activities not later than eight (8) months following the Closing Date; provided, however, that commercially reasonable efforts shall not be deemed to require Buyer to suffer undue business interruptions or other potential adverse effects to its business at the ACM Branches.  Within sixty (60) days after the completion of the ACM Abatement Activities, Buyer shall determine the total costs and expenses incurred or paid by it to complete the ACM Abatement Activities, and if the Environmental Remediation Amount shall exceed the actual costs and expenses so incurred or paid by Buyer, Buyer shall, within two (2) Business Days of such determination, return and deliver to Seller the excess amount by wire transfer of immediately available funds to an account specified by Seller to Buyer in writing.  Buyer agrees to accept the ACM Branches with the Recognized Environmental Conditions at such ACM Branches as identified in the Phase I Environmental and Hazardous Materials Assessments and the Phase II Environmental Assessments produced by Buyer’s consultant pursuant to Section 6.15 (the “ACM

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Branches Reports”) and agrees that, notwithstanding anything to the contrary contained herein and except for the payment by Seller to Buyer of the Environmental Remediation Amount, Seller shall have no Liability to Buyer for, and Buyer shall release, indemnify, defend and hold harmless Seller for, from and against, Liability (including the costs of site security, oversight, restoration, operation and maintenance plans, OSHA compliance and relocation of employees and equipment, as appropriate) associated with or relating to, the remediation or abatement of the following (other than any Liabilities associated with or relating to any violation or noncompliance with Applicable Law (including Environmental Law) or any Proceeding, in any case to the extent arisin g out of or relating to any act, event, condition or other circumstance occurring or attributable to any period prior to the Closing):  (i) the Recognized Environmental Conditions (or any other environmental conditions) that were identified in the ACM Branches Reports, including the remediation of the underground storage tank at the above-referenced West 47th Street Branch and any non-friable asbestos, and (ii) any other asbestos or asbestos containing materials at the ACM Branches, whether now known or hereafter discovered (including any asbestos that is discovered during the ACM Abatement Activities by any contractor that is engaged to perform any ACM Abatement Activity).

Section 7.16                      No Marketing of Credit, Debit or Prepaid Cards.  Seller will not directly or indirectly market the issuance of any credit cards, debit cards, or prepaid cards in the Geographic Region under any agreements and arrangements pursuant to which any other Person is required or permitted to use the name “First Bank” or any variation thereof in connection with issuing any credit cards, debit cards, or prepaid cards.”

Section 12.                      Loans to Purchased by Buyer at the Closing.  Attached hereto as Appendix D is a reconciled list of the Loans to be purchased by Buyer at the Closing, after taking into account all New Loans agreed to be purchased by Buyer on or prior to the date hereof and all Non-Conforming Loans to be excluded from the Acquisition as of the date hereof.  Buyer and Seller acknowledge that the line item of “Loans and Accrued Interest on Loans” set forth in the Estimated Payment Amount Statement delivered in connection with the Closing was prepared before Buyer and Seller agreed to the reconciled list of Loans set forth on Appendix D, and Buyer and Seller further agree to defer to the Supplemental Closing procedures any reconciliation or adjustment in the consideration payable under the Purchase Agreement on account thereof.

Section 13.                      Interest Rate Litigation Affecting Certain of the Loans included in the Acquired Assets.   Seller has advised Buyer that DJL Properties, LLC filed on October 20, 2009, on behalf of itself and all persons similarly situated, a class action lawsuit against Seller in the Circuit Court of the Twentieth Judicial Circuit, St. Clair County, Illinois, assigned Case No. 09-L-238, pursuant to which the plaintiffs named therein have claimed, among other things, that Seller has violated certain provisions of law in connection with the manner in which interest is computed under or pur suant to loans made by Seller to such plaintiffs (the “Class Action Lawsuit”).  Seller acknowledges that certain of the Loans to be sold and transferred to Buyer on the Closing Date are, or may be, subject to or affected by the Class Action Lawsuit.  To induce Buyer to consummate the Acquisition on the Closing Date, Seller and Buyer hereby acknowledge, covenant and agree as follows (and the words “indemnify”, “indemnified” and

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“indemnification” as used herein shall have the meanings specified in Section 12.11 of the Purchase Agreement):

(a)           Seller acknowledges, covenants and agrees that (i) the Class Action Lawsuit constitutes an Excluded Liability pursuant to the terms of the Purchase Agreement, and (ii) Seller is required to, and shall, indemnify the Buyer Indemnitees for all Losses directly or indirectly arising out of, from or in connection with such Class Action Lawsuit, in accordance with the terms of the Purchase Agreement;

(b)           Notwithstanding anything to the contrary contained in Article 11 of the Purchase Agreement, and regardless of whether any actual or potential differing defenses or counterclaims or conflicts of interests do not exist between them (as contemplated by Section 11.5(b) of the Purchase Agreement), Seller agrees that if any Third Party Claim is asserted against one or more Buyer Indemnitees in connection with or relating to the Class Action Lawsuit, the Buyer Indemnitees shall have the right, at Buyer’s election by giving written notice to Seller, to select and employ their own separate counsel, at the reasonable cost and expense of Seller provided such counsel shall be reasonably acceptable to Seller, and to assume and control the defense of such Third Party Claim (it being agreed that such Buyer Indemnitees shall not consent to the entry of a judgment or enter into any settlement of such Third Party Claim without the prior written consent of Seller, which consent shall not be unreasonably withheld or delayed, unless such consent is not required as contemplated by Section 11.5(c) of the Purchase Agreement); and

(c)            Buyer has advised Seller that Buyer may (but shall have no obligation to) amend or modify the terms or provisions governing, or take such other action (including the giving of notice) under or with respect to, the Loans that are subject to or affected by the Class Action Lawsuit (the “CAL Loans”) to alter the accrual, calculation or computation of interest thereon and, in connection therewith:

(i)           Seller, on behalf of itself and its current or future Affiliates and successors and assigns and all of their respective officers, directors, members, managers and shareholders (collectively, the “Seller Releasing Parties”), unconditionally, irrevocably and unequivocally waives and fully and forever remises, releases and discharges the Buyer Indemnitees from and against any and all claims, rights, duties, obligations, debts, losses, Liabilities, damages of any nature, expenses, actions, demands, causes of action and suits of every kind and nature, whether known or unknown, fixed or contingent, liquidated or unliquidated , in law or at equity, under statute or otherwise, whether now existing or hereafter arising, resulting from, based upon, arising out of or in connection with Buyer effecting (or proposing to effect) any such amendment or modification to, or taking (or proposing to take) any such other action with respect to, any such Loan;

(ii)           Seller, on behalf of the Seller Releasing Parties, agrees not to institute or participate in any way in any action or cause of action or file, make or assert or participate in the filing, making or assertion of any claim, law suit or

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other legal proceeding against the Buyer Indemnitees on account of Buyer effecting (or proposing to effect) any such amendment or modification to, or taking (or proposing to take) any such other action with respect to, any such Loan;

(iii)           Seller agrees that no such amendment or modification of, or taking of such other actions with respect to, any such Loan so effected or taken (or proposed to be so effected or taken) by Buyer shall have the effect of invalidating, rendering unenforceable, vitiating or otherwise adversely affecting any of the rights or remedies of the Buyer Indemnitees under the Purchase Agreement (including their right to be fully indemnified for any Losses suffered or incurred by the Buyer Indemnitees on account of any Third Party Claim asserted or threatened against the Buyer Indemnitees relating to or with respect to the Class Action Lawsuit);

(iv)           Buyer hereby waives any breach by Seller of its representations and warranties made by it under the Purchase Agreement to the extent such breach arises out of the existence of the Class Action Lawsuit or the claims or allegations asserted against Seller therein; and

(v)           Buyer, on behalf of itself and its current or future Affiliates and successors and assigns and all of their respective officers, directors, members, managers and shareholders (collectively, the “Buyer Releasing Parties”), unconditionally, irrevocably and unequivocally waives and fully and forever remises, releases and discharges the Seller Indemnitees from and against any and all claims, rights, duties, obligations, debts, losses, Liabilities, damages of any nature, expenses, actions, demands, causes of action and suits of every kind and nature, whether known or unknown, fixed or contingent, liquidated or unliquidated, in law or at equity, under statute or otherwise, whether now existing or hereafter arising, resulting from, based upon, arising out of or in connection with Buyer effecting (or proposing to effect) any amendment or modification to, or taking (or proposing to take) any action with respect to, any of the CAL Loans other than those amendments, modifications or actions contemplated by the introductory language of this Section 13(c), provided, however, that the release provided by this Section 13(c)(v) (A) shall relate only to claims arising from or relating to the ownership of the CAL Loans subsequent to the Closing Date to the extent such claims arise out of events or circumstances occurring subsequent to the Closing Date and (B) in any event, shall not relate to any Pre-Closing Event Liability.

(d)           Neither the execution of this Amendment nor any provision or term hereof shall constitute an admission of liability, fault or violation of law on the part of Seller with respect to the allegations in the Class Action Lawsuit or any other matter.  Seller and Buyer acknowledge and agree that (A) Section 13(c) of this Amendment is intended solely to clarify and supplement the indemnification obligations of each party to the Purchase Agreement as they may relate to or arise from the Class Action Lawsuit; (B) the Class Action Lawsuit is believed by both Buyer and Seller to be without merit, (C) the

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method of computing, accruing, and collecting interest on the CAL Loans is believed by Buyer and Seller to be valid,  proper and not in violation of any Applicable law or contractual provision in the documentation evidencing such CAL Loans; and (D) that any amendments, modifications or actions contemplated by the introductory language of  Section 13(c) of this Amendment shall not constitute an admission or accusation by implication by either Seller or Buyer that the method of computing, accruing, and collecting interest on such CAL Loans is in any way improper or violates any Applicable Law.

Section 14.                      Effective Time.  Buyer and Seller agree, as contemplated by Section 2.5(b) of the Purchase Agreement, that the Effective Time shall mean 6:00 p.m. Central Standard Time on the Closing Date.

Section 15.                      Ratification.  Except as expressly amended by this Amendment, the terms, covenants, conditions and agreements of the Purchase Agreement are in all respects ratified and confirmed and, except as amended hereby, shall continue in full force and effect.

Section 16.                      Miscellaneous.  This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.  A signature on a counterpart may be a facsimile or an electronically transmitted signature, and such signature shall have the same force and effect as an original signature.  This Amendment shall be governed by and construed in accordance with the domestic laws of the State of Illinois without giving effect to any choice or confli ct of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

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IN WITNESS WHEREOF the parties hereto have executed this Second Amendment as of the day and year first above written.

BUYER:
FIRSTMERIT BANK, N.A.
By:	/s/	Judith A. Steiner
	Name:	Judith A. Steiner
	Title:	Secretary, Executive Vice
		President and Counsel
SELLER:
FIRST BANK
By:	/s/	Terrance M. McCarthy
	Name:	Terrance M. McCarthy
	Title:	Chairman, President and Chief
		Executive Officer

EX-10 3 ex10_19.htm EXHIBIT 10.19

EXHIBIT 10.19

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

Written Agreement by and among
FIRST BANKS, INC.	Docket Nos. 10-021-WA/RB-HC
St. Louis, Missouri	10-021-WA/RB-SM
THE SAN FRANCISCO COMPANY
Clayton, Missouri
FIRST BANK
Creve Coeur, Missouri
and
FEDERAL RESERVE BANK OF
ST. LOUIS
St. Louis, Missouri

WHEREAS, in recognition of their common goal to maintain the financial soundness of First Banks, Inc., St. Louis, Missouri (“First Banks”), The San Francisco Company, Clayton, Missouri (“SFC”), both registered bank holding companies (collectively, the “Companies”), and their subsidiary bank, First Bank, Creve Coeur, Missouri (the “Bank”), a state chartered bank that is a member of the Federal Reserve System, the Companies, the Bank, and Federal Reserve Bank of St. Louis (the “Reserve Bank”) have mutually agreed to enter into this Written Agreement (the “Agreement”); and

WHEREAS, on March 24, 2010, the boards of directors of the Companies and the Bank, at duly constituted meetings, adopted resolutions authorizing and directing Terrance M. McCarthy to enter into this Agreement on behalf of the Companies and the Bank, and consenting to compliance with each and every applicable provision of this Agreement by the Companies, the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”)(12 U.S.C. §§ 1813(u) and 1818(b)(3)).

NOW, THEREFORE, the Companies, the Bank, and the Reserve Bank agree as follows:

Source of Strength

1.         The board of directors of First Banks shall take appropriate steps to fully utilize First Banks’ financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 225.4(a)), to ensure that the Bank complies with this Agreement and any other supervisory action taken by the Bank’s federal regulator or the Missouri Division of Finance (the “Division”).

Board Oversight

2.         Within 60 days of this Agreement, the board of directors of the Bank shall submit to the Reserve Bank a written plan to strengthen board oversight of the management and operations of the Bank.  The plan shall, at a minimum, address, consider, and include:

(a)        The actions that the board of directors will take to improve the Bank’s condition and maintain effective control over, and supervision of, the Bank’s senior management and major operations and activities, including but not limited to, credit risk management, lending and credit administration, allowance for loan and lease losses (“ALLL”), capital, and earnings; and

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(b)        the responsibility of the board of directors to monitor management’s adherence to approved Bank policies and procedures, and to require management to document exceptions thereto.

Credit Risk Management

3.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan to strengthen credit risk management practices.  The plan shall, at a minimum, address, consider, and include:

(a)        Strategies to minimize credit losses and reduce the level of problem assets;

(b)        enhanced stress testing of loan and portfolio segments; and

(c)        a schedule for reducing and the means by which the Bank will reduce the level of commercial real estate concentrations, and timeframes for achieving the reduced levels.

Lending and Credit Administration

4.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank acceptable revised written credit administration policies and procedures that shall, at a minimum, address, consider, and include:

(a)        Procedures and controls to ensure timely and consistent analyses of borrowers’ and guarantors’ current financial condition, global cash flow, and repayment sources;

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(b)        enhancements to the internal loan grading system to timely and accurately identify individual problem credits; and

(c)        procedures and controls to ensure the consistent adherence to loan grading standards.

Asset Improvement

5.         The Bank shall not, directly or indirectly, extend, renew, or restructure any credit to or for the benefit of any borrower, including any related interest of the borrower, whose loans or other extensions of credit are criticized in the report of examination of the Bank conducted by the Reserve Bank that commenced on July 6, 2009 (the “Report of Examination”) or in any subsequent report of examination, without the prior approval of a majority of the full board of directors or a designated committee thereof.  The board of directors or its committee shall document in writing the reasons for the extension of credit, renewal, or restructuring, specifically certifying that: (i) the Bank’s risk management policies and practices for loan wo rkout activity are acceptable; (ii) the extension of credit is necessary to improve and protect the Bank’s interest in the ultimate collection of the credit already granted and maximize its potential for collection; (iii) the extension of credit reflects prudent underwriting based on reasonable repayment terms and is adequately secured; and all necessary loan documentation has been properly and accurately prepared and filed; (iv) the Bank has performed a comprehensive credit analysis indicating that the borrower has the willingness and ability to repay the debt as supported by an adequate workout plan, as necessary; and (v) the board of directors or its designated committee reasonably believes that the extension of credit will not impair the Bank’s interest in obtaining repayment of the already outstanding credit and that the extension of credit or renewal will be repaid according to its terms.  The written certification shall be made a part of the minutes of the meetings of the board o f directors or its committee, as appropriate, and a copy of the signed certification, together with the credit analysis and related information that was used in the determination, shall be retained by the Bank in the borrower’s credit file for subsequent supervisory review.  For purposes of this Agreement, the term “related interest” is defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. § 215.2(n)).

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6.         (a)        Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan designed to improve the Bank’s position through repayment, amortization, liquidation, additional collateral, or other means on each loan or other asset in excess of $3,000,000, including other real estate owned (“OREO”), that (i) is past due as to principal or interest more than 90 days as of the date of this Agreement; (ii) is on the Bank’s problem loan list; or (iii) was adversely classified in the Report of Examination.

(b)        Within 30 days of the date that any additional loan or other asset in excess of $3,000,000, including OREO, becomes past due as to principal or interest for more than 90 days, is on the Bank’s problem loan list, or is adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank an acceptable written plan to improve the Bank’s position on such loan or asset.

(c)        Within 45 days after the end of each calendar quarter thereafter, the Bank shall submit a written progress report to the Reserve Bank to update each asset improvement plan, which shall include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along with a copy of the Bank’s current problem loan list, a list of all loan renewals and extensions without full collection of interest in the last quarter, and past due/non-accrual report.

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Allowance for Loan and Lease Losses

7.         (a)        The Bank shall, within 30 days from the receipt of any federal or state report of examination, charge off all assets classified “loss” unless otherwise approved in writing by the Reserve Bank.

(b)        Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in the Report of Examination, and submit a description of the revised methodology to the Reserve Bank.  The revised ALLL methodology shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank’s loan grading system, the volume of criticized loans, concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank’s loan portfolio, including adversely classified loans, and the impact of market conditions on loan and collateral valuations and collectibility.

(c)        Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written program for the maintenance of an adequate ALLL.  The program shall include policies and procedures to ensure adherence to the revised ALLL methodology and provide for periodic reviews and updates to the ALLL methodology, as appropriate.  The program shall also provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis.  Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income, by additional provisions.  The board of directors shall maintain written documentation of its review, including the fa ctors considered and conclusions reached by the Bank in determining the adequacy of the ALLL.  During the term of this Agreement, the Bank shall submit to the Reserve Bank, within 45 days after the end of each calendar quarter, a written report regarding the board of directors’ quarterly review of the ALLL and a description of any changes to the methodology used in determining the amount of ALLL for that quarter.

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Capital Plan

8.         Within 60 days of this Agreement, First Banks shall submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at First Banks, on a consolidated basis, and First Banks and the Bank shall jointly submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at the Bank, as a separate legal entity on a stand-alone basis.  These plans shall, at a minimum, address, consider, and include:

(a)        First Banks’ current and future capital needs, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);

(b)        the Bank’s current and future capital needs, including compliance with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);

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(c)        the adequacy of the Bank’s capital, taking into account the volume of classified credits, concentrations of credit, ALLL, current and projected asset growth, and projected retained earnings;

(d)        the source and timing of additional funds to fulfill the consolidated organization’s and the Bank’s future capital requirements; and

(e)        the requirements of section 225.4(a) of Regulation Y of the Board of Governors that First Banks serve as a source of strength to the Bank.

9.         First Banks and the Bank shall notify the Reserve Bank, in writing, no more than 45 days after the end of any quarter in which any of First Banks’ consolidated capital ratios or the Bank’s capital ratios (total risk-based, Tier 1 risk-based, or leverage) fall below the approved capital plan’s minimum ratios.  Together with the notification, First Banks and the Bank shall submit an acceptable written plan that details the steps First Banks or the Bank, as appropriate, will take to increase First Banks’ or the Bank’s capital ratios to or above the approved capital plan’s minimums.

Earnings Plan and Budget

10.        (a)       Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank a revised written business plan for 2010 to improve the Bank’s earnings and overall condition.  The plan, at a minimum, shall provide for or describe:

(i)         a realistic and comprehensive budget for calendar year 2010, including income statement and balance sheet projections; and

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(ii)         a description of the operating assumptions that form the basis for, and adequately support, major projected income, expense, and balance sheet components.

(b)        A business plan and budget for each calendar year subsequent to 2010 shall be submitted to the Reserve Bank at least 30 days prior to the beginning of that calendar year.

Liquidity Funds Management

11.       Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable revised written contingency funding plan that, at a minimum, continues to identify available sources of liquidity and includes adverse scenario planning.

Dividends and Distributions

12.       (a)        The Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director of the Division of Banking Supervision and Regulation (the “Director”) of the Board of Governors.

(b)        The Companies shall not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director.

(c)        The Companies shall not directly or indirectly take dividends or any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank.

(d)        The Companies and their nonbank subsidiaries shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director.

9

(e)        All requests for prior approval shall be received by the Reserve Bank at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities.  All requests shall contain, at a minimum, current and projected information on the Companies’ capital, earnings, and cash flow; the Bank’s capital, asset quality, earnings, and allowance for loan and lease losses; and identification of the sources of funds for the proposed payment or distribution.  For requests to declare or pay dividends, the Companies and the Bank, as appropriate, must also demonstrate that the requested declaration or payment of dividends is consistent with the Board o f Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).

Debt and Stock Redemption

13.       (a)        The Companies and any of their nonbank subsidiaries shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank.  All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

(b)        The Companies shall not, directly or indirectly, purchase or redeem any shares of their stock without the prior written approval of the Reserve Bank.

10

Compliance with Laws and Regulations

14.       In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, the Companies and the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

15.       The Companies and the Bank shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).

Compliance with the Agreement

16.       Within 10 days of this Agreement, First Banks’ and the Bank’s boards of directors shall appoint a joint compliance committee (the “Compliance Committee”) to monitor and coordinate First Banks’ and the Bank’s compliance with the provisions of this Agreement.  The Compliance Committee shall include a majority of outside directors who are not executive officers or principal shareholders of First Banks and the Bank, as defined in sections 215.2(e)(1) and 215.2(m)(1) of Regulation O of the Board of Governors (12 C.F.R. §§ 215.2(e)(1) and 215.2(m)(1)).  At a minimum, the Compliance Committee shall meet at least quarterly, keep detailed minutes of each meeting, and report its findings to the boards of directors o f First Banks and the Bank.

17.       Within 45 days after the end of each calendar quarter following the date of this Agreement, the Companies and the Bank shall submit to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement and the results thereof.

11

Approval and Implementation of Plans, Policies, Procedures, and Program

18.       (a)        The Bank, and where applicable First Banks, shall submit written plans, policies, procedures, and program that are acceptable to the Reserve Bank within the applicable time periods set forth in paragraphs 3, 4, 6(a), 6(b), 7(c), 8, 9, and 11 of this Agreement.

(b)        Within 10 days of approval by the Reserve Bank, the Bank shall adopt the approved plans, policies, procedures, and program. Upon adoption, the Bank shall promptly implement the approved plans, policies, procedures, and program and thereafter fully comply with them.

(c)        During the term of this Agreement, the approved plans, policies, procedures, and program shall not be amended or rescinded without the prior written approval of the Reserve Bank.

Communications

19.       All communications regarding this Agreement shall be sent to:

(a) Mr. Timothy A. Bosch

Vice President

Federal Reserve Bank of St. Louis

P.O. Box 442

St. Louis, Missouri 63166-0442

(b) Mr. Terrance M. McCarthy

President and Chief Executive Officer

First Banks, Inc., The San Francisco Company, and First Bank

135 N. Meramec

Clayton, Missouri 63105

12

Miscellaneous

20.       Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole discretion, grant written extensions of time to the Companies and the Bank to comply with any provision of this Agreement.

21.       The provisions of this Agreement shall be binding upon the Companies, the Bank, and their institution-affiliated parties, in their capacities as such, and their successors and assigns.

22.       Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank.

23.       The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting the Companies, the Bank, any nonbank subsidiary of the Companies, or any of their current or former institution-affiliated parties and their successors and assigns.

13

24.       Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 24 day of March, 2010.

FIRST BANKS, INC.		FEDERAL RESERVE BANK
		OF ST. LOUIS
By:	/s/  Terrance M. McCarthy	By:	/s/  Timothy A. Bosch
			Timothy A. Bosch
			Vice President
THE SAN FRANCISCO COMPANY		FIRST BANK
By:	/s/  Terrance M. McCarthy	By:	/s/  Terrance M. McCarthy

14

EX-21 4 ex21_1.htm EXHIBIT 21.1

EXHIBIT 21.1

First Banks, Inc.

Subsidiaries

(As of December 31, 2009)

The following is a list of our subsidiaries and the jurisdiction of incorporation or organization:

Name of Subsidiary				Jurisdiction of Incorporation or Organization
The San Francisco Company				Delaware
	First Bank			Missouri
		First Land Trustee Corp.		Missouri
		First Bank Business Capital, Inc.		Missouri
		Missouri Valley Partners, Inc.		Missouri
		WIUS, Inc. (1)		Missouri
			WIUS of California, Inc. (2)	California
		Small Business Loan Source LLC		Nevada
		FB Holdings, LLC (3)		Missouri
		ILSIS, Inc.		Missouri
		FBIN, Inc.		Nevada

_______________

(1) Formerly Universal Premium Acceptance Corporation.

(2) Formerly UPAC of California, Inc.

(3) First Bank owned 53.23% of FB Holdings, LLC at December 31, 2009.

EX-31 5 ex31_1.htm EXHIBIT 31.1

EXHIBIT 31.1

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OR RULE 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Terrance M. McCarthy, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 25, 2010

FIRST BANKS, INC.
By:	/s/	Terrance M. McCarthy
		Terrance M. McCarthy
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31 6 ex31_2.htm EXHIBIT 31.2

EXHIBIT 31.2

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OR RULE 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Lisa K. Vansickle, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 25, 2010

FIRST BANKS, INC.
By:	/s/	Lisa K. Vansickle
		Lisa K. Vansickle
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32 7 ex32_1.htm EXHIBIT 32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

I, Terrance M. McCarthy, 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 to the best of my knowledge:

(1) The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2009 (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 25, 2010

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

EX-32 8 ex32_2.htm EXHIBIT 32.2

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

I, Lisa K. Vansickle, 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 to the best of my knowledge:

(1) The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2009 (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 25, 2010

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

EX-99 9 ex99_1.htm EXHIBIT 99.1

EXHIBIT 99.1

First Fiscal Year PEO and PFO Certification

I, Terrance M. McCarthy, certify, based on my knowledge, that:

(i)              Not applicable because the entity serving as the compensation committee (the “Committee”) of First Banks, Inc. (the “Company”) was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(ii)             The Committee has identified and limited during the applicable period any features of the senior executive officer (“SEO”) compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the Company and each entity aggregated with the Company as the “TARP Recipient” as defined in the regulations and guidance established under section 111 of EESA (collectively referred to as the “TARP Recipient”), and during that same applicable period has identified any features of the employee compensation plans that pose risks to the TARP Recipient and has limitedthose features to ensure that the TARP Recipient is not unne cessarily exposed to risks;

(iii)             Not applicable because the Committee was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(iv)            The Committee will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)             The Committee will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in:

(A)            SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the TARP Recipient;

(B)             Employee compensation plans that unnecessarily expose the TARP Recipient to risks; and

(C)             Employee compensation plans that could encourage the manipulation of reported earnings of the TARP Recipient to enhance the compensation of an employee;

(vi)            The TARP Recipient has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), to SEOs and any of the next twenty most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)           The TARP Recipient has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to an SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(viii)          The TARP Recipient has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(ix)             The board of directors of the Company has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP Recipient and Treasury; this policy has been provided to Treasury and its primary regulatory agency; the TARP Recipient and its employees have complied with this policy during the applicable period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)              The TARP Recipient will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xi)             The TARP Recipient will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)            The TARP Recipient will disclose whether the TARP Recipient, the board of directors of the Company, or the Committee has engaged during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)           The TARP Recipient has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xiv)           The TARP Recipient has substantially complied with all other requirements related to employee compensation that are provided in the agreement between the TARP Recipient and Treasury, including any amendments;

(xv)            The TARP Recipient has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)           I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 U.S.C. 1001.)

Date:  March 25, 2010

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

EX-99 10 ex99_2.htm EXHIBIT 99.2

EXHIBIT 99.2

First Fiscal Year PEO and PFO Certification

I, Lisa K. Vansickle, certify, based on my knowledge, that:

(i)              Not applicable because the entity serving as the compensation committee (the “Committee”) of First Banks, Inc. (the “Company”) was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(ii)             The Committee has identified and limited during the applicable period any features of the senior executive officer (“SEO”) compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the Company and each entity aggregated with the Company as the “TARP Recipient” as defined in the regulations and guidance established under section 111 of EESA (collectively referred to as the “TARP Recipient”), and during that same applicable period has identified any features of the employee compensation plans that pose risks to the TARP Recipient and has limitedthose features to ensure that the TARP Recipient is not unne cessarily exposed to risks;

(iii)             Not applicable because the Committee was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(iv)            The Committee will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)             The Committee will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in:

(A)            SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the TARP Recipient;

(B)             Employee compensation plans that unnecessarily expose the TARP Recipient to risks; and

(C)             Employee compensation plans that could encourage the manipulation of reported earnings of the TARP Recipient to enhance the compensation of an employee;

(vi)            The TARP Recipient has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), to SEOs and any of the next twenty most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)           The TARP Recipient has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to an SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(viii)          The TARP Recipient has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(ix)             The board of directors of the Company has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP Recipient and Treasury; this policy has been provided to Treasury and its primary regulatory agency; the TARP Recipient and its employees have complied with this policy during the applicable period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)              The TARP Recipient will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xi)             The TARP Recipient will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)            The TARP Recipient will disclose whether the TARP Recipient, the board of directors of the Company, or the Committee has engaged during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)           The TARP Recipient has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xiv)           The TARP Recipient has substantially complied with all other requirements related to employee compensation that are provided in the agreement between the TARP Recipient and Treasury, including any amendments;

(xv)           The TARP Recipient has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)           I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 U.S.C. 1001.)

Date:  March 25, 2010

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

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EX-2

EXHIBIT 2.1

EXECUTION COPY

PURCHASE AND ASSUMPTION AGREEMENT

BY AND BETWEEN

FIRSTMERIT BANK, N.A.

AND

FIRST BANK

Dated as of November 11, 2009

TABLE OF CONTENTS

Tab

ARTICLE 1 DEFINITIONS			1
ARTICLE 2 PURCHASE AND SALE			15
	2.1	The Acquisition.	15
	2.2	Consideration for the Acquisition.	19
	2.3	Allocation.	22
	2.4	Pro Rata Adjustment and Reimbursement.	23
	2.5	Closing.	24
	2.6	Repurchase of Non-Conforming Loans	25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER			26
	3.1	Organization, Qualification, and Corporate Power	26
	3.2	Authorization of Transaction	26
	3.3	Noncontravention	27
	3.4	Governmental Authorizations	27
	3.5	Brokers’ Fees	27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES CONCERNING THE BRANCHES			27
	4.1	Title; Tangible Personal Property	28
	4.2	Deposits.	28
	4.3	Undisclosed Liabilities	29
	4.4	Tax Matters.	29
	4.5	Employee Benefits	30
	4.6	Compliance with Applicable Laws	30
	4.7	Legal Proceedings; Orders	31
	4.8	Employees.	31
	4.9	Environmental Matters.	32
	4.10	Loans	34
	4.11	Owned Real Property, Leased Real Properties and Tangible Personal Property.	36
	4.12	Leased Real Property	39
	4.13	Acquired Contracts	39
	4.14	Absence of Certain Changes and Events	40
	4.15	Escheat Deposits	41
	4.16	Books and Records.	41
	4.17	Insurance.	41
	4.18	Disclosure.	41

(i)

	4.19	Community Reinvestment Act Designations.	41
	4.20	No Knowledge of Fraud.	42
	4.21	Limitation on Warranties	42
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER			42
	5.1	Organization, Qualification, and Corporate Power	42
	5.2	Authorization of Transaction	42
	5.3	Noncontravention	42
	5.4	Brokers’ Fees	43
	5.5	Legal Proceedings; Orders	43
	5.6	Financial Condition	43
	5.7	Regulatory Condition	43
ARTICLE 6 PRE-CLOSING COVENANTS			43
	6.1	Operation of Business.	44
	6.2	Notice of Potential Material Adverse Effect	46
	6.3	Reasonable Access	46
	6.4	Press Releases	47
	6.5	Exclusivity	47
	6.6	Regulatory Matters and Approvals	47
	6.7	Employment.	48
	6.8	Conveyance of Customer Accounts.	50
	6.9	Branch Access	50
	6.10	Maintenance of Properties	51
	6.11	Conversion Planning and Execution	51
	6.12	General Third Party Consents	51
	6.13	Title Insurance and Surveys	52
	6.14	Insurance Proceeds and Casualty Payments	53
	6.15	Environmental Reports and Investigations	53
	6.16	Condemnation	55
	6.17	Exclusion of Non-Core Deposits	55
	6.18	Additions to Loans; Removal of Certain Loans	55
	6.19	Subordination, Non-Disturbance and Attornment Agreements	56
	6.20	Assumption of Ira and Keogh Account Deposits.	56
	6.21	Naperville Branch	57
	6.22	Post-Signing Selection of Certain Excluded Tangible Personal Property	57
ARTICLE 7 POST-CLOSING COVENANTS			57
	7.1	Continued Cooperation	57
	7.2	Transitional Matters Concerning Deposits.	57

(ii)

	7.3	Transitional Matters Concerning Loans	60
	7.4	Transitional Matters Concerning Real Estate Interests	60
	7.5	Transfer of Books and Records	60
	7.6	Electronic Records, Conversion, and Servicing.	62
	7.7	Tax Reporting Obligations.	62
	7.8	Credit Life Insurance Refunds	63
	7.9	Non-Solicitation of Employees	64
	7.10	Non-Solicitation of Business	64
	7.11	Covenant Not to Compete.	64
	7.12	Legal Inquiries	66
	7.13	Employment.	66
	7.14	Removal of Seller’s Name From Signs	67
ARTICLE 8 CONDITIONS TO OBLIGATION TO CLOSE			67
	8.1	Conditions to Obligation of Buyer	67
	8.2	Conditions to Obligation of Seller	70
ARTICLE 9 ITEMS TO BE DELIVERED AT OR PRIOR TO CLOSING			70
	9.1	By Seller	70
	9.2	By Buyer	71
ARTICLE 10 TERMINATION			72
	10.1	Termination of Agreement.	72
	10.2	Effect of Termination	73
ARTICLE 11 REMEDIES FOR BREACH OF THIS AGREEMENT			73
	11.1	Survival	73
	11.2	Indemnification by Seller	74
	11.3	Indemnification by Buyer	74
	11.4	Limitations on Indemnity.	75
	11.5	Third Party Claims.	76
	11.6	Losses Computed Without Giving Effect to Materiality	79
	11.7	Indemnity Payments Treated as Adjustments to Purchase Price	79
	11.8	After-Tax Nature of Indemnity Payments	79
	11.9	Third Party Beneficiaries	79
ARTICLE 12 MISCELLANEOUS			79
	12.1	Governing Law	79
	12.2	Consent to Jurisdiction; Waiver of Jury Trial.	79
	12.3	Waiver of Punitive Damages and Jury Trial.	80

(iii)

12.4	Successors and Assigns; No Third-Party Rights	81
12.5	Entire Agreement; Amendment	81
12.6	Notices	81
12.7	Amendments and Waivers	82
12.8	Counterparts	82
12.9	Severability	82
12.10	Titles and Subtitles	82
12.11	Construction	82
12.12	Expenses	83
12.13	Waiver of Compliance with Bulk Sales Laws	83
12.14	Next Business Day	83

Exhibit A	Seller’s Branches
Exhibit B	FMER Loan Review Standards
Exhibit C	Form of Limited Power of Attorney
Schedule 1.1	Loans
Schedule 1.2	Select Remote Employees
Schedule 2.1(a)(vii)(B)	Acquired Contracts
Schedule 2.1(b)(i)	Excluded Tangible Personal Property
Schedule 3.2	Consents
Schedule 4.2(e)	Exceptions to Deposits
Schedule 4.2(f)	Exceptions to Deposit Agreements
Schedule 4.7(a)	Legal Proceedings; Orders
Schedule 4.8(b)	Employment Agreements
Schedule 4.8(d)	Employment-Related Claims
Schedule 4.9(a)	Compliance with Environmental Laws
Schedule 4.9(g)	Asbestos, Mold and Lead-Based Paint
Schedule 4.10(a)	Loans to Employees and Affiliates
Schedule 4.11(a)(i)	Owned Real Property
Schedule 4.11(a)(ii)	Tenant Leases
Schedule 4.11(b)	Issues Affecting Owned Real Property, Leased Property and Tangible Personal Property
Schedule 4.12	Leases
Schedule 4.14(e)	Compensation Increases
Schedule 6.11	Conversion-Related Responsibilities
Schedule 6.20(c)	Excluded IRA/Keogh Accounts
Schedule 8.1(m)	Employment Agreements with Buyer

(iv)

PURCHASE AND ASSUMPTION AGREEMENT

THIS PURCHASE AND ASSUMPTION AGREEMENT (this “Agreement”) entered into as of November 11, 2009, by and between FIRSTMERIT BANK, N.A., a national banking association (“Buyer”), and FIRST BANK, a Missouri state chartered bank (“Seller”).  Buyer and Seller are referred to collectively herein as the “Parties.”

W I T N E S S E T H

WHEREAS, Buyer and Seller are each engaged in the business of banking;

WHEREAS, Seller desires to sell certain assets and transfer certain liabilities with respect to Seller’s branch operations which are listed on Exhibit A and referred to herein as the Branches;

WHEREAS, Buyer desires to purchase certain assets and assume certain liabilities of Seller related to the Branches;

WHEREAS, the Parties desire to set forth in writing the terms and conditions under which the transaction will be consummated.

NOW, THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized terms used but not otherwise defined herein shall have the following meanings:

“ABL Purchase Agreement” means that certain Loan Purchase Agreement, dated of even date hereof, between Buyer and First Bank Business Capital, Inc., as amended, modified or supplemented from time to time in accordance with the terms thereof.

“Accountant” has the meaning set forth in Section 2.2(d) of this Agreement.

“ACH” has the meaning set forth in Section 7.2(g) of this Agreement.

“Acquired Assets” has the meaning set forth in Section 2.1(a) of this Agreement.

“Acquired Branches” means the Branches other than the Rejected Branches.

“Acquired Contracts” has the meaning set forth in Section 2.1(a)(vii) of this Agreement.

1

“Acquired Intellectual Property” has the meaning set forth in Section 2.1(a)(iii) of this Agreement.

“Acquired Leased Real Properties” has the meaning set forth in Section 2.1(a)(v) of this Agreement.

“Acquired Leasehold Improvements” has the meaning set forth in Section 2.1(a)(vi) of this Agreement.

“Acquired Leases” has the meaning set forth in Section 2.1(a)(v) of this Agreement.

“Acquired Owned Real Property” means the Owned Real Property other than the Excluded Owned Real Property, if any.

“Acquired Tangible Personal Property” has the meaning set forth in Section 2.1(a)(ii) of this Agreement.

“Acquisition” means the acquisition by Buyer of the Acquired Assets and the assumption of the Assumed Liabilities pursuant to the terms of this Agreement.

“Acquisition Closing Date Balance Sheet” means an unaudited balance sheet listing only the Acquired Assets and the Assumed Liabilities as of the close of business on the Closing Date and prepared from and using the same methodologies and principles used in connection with the Closing Date Balance Sheet, which unaudited balance sheet shall also include appropriate line items in respect of the Taxes and other prepaid expenses or items to be prorated between Buyer and Seller as required by Section 2.4 of this Agreement.

“Acquisition Pre-Closing Balance Sheet” means an unaudited balance sheet listing only the Acquired Assets and the Assumed Liabilities as of the last day of the immediately preceding month end prior to the Closing Date and prepared from and using the same methodologies and principles used in connection with the Pre-Closing Balance Sheet, which unaudited balance sheet shall be prepared by Seller and delivered to Buyer on or before the fifth (5th) Business Day prior to the Closing Date and shall include appropriate line items in respect of the Taxes and other prepaid expenses or items to be prorated between Buyer and Seller as required by Section 2.4 of this Agreement.

“Affiliate” means with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person.  For purposes of this definition, “control” (including with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise; provided, however, that with respect to Seller, “Affiliate” means FB Parent and the Affiliates of Seller or FB Parent that are controlled, either directly or indirectly, by Seller or FB Parent.

“Agreement” has the meaning set forth in the preface above.

2

“Applicable Laws” means all applicable federal, state, county and municipal laws, codes, injunctions, judgments, orders, decrees, rulings and charges thereunder and other governmental requirements, constitutions, ordinances, statutes, rules, regulations, and administrative interpretations and pronouncements.

“Assumed Liabilities” has the meaning set forth in Section 2.1(c) of this Agreement.

“Book Value” means, with respect to any Acquired Asset and any Assumed Liability, the dollar amount thereof stated on the accounting records of Seller.  The Book Value of any item shall be determined as of the Closing Date after adjustments made by Seller for differences in accounts, suspense items, unposted debits and credits, and other similar adjustments or corrections.  Without limiting the generality of the foregoing, the Book Value of (i) an Assumed Liability shall include all accrued and unpaid interest thereon as of the Closing Date, (ii) a Loan shall reflect adjustments for earned or unearned interest (as it relates to the “rule of 78s” or add-on-interest loans, as applicable), if any, as of the Closing Date, and adjustments for the portion of earned or unearned loan-related credit life and/or disability insurance premiums, FAS 91 costs, if any, attributable to Seller as of the Closing Date in each case determined for financial reporting purposes, (iii) a Commitment shall be deemed to be zero, and (iv) the Acquired Tangible Personal Property and the Owned Real Property shall be the net book value thereof prorated to the Closing Date except that the Book Value of all signs and sign framing, posts, structures and other signage infrastructure shall be zero.  The Book Value of an Acquired Contract shall be zero.  The Book Value of an Acquired Asset shall not include any adjustment for any general or specific reserves on the accounting records of Seller.  Seller shall continue to depreciate the Acquired Assets in accordance with generally accepted accounting principles applied on a basis consistent with prior periods provided that Seller shall not book depreciation less often t han monthly.

“Books and Records” has the meaning set forth in Section 7.5 of this Agreement.

“Branches” means Seller’s branch offices listed on Exhibit A.  (Any individual location may be referred to as “Branch” if the context so requires.)

“Business Day” means a day other than a Saturday, Sunday or any holiday observed by the Federal Reserve.

“Buyer” has the meaning set forth in the preface above.

“Buyer Documents” means this Agreement and each other agreement, instrument or document entered into by Buyer pursuant to this Agreement.

“Buyer Indemnitees” has the meaning set forth in Section 11.2 of this Agreement.

“Buyer Material Adverse Effect” means, with respect to Buyer, any condition, event, change or occurrence that, individually or collectively, is reasonably likely to have a material adverse effect upon the ability of Buyer to perform its obligations under, and to consummate the transactions contemplated by this Agreement.

3

“Buyer’s 401(k) plan”  has the meaning set forth in Section 7.13(a) of this Agreement.

“Buyer Taxes” has the meaning set forth in Section 11.5(d) of this Agreement.

“Cap” has the meaning set forth in Section 11.4(a) of this Agreement.

“Claim Notice” has the meaning set forth in Section 11.5(a)(i) of this Agreement.

“Closing” has the meaning set forth in Section 2.5(a) of this Agreement.

“Closing Date” has the meaning set forth in Section 2.5(a) of this Agreement.

“Closing Date Balance Sheet” means an unaudited balance sheet listing the assets and liabilities of the Branches as of the close of business on the Closing Date prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commercially Reasonable Efforts” means efforts that a prudent Person desirous of achieving a result would use in similar circumstances to achieve that result; provided, however, that Commercially Reasonable Efforts shall not be deemed to require a Person to undertake extraordinary or unreasonable measures, including the payment of amounts in excess of normal and usual filing fees and processing fees, if any, or other payments with respect to any Contract that are significant in the context of such Contract (or significant on an aggregate basis as to all Contracts).

“Commitments” means unfunded commitments by Seller to lend funds to customers of the Branches on the terms and conditions set forth in the applicable commitment letters or other documentation, as such commitments exist as of the Closing Date.

“Consent” means any approval, consent, ratification, waiver, or other authorization (including, without limitation, any Governmental Authorization, and any other third party consents necessary for the assignment to Buyer of any Acquired Contract); provided, however, that “Consent” shall not include any Landlord Consent.

“Contract” means any agreement, contract, lease, obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding.

“Controlling Party” has the meaning set forth in Section 11.5(d) of this Agreement.

“Cut-Off Date” means the date that is one hundred eighty days following the Closing Date.

“Deposits” means all deposits (as defined in 12 U.S.C. § 1813(l)), and the obligations and duties incidental thereto, which are assigned to the Branches, including demand deposit accounts, time and savings accounts, interest checking accounts, deposits relating to debit cards / ATM cards, certificates of deposits, IRAs (to the extent contemplated by Section 6.20(a)), Keogh

4

Accounts (to the extent contemplated by Section 6.20(b)), sweep accounts and other deposit accounts, including for each, all interest accrued but unpaid and both collected and uncollected funds through the Closing Date; and including the obligations relating to the clearance of checks and drafts drawn against the deposit liabilities, in accordance with the Books and Records of the Branches as of the close of business on the Closing Date; provided however that deposits shall not include (a) deposits constituting official checks, travelers checks, money orders, certified checks or other items in the process of clearing on the Closing Date; ( b) deposits pledged as collateral for any Excluded Loan; (c) any deposit account with an overdraft in excess of $1,000 outstanding as of the calendar month end immediately preceding the Closing Date; (d) the Excluded IRA/Keogh Account Deposits; (e) Non-Core Deposits excluded by Buyer pursuant to the provisions of Section 6.17; (f) deposits that would be presumed to be abandoned under escheat law or other abandoned property law of any applicable jurisdiction, (g) brokered deposits, and (h) deposits of Branches excluded under Section 6.12, 6.13, 6.15 or 6.21 due to the inability to transfer such Deposits to Buyer on account of the failure to satisfy ap plicable regulatory requirements with respect to any such transfer prior to the Closing Date.

“Disagreement” has the meaning set forth in Section 2.2(c) of this Agreement.

“Disclosure Schedule” means the disclosure Schedules delivered by Seller under Articles 3 and 4 of this Agreement that limit or qualify the representations and warranties made by Seller under Articles 3 and 4 of this Agreement.

“Draft Allocation Statement” has the meaning set forth in Section 2.3(a) of this Agreement.

“Effective Time” has the meaning set forth in Section 2.5(b) of this Agreement.

“Encumbrance” means any charge, claim, community property interest, condition, encumbrance, equitable interest, lien, option, pledge, mortgage, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

“Environmental Law” means any federal, state or local law (including common law), statute, ordinance, rule, regulation, code, Consent, Order, or agreement with any Governmental Body in each case as amended from time to time relating to (1) the protection, preservation or restoration of the indoor or outdoor environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), or (2) the use, storage, remediation, removal, inspection, monitoring, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of, or exposure to, or injury or damage by, any Hazardous Materials , including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended; the Hazardous Materials Transportation Act, as amended; the Resource Conservation and Recovery Act of 1976, as amended; the Federal Water Pollution Control Act, as amended; the Toxic Substances Control Act, as amended; the Clean Air Act, as amended; the Occupational Safety and Health Act, as amended; and the Safe Drinking Water Act, as amended.

5

“Estimated Payment Amount” has the meaning set forth in Section 2.2(b) of this Agreement.

“Estimated Payment Amount Statement” has the meaning set forth in Section 2.2(b) of this Agreement.

“Excluded Assets” has the meaning set forth in Section 2.1(b) of this Agreement.

“Excluded Intellectual Property” has the meaning set forth in Section 2.1(b)(ii) of this Agreement.

“Excluded IRA/Keogh Account Deposits” has the meaning set forth in Section 6.20(c).

“Excluded Lease” means any Lease in respect of any item of Excluded Leased Real Property.

“Excluded Leased Real Property” means any Leased Real Property that has been excluded from the Acquisition by Buyer pursuant to Section 6.12, 6.13 or 6.15 of this Agreement.

“Excluded Liabilities” has the meaning set forth in Section 2.1(d) of this Agreement.

“Excluded Loans” has the meaning set forth in Section 2.1(b)(iv) of this Agreement.

“Excluded Owned Real Property” means any Owned Real Property that has been excluded from the Acquisition by Buyer pursuant to Section 6.13, 6.15 or 6.21 of this Agreement.

“Excluded Tangible Personal Property” has the meaning set forth in Section 2.1(b)(i) of this Agreement.

“Fair Market Value” means the fair market value as determined by an appraiser that is mutually agreeable to Seller and Buyer and that is independent and has no fewer than seven (7) years experience appraising similar property in the county in which the parcel of Owned Real Property is located.

“FB Parent” means First Banks, Inc., a Missouri corporation and the legal and beneficial owner of all of the issued and outstanding capital stock of The San Francisco Company and Coast Financial Holdings, Inc., which together are the legal and beneficial owners of all of the issued and outstanding capital stock of Seller.

“FDIC” means the Federal Deposit Insurance Corporation.

“Federal Funds Rate” means the federal funds target rate as quoted by the Federal Reserve Bank of St. Louis on the relevant Business Day.

“Fiduciary Relationships” means (a) any and all common law or other trusts between individual, corporate or other entities with Seller as a trustee or co-trustee, including, without

6

limitation, pension, compensation, testamentary, and charitable trusts and indentures, (b) any and all decedents’ estates where Seller is serving as a co- or sole executor, personal representative or administrator, administrator de bonis non, administrator de bonis non with will annexed, or in any similar fiduciary capacity, (c) any and all guardianships, conservatorships or similar positions where Seller is serving or has served as a co- or sole guardian or conservator, or any similar fiduciary capacity, (d) any and all agency and/or custodial accounts and/or similar arrangements under which Seller is serving or has served as an agent or custodian for the owner or other party establishing the account with or without investment authority and (e) any and all escrow arrangements under which Seller holds or held assets for any party or parties on stated terms and conditions.

“Final Allocation Statement” has the meaning set forth in Section 2.3(a) of this Agreement.

“Final Payment Amount Statement” has the meaning set forth in Section 2.2(c) of this Agreement.

“FMER Loan Review Standards” means the loan review standards of Buyer described on Exhibit B hereto.

“Geographic Region” has the meaning set forth in Section 7.11 of this Agreement.

“Governmental Authorization” means any approval, consent, license, permit, registration, certification, exemption, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Applicable Law.

“Governmental Body” means any (a) federal, state, local, municipal, foreign or other government; (b) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); or (c) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority.

“Hazardous Materials” means (i) any petroleum or petroleum products, natural gas, or natural gas products, radioactive materials, asbestos, mold, lead, radon gas, urea formaldehyde foam insulation, transformers or other equipment that contains dielectric fluid containing levels of polychlorinated biphenyls (PCBs) and radon gas; (ii) any chemical, material, waste or substance defined, listed, classified or described as “hazardous substance,” “hazardous waste,” “regulated substance,” “solid waste,” “hazardous material,” “extremely hazardous waste,” “restricted hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” under any Environmental Laws; and (iii) any material, waste or substance the use, disposal, or handling of which is in any way regulated by any Governmental Body, including any such material, waste or substance regulated as hazardous or toxic by any Governmental Body, including mixtures thereof with other materials, and including any regulated building materials containing asbestos or lead.  Notwithstanding the preceding, however, “Hazardous Materials” shall not mean or include any such Hazardous Material (A) used, generated, manufactured, stored, disposed of or otherwise handled in normal quantities in the Ordinary Course of Business

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in compliance with all applicable Environmental Laws as in existence on the date hereof, or (B) that may be naturally occurring in any ambient air, surface water, ground water, land surface or subsurface strata.

“Holds” has the meaning set forth in Section 7.2(h) of this Agreement.

“Indemnifying Party” means the Party that is required to indemnify an Indemnitee pursuant to Article 11 hereof.

“Insurance” has the meaning set forth in Section 7.8 of this Agreement.

“Indemnitee” means any Person that may be entitled to seek indemnification pursuant to Article 11 hereof.

“IRA” means an “individual retirement account” or similar account created by a trust for the exclusive benefit of any individual or his beneficiaries in accordance with the provisions of Section 408 or Section 408A of the Code.

“Keogh Account” means an account created by a trust for the benefit of employees (some or all of whom are owner-employees) and that complies with the provisions of Section 401 of the Code.

“Knowledge” of a particular fact or other matter means information actually known to a Parties’ officers, directors, senior managers or Branch managers or such other information that a prudent person could be expected to discover after due inquiry appropriate under the circumstances; provided, however, that Seller shall be deemed to have knowledge of any matter, fact, event, default, violation, breach, noncompliance, notice, consent or other circumstance if any of the same shall have been delivered in writing to Seller at anytime prior to the Closing.

“Landlord Consents” has the meaning set forth in Section 4.12 of this Agreement.

“Leased Real Property” means, with respect to any Lease, the real property and improvements leased by Seller under such Lease.

“Leasehold Improvements” means, with respect to any Lease, all improvements by Seller to the Leased Real Property under such Lease.

“Leases” has the meaning set forth in Section 4.12 of this Agreement; provided, however, that, for the avoidance of doubt, the Leases shall not include, and Buyer shall not be acquiring or assuming from Seller (i) the leases for suites 140 and 165, 161 N. Clark, Chicago, Illinois, (ii) the leases for suites 110 and 113, drive thru and ATM facilities at 15255 South 94th Avenue, Orland Park, Illinois, or (iii) suite 3, 700 Osterman Avenue, Deerfield, Illinois.

“Liability” means any liability (INCLUDING, WITHOUT LIMITATION, ANY STRICT LIABILITY), whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and due or to become due, of any nature whatsoever, including any liability for Taxes.

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“Loans” mean (a) the loans and participation interests in the loans (including servicing rights where applicable, accrued but unpaid interest and any accrued but unpaid ancillary income due under the term of the note) and Commitments in the amounts set forth on the Books and Records of the Branches as of the close of business on the Closing Date that are identified by Buyer to Seller on Schedule 1.1, as such Schedule may be supplemented or amended pursuant to Section 6.18 of this Agreement, and (b) overdrafts of less than $1,000 in deposit accounts of the Branches; provided, however, that Loans shall not include any of the following loans, participation interests, Commitments and overdrafts except to the extent any of them are identified in the Special Acceptance Notice delivered by Buyer to Seller at least five (5) Business Days prior to the Closing Date:

(i)           any such loan, participation interest, Commitment or overdraft that is delinquent as of the Closing Date or, if not delinquent as of the Closing Date, would have been delinquent at anytime during the 180 day period prior to the Closing Date but for the granting of any grace period, waiver, forbearance, extension, modification or amendment;

(ii)           any such loan, participation interest, Commitment or overdraft of any obligor if the financial condition of such obligor as of the Closing Date is such that Buyer would place such loan, participation interest, Commitment or overdraft on “watch” (or worse) status in accordance with the FMER Loan Review Standards;

(iii)           any such loan, participation interest, Commitment or overdraft of any obligor that is subject to a pending legal proceeding related to a customer’s inability or refusal to pay such loan, Commitment or overdraft;

(iv)           any such loan, participation interest, Commitment or overdraft of any obligor that is subject to pending proceedings against the obligor or obligors (including any guarantor) of such loan, participation interest, Commitment or overdraft under any law, rule or regulation relating to bankruptcy, insolvency, reorganization or other relief from creditors;

(v)           any such loan, participation interest, Commitment or overdraft that constitutes an SBA Loan unless the SBA Consent with respect thereto shall have been obtained as of the Closing Date;

(vi)           any such loan, participation interest or Commitment that has been fully discharged and satisfied or, in the case of a Commitment, terminated as of the Closing Date; and

(vii)           any such loan, participation interest, Commitment or overdraft that constitutes a Non-Conforming Loan pursuant to clause (i) or (ii) of the definition of Non-Conforming Loan set forth in this Article 1.

”Loss” or “Losses” means any and all losses, costs, Liabilities, damages, demands, penalties, fines, settlements, response or remedial or inspection costs, reasonable expenses  (including, without limitation, interest on any amount payable to a third party as a result of the foregoing), and any legal, accounting, auditing, consulting or other expenses reasonably incurred

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in connection with investigating or defending any claims, actions or proceedings, whether or not resulting in any liability, or enforcing any right to indemnification under Article 11, actually incurred by an Indemnitee in connection with the matters described in Section 11.2 or 11.3, as the case may be; provided, however, that the term “Loss” shall not be deemed to include lost profits, opportunity costs, any other consequential damages or punitive damages except to the extent that, in connection with a Third Party Claim, any such profits, opportunity costs, consequential damages or punitive damages are incurred or suffered by a third party and are included in a judgment awarded to, or a settlement or compromise obtained by, such third party.

“Loss Threshold” has the meaning set forth in Section 11.4(a) of this Agreement.

“Naperville Branch” has the meaning set forth in Section 6.21 of this Agreement.

“New Loan” has the meaning set forth in Section 6.18 of this Agreement.

“Non-Conforming Loan” means any Loan acquired under this Agreement as to which Buyer shall have determined in its reasonable good faith judgment not later than the Cut-Off Date is or constitutes a Loan:

(i)           that is fraudulent in nature as a result of any intentional act or omission taken by any Person at anytime on or prior to the Closing Date;

(ii)           as to which any one or more of the representations or warranties made by Seller under this Agreement in respect of such Loan shall have been inaccurate or untrue; or

(iii)           that should not constitute a “Loan” on account of any of the circumstances described in any of clauses (i) through (vi) of the proviso to the definition of Loans set forth in Article 1 of this Agreement.

“Non-Conforming Loan Closing Date” has the meaning set forth in Section 2.6 of this Agreement.

“Non-Conforming Loan Notice” has the meaning set forth in Section 2.6 of this Agreement.

“Non-Controlling Party” has the meaning set forth in Section 11.5(d) of this Agreement.

“Non-Core Deposit” shall mean certificates of deposit or money market deposit accounts originated by Seller after the date of this Agreement that had a rate of interest (i) greater than 1.5% on the date of origination, in the case of certificates of deposits or money market deposit accounts with a maturity of one (1) year or less, and (ii) greater than 1.75% on the date of origination, in the case of certificates of deposits or money market deposit accounts with a maturity of more than one (1) year.

“Non-disclosure Agreement” means the letter agreement dated August 19, 2009 between Hovde Financial, Inc. and FirstMerit Bank, N.A.

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“Non-Divested Branches” means all of the banking branches of Seller in any jurisdiction, other than the Branches.

“Notice of Disagreement” has the meaning set forth in Section 2.2(c) of this Agreement.

“Notice Period,” as applied to any Third Party Claim for which an Indemnitee seeks to be indemnified pursuant to this Agreement, shall mean the period ending the earlier of the following:

(a)           sixty (60) days after the time at which the Indemnitee has either (i) received notice of the facts giving rise to such Third Party Claim, or (ii) commenced an active investigation of circumstances likely to give rise to such Third Party Claim and, in the case of clause (ii), where such Indemnitee believes or should reasonably believe that such facts or circumstances would give rise to such Third Party Claim for which such Indemnitee would be entitled to indemnification pursuant to this Agreement; and

(b)           sixty (60) days after the time at which any Third Party Claim against the Indemnitee has become the subject of Proceedings before any court or tribunal or other decision-making body, or such shorter time as would allow the Indemnifying Party  sufficient time to contest, on the assumption that there is an arguable defense to such Third Party Claim, such Proceeding prior to any judgment or decision thereon.

“Objectionable Title Matter” has the meaning set forth in Section 6.13 of this Agreement.

“OCC” means the Office of the Comptroller of the Currency.

“Order” means any cease or desist order, written agreement, memorandum of understanding, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body or by any arbitrator.

“Ordinary Course of Business” shall mean an action taken by a Person if:

(a)           such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person;

(b)           if the Person is a corporation, bank, partnership, limited liability company or any other entity of any nature, such action is not required to be authorized by the board of directors of such entity (or by any Person or group of Persons exercising similar authority) and is not required to be authorized by the shareholders or other equity owners (if any) of such entity; and

(c)           such action is similar in nature and magnitude to actions customarily taken in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business of and of similar size to such Person.

“Overdraft Items” has the meaning set forth in Section 7.2(e) of this Agreement.

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“Owned Location” has the meaning set forth in Section 6.13 of this Agreement.

“Owned Real Property” has the meaning set forth in Section 4.11(a) of this Agreement; provided, however, that, for the avoidance of doubt, the Owned Real Property shall not include, and Buyer shall not be purchasing from Seller under this Agreement, the real property owned by Seller associated with the closed branch located at 2356 S. Kedzie, Chicago, Illinois (Little Village) or Lot 3 of the Vineyard of Frankfort, or 12505 S. Ridgeland Avenue, Palos Heights, Illinois.

“Par Value” means, with respect to any Non-Conforming Loan as of any date of determination, the unpaid principal amount of such Non-Conforming Loan plus all accrued or earned, but unpaid, interest and fees thereon.

“Parties” has the meaning set forth in the preface above.

“Payment Amount” has the meaning set forth in Section 2.2(a) of this Agreement.

“Permitted Encumbrances” means any exceptions to good and marketable title to the Owned Real Property (i) which is not an Objectionable Title Matter or (ii) to which Buyer in its sole discretion shall consent in writing prior to the Closing to accept as a permitted exception to good and marketable title.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a joint venture, an unincorporated organization, or a Governmental Body.

“Phase I Environmental Assessment” means an environmental assessment that is intended  to be consistent with ASTM E 1527-05 and/or the federal “All Appropriate Inquiries” Rule found at 40 C.F.R. Part 312.

“Phase I Environmental and Hazardous Materials Assessment” has the meaning set forth in Section 6.15 of this Agreement.

“Phase II Environmental Assessment” means an environmental investigation, including but not limited to invasive sampling and chemical analyses, that further evaluates previously identified Recognized Environmental Conditions (“RECs”), including historic RECs.

“Potential Employees” has the meaning set forth in Section 6.7(a) of this Agreement.

“Pre-Closing Balance Sheet” means an unaudited balance sheet listing the assets and liabilities of the Branches (as of the last day of the immediately preceding month end prior to the Closing Date) prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods to be prepared by Seller and delivered to Buyer on or before the fifth (5th) Business Day prior to the Closing Date.

“Pre-Closing Environmental Liability” has the meaning set forth in Section 2.1(d)(ii) of this Agreement.

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“Pre-Closing Event Liability” means, with reference to any item and whether or not any of the acts, omissions, circumstances, events, violations, breaches or other matters described in the following clauses are now or hereafter known, all obligations and Liabilities arising out of or relating to (i) any breach of or noncompliance with any Contract to the extent such breach or noncompliance arises out of any act, omission, circumstance or event attributable to the period prior to the Effective Time, (ii) any Proceeding to the extent such Proceeding arises out of any act, omission, circumstance or event attributable to the period prior to the Effective Time, (iii) any violation of or noncompliance with any Applicable Law to the extent such violat ion or noncompliance arises out of any act, omission, circumstance or event attributable to the period prior to the Effective Time, (iv) any fraudulent or criminal activity or conduct or other wrong doing on the part of Seller or any of its employees or agents at any time on or prior to the Effective Time (or, in the case of a Retained Employee, at any time prior to the time such Retained Employee shall become an employee of Buyer), (v) any violation of any express policy or standard (including any underwriting standard) of Seller with respect to the origination, renewal, waiver, forbearance, extension, renewal, amendment, modification of, or release of any collateral or guaranty collateralizing or guarantying, any Loan, (vi) any data or security breach or other misappropriation of customer data or information attributable to any period prior to the Effective Time, and (vii) Seller Taxes.

“Pre-Closing Tax Period” means a taxable period or portion thereof that ends on or prior to the Closing Date; if a taxable period is a Straddle Period, then the portion of the Straddle Period that ends on and includes the Closing Date shall constitute the Pre-Closing Tax Period.

“Proceeding” means any action, arbitration, audit, proceeding, oversight, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced brought, conducted, or heard (or capable of being heard) by or before, or otherwise involving, any Governmental Body or arbitrator, involving the Branches, the Acquired Assets or the Assumed Liabilities.

“Real Estate Interests” means the Owned Real Property and the Leased Real Property.

“Reclaimed Amount” has the meaning set forth in Section 7.2(c) of this Agreement.

“Recognized Environmental Condition” or “REC” has the meaning set forth in ASTM E 1527-05 Section 3.2.74.

“Regulatory Approvals” means the following approvals required to consummate the Acquisition:  the approval of the OCC, the United States Department of Justice, the Division of Banking of Illinois Department of Financial & Professional Regulation, and the Missouri Division of Finance.

“Rejected Branch” means any Branch that Buyer has excluded from the Acquisition as contemplated by, and pursuant to, Section 6.12 (which relates to Landlord Consents), Section 6.13 (which relates to title insurance and land surveys), Section 6.15 (which relates to environmental liabilities) or Section 6.21 (which relates to the Naperville Branch) of this Agreement.

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“Rejected Branch Deposits” means, collectively, all Deposits of the Rejected Branches.

“Retained Employees” has the meaning set forth in Section 6.7(b) of this Agreement.

“Safe Deposit Business” means the maintenance of all necessary facilities for the use of safe deposit boxes by the renters thereof, subject to the provisions of the applicable leases or other agreements relating to such boxes, and the safekeeping of items maintained by the Acquired Branches for the benefit of its customers, pursuant to applicable safekeeping agreements, memoranda or receipts.

“Safe Deposit Contracts” means all customer agreements, leases, and maintenance agreements related to the Safe Deposit Business.

“SBA” means the United States Small Business Administration.

“SBA Consent” means all consents necessary to transfer to Buyer the SBA Loans.

“SBA Loan” means any Loan that is guaranteed by the SBA or otherwise made pursuant to the small business loan program of, or administered by, the SBA.

“Select Remote Employees” means those employees of Seller listed on Schedule 1.2 hereto.

“Seller” has the meaning set forth in the preface above.

“Seller Documents” means this Agreement and each other agreement, instrument or document entered into by Seller pursuant to this Agreement.

“Seller Indemnitees” has the meaning set forth in Section 11.3 of this Agreement.

“Seller Material Adverse Effect” means, with respect to Seller, any condition, event, change or occurrence that, individually or collectively, is reasonably likely to have a material adverse effect upon (i) the condition, financial or otherwise, properties, business, assets, deposits, earnings or results of operations or cash flows of the Branches, the Acquired Assets or the Assumed Liabilities, or (ii) the ability of Seller to perform its obligations under, or to consummate the transactions contemplated by, this Agreement.

“Seller Taxes” has the meaning set forth in Section 2.1(d)(i) of this Agreement.

“SNDAs” has the meaning set forth in Section 6.19 of this Agreement.

“Special Acceptance Notice” has the meaning set forth in Section 6.18 of this Agreement.

“Straddle Period” means any taxable period beginning on or prior to and ending after the Closing Date.

“Subpoenas” has the meaning set forth in Section 7.12 of this Agreement.

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“Supplemental Closing” has the meaning set forth in Section 2.5(c) of this Agreement.

“Supplemental Closing Date” has the meaning set forth in Section 2.5(c) of this Agreement.

“Taxes” has the meaning set forth in Section 4.4(f) of this Agreement.

“Tax Claim” has the meaning set forth in Section 11.5(d) of this Agreement.

“Tax Returns” has the meaning set forth in Section 4.4(f) of this Agreement.

“Tenant Leases” has the meaning set forth in Section 4.11(a) of this Agreement.

“Third Party Claims” means any and all Losses which arise out of or result from (a) any claims or actions asserted against an Indemnitee by any Person not a party to this Agreement, (b) any rights of any Person not a party hereto asserted against an Indemnitee, or (c) any Liabilities of, or amounts payable by, an Indemnitee to any Person not a party hereto arising out of clause (a) or (b), including, without limitation, claims or actions asserted against an Indemnitee by any taxing authority on account of Taxes.

“Transfer Taxes” has the meaning set forth in Section 2.4(f) of this Agreement.

“Transferred Records” has the meaning set forth in Section 7.6(a) of this Agreement.

ARTICLE 2

PURCHASE AND SALE

2.1           The Acquisition.

(a)           The Acquired Assets.  As of the Effective Time, upon the terms and conditions set forth herein, Seller will sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from Seller, all of Seller’s rights, title and interests in, to and under all of the following loans, properties, contracts and other assets, whether now existing or hereafter acquired, free and clear of all Encumbrances other than the Permitted Encumbrances (collectively, the “Acquired Assets”):

(i)           all cash on hand (including all ATM cash, petty cash and teller cash), cash held in the vaults and other cash items or cash equivalents, in each case held at the Branches as of the Closing Date;

(ii)           except for those items that constitute Excluded Tangible Personal Property, all of the tangible personal property of Seller located in or at, or affixed to the premises of, the Acquired Branches, including trade fixtures, shelving, furniture, on-premises ATMs, equipment (including all televisions, Bloomberg terminals, cell phones and PDAs used by the Retained Employees), security systems, safe deposit boxes (exclusive of contents), vaults, copier paper, all signs (including signs with Seller’s name or logo but excluding all logo boxes and

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channel letter sets) and sign framing, structures, posts and other signage infrastructure, and all non-logo office supplies (collectively, the “Acquired Tangible Personal Property”);

(iii)           lists of borrowers, depositors and other customers of the Branches to the extent relating to any Acquired Asset or Assumed Liability, lists of prospective customers of the Branches, and any other information (including confidential information) of Seller relating to the Branches that is necessary for Buyer to possess in connection with its administration, ownership and use of any Acquired Asset or Assumed Liability (the “Acquired Intellectual Property”);

(iv)           all Acquired Owned Real Property;

(v)           all Leases other than the Excluded Leases, if any (the “Acquired Leases”), together with all Leased Real Properties other than the Excluded Leased Real Properties, if any (the “Acquired Leased Real Properties”);

(vi)           all Leasehold Improvements in respect of all Leases other than the Excluded Leases (the “Acquired Leasehold Improvements”);

(vii)           all (A) Safe Deposit Contracts, and (B) (1) all equipment leases relating to the lease of equipment located at the Acquired Branches and related maintenance agreements, and (2) all other contracts, in each case as to subclause (1) and (2) of this clause (vii) solely to the extent listed on Schedule 2.1(a)(vii)(B) attached hereto other than any such equipment leases and other contracts that Buyer has elected to remove from such Schedule 2.1(a)(vii)(B) by giving written notice of such election to Seller not later than thirty (30) days following the date hereof, in which case such Schedule delivered on the date hereof, as so modified by such election notice, shall be deemed to constitute Schedule 2.1(a)(vii)(B) for all purposes of this Agreement (the leases and contracts listed on Schedule 2.1(a)(vii)(B), collectively, the “Acquired Contracts”);

(viii)           all Loans and servicing rights with respect thereto, including (A) all (1) collateral pledged as collateral security therefor, (2) guaranties and other instruments of credit support issued in favor of the Seller as a guaranty or credit support thereof and (3) monies held by Seller in escrow for taxes, insurances, special assessments or other purposes in respect of such Loans, and (B) all related loan documents and instruments and promissory notes, collateral documents, guaranty and other credit support instruments or agreements and other documents evidencing, governing or in respect of such Loans;

(ix)           all rights of Seller relating to pre-paid expenses associated with the foregoing Acquired Assets or any of the Deposits, including an appropriately pro-rated portion of any pre-paid FDIC deposit insurance assessment, as contemplated by Section 2.4 hereof; and

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(x)           without limiting any other provision contained in this Section 2.1(a), all Books and Records relating to any of the foregoing Acquired Assets or any of the Assumed Liabilities.

(b)           The Excluded Assets.  Seller shall not sell and transfer and shall retain, and Buyer shall not purchase or acquire, all of the following assets and properties of Seller, as follows (collectively, the “Excluded Assets”):

(i)           all (A) paper stock, forms and other supplies containing any logos, trade name, trademark or service mark, if any, of Seller, other than all signage, (B) desk top and lap top computers, computer monitors and computer servers of Seller, and (C) the specific items of tangible personal property in or at, or affixed to the premises of, the Branches listed on Schedule 2.1(b)(i) hereof (all such items, as the same may be adjusted for inclusion in the Acquired Assets pursuant to Section 6.22 hereof, collectively, the “Excluded Tangible Personal Property”) ;

(ii)           except for the Acquired Intellectual Property, all of Seller’s computer software programs, trade secrets, registered or common law trademarks or trade names, corporate logos and other intellectual property rights, including the name “First Bank” (collectively, the “Excluded Intellectual Property”);

(iii)           the (A) Excluded Owned Real Property, if any, and (B) the Excluded Leases, if any, together with the Excluded Leased Real Properties in respect thereof;

(iv)           all loans, loan participation interests, Commitments, overdrafts and similar items of the Branches, other than the Loans (the “Excluded Loans”);

(v)           all of Seller’s right to recover assets charged off by Seller prior to the Closing;

(vi)           all items of real estate that are classified as “other real estate owned” of the Branches on the books and records of Seller;

(vii)           Seller’s credit card portfolio;

(viii)           foreclosed or repossessed personal property of customers of the Branches, except to the extent any thereof shall constitute collateral for the Loans;

(ix)           all assets, Contracts (including Safe Deposit Contracts) and properties of Seller in respect of the Rejected Branches (other than (A) the Books and Records relating to the Loans and Deposits of such Rejected Branches, (B) the Loans (and other items contemplated by Section 2.1(a)(viii)) of such Rejected Branches, and (C) the cash and other cash items of the Branches included in the Acquired Assets pursuant to Section 2.1(a)(i) hereof);

(x)           all assets, rights and interests of Seller relating to the Branches in respect of Fiduciary Relationships, except for the Deposits in respect of IRAs and

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Keogh Accounts included in the Acquired Assets or Assumed Liabilities as contemplated by Section 6.20 hereof;

(xi)           records of Seller not included in the Acquired Assets or that are otherwise not required to be delivered to Buyer pursuant to any other provision of this Agreement; and

(xii)           any other assets or properties of Seller not included in the Acquired Assets, including all Non-Divested Branches of Seller.

(c)           The Assumed Liabilities.  Subject to the terms and conditions hereof, from and after the Effective Time, Seller will transfer to Buyer, and Buyer shall assume, pay, perform and discharge and indemnify Seller in accordance with Article 11 hereof with respect to, the following (and only the following) obligations and liabilities of Seller to the extent required to be paid, performed, satisfied or discharged from and after the Effective Time (collectively, the “Assumed Liabilities”):

(i)           all of Seller’s obligations and liabilities with respect to the Acquired Contracts and the Acquired Leases, other than any Pre-Closing Event Liability relating to or in respect of such Acquired Contracts or Acquired Leases;

(ii)           all of Seller’s obligations and liabilities with respect to the Deposits, other than any Pre-Closing Event Liability relating to or in respect of such Deposits;

(iii)           all of Seller’s obligations and liabilities with respect to the Commitments, other than any Pre-Closing Event Liability relating to or in respect of such Commitments; and

(iv)           in the event that the Phase I Environmental and Hazardous Materials Assessment or Phase II Environmental Assessment with respect to a single Branch confirms the existence of a condition in violation of applicable Environmental Laws, the presence of asbestos, or the presence of any other Hazardous Materials in excess of industrial/commercial remediation standards and such condition was not disclosed or identified on Schedule 4.9(a) or 4.9(g) or in the documents (or attachments to the documents) referenced on Schedule 4.9(a) or 4.9(g), the remediation costs of up to $25,000 for all Real Estate Interests relating to such single Branch, as contemplated by Section 6.15 hereof.

(d)           The Excluded Liabilities.  Notwithstanding anything to the contrary contained in this Agreement, Buyer shall not assume or be bound by any duties, responsibilities, obligations or Liabilities of Seller relating to Seller or arising out of the Acquired Assets, the Excluded Assets, the Deposits or the Branches, of any kind or nature and whether known, unknown, contingent or otherwise, other than the Assumed Liabilities (all such duties, responsibilities, obligations and Liabilities, other than the Assumed Liabilities, the “Excluded Liabilities”), including the following:

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(i)           any (A) Taxes imposed on Seller for any period, (B) Taxes imposed with respect to the Acquired Assets or the Deposits, or the operation of the Acquired Branches, for any Pre-Closing Tax Period, (C) Transfer Taxes to the extent of the amount allocated to Seller pursuant to Section 2.4(f) hereof, and (D) Taxes imposed on Buyer or any of its Affiliates as a successor or transferee of Seller (collectively, the “Seller Taxes”);

(ii)           subject to the provisions of Section 2.1(c)(iv) and Section 11.4(d) hereof, all Liabilities (A) imposed on Buyer with respect to or in respect of the Real Estate Interests arising under any Environmental Law to the extent arising out of or relating to any release, violation of Applicable Law, event, condition, action, omission or other circumstance attributable to any period on or prior to the Closing Date, including any claims, penalties, remediation costs, Liabilities arising from the emission, discharge release or disposal of any Hazardous Materials into the air, ground or water or the presence of any Hazardous Materials on, at o r in any Branches or any real property included in the Acquired Assets, and (B) without limiting the provisions of clause (A) above, all Liabilities imposed on Buyer with respect to or in respect of the Real Estate Interests arising out of any underground storage tank located in, or asbestos located in any building upon, any Real Estate Interests at anytime on or prior to the Closing Date, whether or not such Liability shall arise prior to or after the Closing Date, including, without limitation, in the case of each of clause (A) and clause (B), all such Liabilities arising out of any environmental event or condition disclosed on Schedules 4.9(a) and 4.9(g) hereof or in the documents (or the attachments to the documents) referenced on Schedules 4.9(a) and 4.9(g) hereof; provided, however, that (1) Seller shall not be responsible for any Liabilities under this clause (ii) arising under any Environmental Law to the extent such Liabilities are caused by (X) Buyer’s changed use of any Real Estate Interests following the Closing Date, (Y) changes made by Buyer to any structures on any Real Estate Interest following the Closing Date, or (Z) exacerbation of any underlying condition by the acts or omissions of Buyer following the Closing Date (and all environmental Liabilities for which Seller shall be responsible to the extent provided in this Section 2.1(d)(ii) are referred to herein as, collectively, the “Pre-Closing Environmental Liabilities”), and (2) Selle r’s obligation to indemnify Buyer for the Excluded Liabilities described in this clause (ii) shall survive for a period of only eight (8) years following the Closing Date as provided in Section 11.1 hereof;

(iii)           all Liabilities arising out of or relating to the employment by Seller of any employee, including any former employee and any Retained Employee, including all salary, bonus, change of control and other obligations arising under or out of any employment agreement between Seller (or any Affiliate thereof) and any such employee (including any Retained Employee);

(iv)           all Liabilities arising out of or relating to all employee benefit plans, agreements or arrangements, as described in Section 4.5 hereof, of or maintained by Seller or at anytime as to which Seller contributed or had any Liability;

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(v)           all account, trade and note payables of Seller with respect to the Branches; and

(vi)           all Liabilities arising out of the ownership or operation of the Branches or their respective business or properties or assets (including the Acquired Assets and Deposits) on or prior to the Closing Date, including the Liabilities arising out of the Proceedings listed on Schedule 4.7(a) hereof.

2.2           Consideration for the Acquisition.

(a)           In consideration for the Acquisition, Seller shall make available and transfer to Buyer, or Buyer shall make available and transfer to Seller, the Payment Amount in accordance with this Section 2.2.  The “Payment Amount” means an amount equal to the sum of the aggregate balance of all the Deposits (as set forth on the Acquisition Closing Date Balance Sheet) including interest posted or accrued with respect to the Deposits as of the close of business on the Closing Date, less an amount equal to the sum of:

(i)           A premium for the Deposits and franchise value relating to the Branches equal to 3.5% of the average Deposit balances of the Branches for the thirty (30) calendar days immediately preceding and including the Closing Date; provided, however, that (A) Non-Core Deposits (to the extent included in the Deposits), and (B) all Rejected Branch Deposits shall, in each case, be excluded from such Deposits for purposes of the calculation of average Deposit balances;

(ii)           The amount held as cash and cash items of the Branches as reflected on the Acquisition Closing Date Balance Sheet;

(iii)           The Book Value of all Loans, including accrued interest as reflected on the Acquisition Closing Date Balance Sheet;

(iv)           The Book Value of Acquired Owned Real Property;

(v)           The Book Value of the Acquired Tangible Personal Property and Leasehold Improvements as reflected on the Acquisition Closing Date Balance Sheet; and

(vi)           Buyer’s share of the pro rata adjustment of items required pursuant to Section 2.4.

(b)           On the Closing Date, (i) Seller shall deliver to Buyer an amount estimated to be the Payment Amount, calculated as set forth in clause (a) of this Section 2.2 off of the balances reflected on the Acquisition Pre-Closing Balance Sheet (the “Estimated Payment Amount”) if the Estimated Payment Amount is a positive number, and (ii) Buyer shall deliver to Seller the absolute value of the Estimated Payment Amount if the Estimated Payment Amount is a negative number.  The Estimated Payment Amount shall be set forth in a statement prepared as of the date of the Acquisition Pre-Closing Balance

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Sheet and delivered to Buyer at least two (2) Business Days prior to the Closing Date (such statement, the “Estimated Payment Amount Statement”).

(c)           Within ten (10) Business Days following the Closing Date, Seller shall prepare and deliver to Buyer the Acquisition Closing Date Balance Sheet, together with a statement prepared as of the close of business on the Closing Date showing the Payment Amount and reconciling the Payment Amount to the Estimated Payment Amount (such statement, the “Final Payment Amount Statement”).  Within twenty (20) Business Days after receipt of delivery of the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement, Buyer may dispute all or any portion of the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement by giving written notice (a “Notice of Disagreement”) to Seller setting forth in reasonable detail the basis for any such dispute (a “Disagreement”).  Seller shall provide Buyer and its designees with full reasonable access, during normal business hours, to relevant books, records, work papers, personnel and representatives of Seller and such other information as Buyer may reasonably request in connection with its review of the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement and with respect to the resolution of any Disagreement.  The Parties shall promptly commence good faith negotiations with a view to resolving all such Disagreements.  Subject to Sections 2.5(e) and 2.5(f), if Buyer does not give a Notice of Di sagreement within the twenty (20) Business Day period set forth above, Buyer shall be deemed to have irrevocably accepted such Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement in the form delivered to Buyer by Seller.  Seller shall be deemed to have irrevocably accepted the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement as modified by and disclosed in Buyer’s Notice of Disagreement if Seller does not dispute all or any portion of such Notice of Disagreement by giving its written response to Buyer within ten (10) Business Days following the delivery of such Notice of Disagreement setting forth in reasonable detail the basis for its dispute.

(d)           In the event that a dispute arises as to the appropriate amounts to be paid to either Party pursuant to the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement discussed in subsection (c), each Party shall pay to the other all amounts other than those as to which a dispute exists.  The Parties shall refer the disputed amounts to an independent firm of certified public accountants of national standing (an “Accountant”) reasonably acceptable to Buyer and Seller, and Buyer and Seller agree to be bound by the determination of such firm with respect to such disputed matters (absent manifest error).  Buyer and Seller shall agree upon an Accountant wit hin fourteen (14) calendar days after the date on which either Buyer or Seller notifies the other in writing that the referral of a disputed matter within the scope of this Section 2.2(d) is necessary.  If Buyer and Seller shall fail to agree on an Accountant within such fourteen (14) day period, then Buyer and Seller shall each choose an accountant who will mutually select a third qualifying accountant who shall be the Accountant for purposes of this Section 2.2(d).  Buyer and Seller agree to share equally the fees and charges of the Accountant appointed hereunder for its services in resolving disputes within the scope of this Section 2.2(d).

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(e)           The provisions of Section 2.2(d) are not intended to and shall not be interpreted to require that the Parties refer to an Accountant (a) any dispute arising out of a breach by one of the Parties of its obligations under this Agreement, (b) any dispute the resolution of which requires a construction or interpretation of this Agreement other than this Section 2.2 and the definitions related hereto and any other Section of this Agreement as necessary to enable the Accountant to resolve the dispute submitted to it pursuant to this Section 2.2, or (c) any other dispute other than (in the case of this clause (e)) a dispute related to the mathematical calculation of the Payment Amount or the accounting treatment of any asset or liability, or item of income or expense, that affects the calculation of the Payment Amount, or both.  The Parties reserve all rights and remedies, including at law or in equity, to resolve disputes other than those within the scope of Section 2.2(d).

(f)           Any disputed amounts retained by a Party that are later found to be due to the other Party shall be paid to such other Party promptly upon resolution with interest thereon from the Closing Date to the date paid at the applicable Federal Funds Rate.

2.3           Allocation.

(a)           No later than thirty (30) calendar days after the determination of the Acquisition Closing Date Balance Sheet and the Final Payment Amount Statement (including the final resolution of any dispute related thereto pursuant to Section 2.2(d)), Buyer shall prepare and deliver to Seller a draft of a statement (the “Draft Allocation Statement”) setting forth the allocation of the total consideration paid by Seller to Buyer pursuant to this Agreement among the assets acquired pursuant to this Agreement for purposes of, and in accordance with, Section 1060 of the Code.  If, within forty-five (45) calendar days of the receipt of the Draft Allocation Statement, Seller shall not have objected in writing to such draft, the Draft Allocation Statement shall become the Final Allocation Statement, as defined below.  If Seller objects to the Draft Allocation Statement in writing within such 45-day period, Seller and Buyer shall negotiate in good faith to resolve any disputed items.  If, within ninety (90) calendar days after the receipt of the Draft Allocation Statement, Seller and Buyer fail to agree on such allocation, any disputed aspects of such allocation shall be resolved by an Accountant in accordance with the procedures set forth in Section 2.2(d).  The allocation of the total consideration, as agreed upon by Seller and Buyer (as a result of either Seller’s failure to object to the Draft Allocation Statement or of good faith negotiations between Seller and Buyer) or determined by the Accountant (the “Final Allocation Statement”) shall be final and binding upon the parties hereto.  If there is any adjustment to the consideration paid by Seller to Buyer pursuant to this Agreement for purposes of Section 1060 of the Code, any such adjustment shall be allocated, to the extent possible, to the asset(s) resulting in such adjustment, and Buyer shall prepare a revised Draft Allocation Statement reflecting such adjustment which shall, subject to the review and dispute resolution provisions set forth in this Section 2.3(a), replace the Final Allocation Statement.  Each of Seller and Buyer shall bear all fees and costs incurred by it in connection with the determination of the allocation of the total consideration, except that the Parties shall each pay one-half (50%) of the fees and expenses of the Accountant retained to resolve any disputed aspects of the allocation prepared pursuan t to this Section 2.3(a).

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(b)           Seller and Buyer shall report the transaction contemplated by this Agreement for federal and other applicable income Tax purposes (including income Tax reporting requirements imposed pursuant to Section 1060 of the Code) in accordance with the allocation specified in the Final Allocation Statement (including any adjustment thereof).  Each of Seller and Buyer agree to timely file, or cause to be timely filed, IRS Form 8594 (and any comparable form under state or local Tax law and including any amendment thereto) and any required attachment thereto in accordance with the Final Allocation Statement and provide the other Party with a copy of each such form as filed no later than ten (10) calendar days following the filing thereof.  Except as otherwis e required pursuant to a “determination” under Section 1313 of the Code (or any comparable provision of state or local Tax law), neither Seller nor Buyer shall take, or shall permit its Affiliates to take, a Tax position which is inconsistent with the Final Allocation Statement (including any adjustment thereof).  In the event any Party receives notice of an audit in respect of the allocation of the consideration paid for the Acquired Assets, such Party shall promptly notify the other Party in writing as to the date and subject of such audit.

2.4           Pro Rata Adjustment and Reimbursement.

(a)           Unless otherwise provided herein, it is the intention of the Parties that Seller will operate the Branches for its own account until the Effective Time and that Buyer shall operate and hold the Acquired Assets and assume the Assumed Liabilities for its own account after the Effective Time.  Thus, except as otherwise specifically provided herein, items of proration and other adjustments shall be prorated as of the Effective Timeand settled between Seller and Buyer as contemplated by Section 2.2 hereof whether or not such adjustment would normally be made as of such time; prov ided, however, that items of proration and other adjustments allocated to Buyer shall be allocated to Buyer solely to the extent such items shall apply to the Acquired Assets or the Deposits.  Items of proration and adjustment will be handled at Closing as an adjustment to the amount of funds to be delivered by Seller to Buyer, or Buyer to Seller, as appropriate, as contemplated by Section 2.2 hereof.

(b)           For purposes of this Agreement, items of proration and other adjustments with respect to the Acquired Assets and the Deposits shall include, without limitation: (i) personal and general real property taxes; (ii) FDIC deposit insurance assessments and prepayments; (iii) safe deposit rental payments; (iv) rent for any Acquired Leased Real Property, and (v) other prepaid expenses and items (including security deposits), if any, as of the Effective time on the Closing Date.  To the extent that the amount of the foregoing items is not known on the Closing Date, such proration shall be based on the amount of such items for the prior month or year, as appropriate; provided, however, the Parties shall apportion all general real estate taxes as provided in paragraph (c) below.

(c)           Buyer and Seller shall apportion pro rata all general real estate taxes (state, county, municipal, school and fire district) paid or payable in connection with the Acquired Owned Real Property and any special taxes or assessments, if any, upon the Acquired Owned Real Property assessed or becoming a lien in accordance with Section 2.4(e) hereof.  Such apportionment shall be based upon the fiscal year for which the same are assessed.  In the event that the applicable Tax bill, or other information reasonably

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necessary for computing any such apportionment, is not available on the Closing Date, the apportionment shall be made at Closing on the basis of the prior period’s general real estate taxes, and such apportionment shall thereafter be reconciled based on the final Tax bill as set forth in the remaining provisions of this clause (c).  Within thirty (30) days after receipt by the Parties of the applicable final Tax bill or other information reasonably necessary for computing such apportionment, Buyer and Seller shall apportion the actual general real estate taxes and, if either Party paid more than its proper share thereof at Closing, the other Party shall within seven (7) Business Days after written request therefore reimburse such Party for the amount so expended.

(d)           Notwithstanding anything to the contrary, to the extent that the FDIC imposes an assessment (special or otherwise) after the Closing Date, which assessment is applicable to deposits that were attributable to the Deposits prior to the Closing Date, then such assessment shall be appropriately apportioned between Seller and Buyer after the Closing Date within five (5) Business Days after payment of such assessment.

(e)           For purposes of this Agreement, in the case of any Straddle Period, (1) general real estate taxes for the Pre-Closing Tax Period shall be equal to the amount of such general real estate taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period, and (2) Taxes (other than general real estate taxes) for the Pre-Closing Tax Period shall be computed as if such taxable period ended as of the end of the Closing Date.

(f)           Notwithstanding anything to the contrary contained in the foregoing provisions of this Section 2.4 or otherwise contained in this Agreement, all excise, sales, use, transfer, recordingand similar Taxes that are payable or that arise as a result of the consummation of the purchase and sale contemplated by this Agreement (collectively, the “Transfer Taxes”) shall be borne and, when due, paid one-half by Seller and one-half by Buyer, whether such Transfer Taxes are imposed on Seller or Buyer.

2.5           Closing.

(a)           The closing of the Acquisition (the “Closing”) shall occur by facsimile or PDF, or in person at a mutually convenient location, or by such other method as shall be mutually agreed to by the Parties, and any Closing documents delivered by facsimile or PDF at the Closing shall be delivered in original execution form by the Parties by overnight courier promptly following the Closing.  Any executed Closing documents sent by a Party or its counsel to the other Party or its counsel prior to Closing shall be held in escrow by such other Party or its counsel until such executed documents are authorized to be released by a senior officer of the sending Party or by the sending Party counsel .  The Closing shall occur on such date on which the Parties mutually agree but in any event not later than three (3) Business Days after all conditions precedent to Closing as set forth in Sections 8.1 and 8.2 shall have been satisfied or waived; provided, however, that unless the Parties shall have otherwise mutually agreed, in no event shall the Closing occur prior

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to the latest of (i) ninety (90) days after the date of this Agreement, (ii) forty-five (45) days after the date on which all Regulatory Approvals shall have been obtained, and (iii) February 12, 2010 (the date on which the Closing shall have occurred, the “Closing Date”).

(b)           The effective time of the consummation of the Acquisition (the “Effective Time”) shall be at a mutually agreeable time after the close of business for the Branches on the Closing Date.

(c)           Promptly after the Closing Date Balance Sheet and the Final Payment Amount Statement have been finally determined in accordance with Section 2.2(c), but in no event later than five (5) Business Days following such final determination (the “Supplemental Closing Date”), the parties hereto shall hold a supplemental closing (the “Supplemental Closing”), either by telephone, or in person at a mutually convenient location.  On the Supplemental Closing Date, if the Payment Amount is less than the Estimated Payment Amount, Buyer shall refund to Seller cash having an aggregate value equal to the difference between the Estimated Payment Amount and the Payment Amount by wire transfer or other immediately available funds.  On the Supplemental Closing Date, if the Payment Amount is more than the Estimated Payment Amount, Seller shall deliver to Buyer, by wire transfer or other immediately available funds, an amount equal to the difference between the Payment Amount and the Estimated Payment Amount.

(d)           The post-closing settlement payment shall not bear interest.

(e)           In the event any bookkeeping omissions or errors are discovered in preparing the Acquisition Closing Date Balance Sheet for the Branches or in completing the transfer and assumptions contemplated hereby, the Parties agree to correct such errors and omissions, it being understood that no adjustments will be made that are inconsistent with the judgments, methods, policies, or accounting principles utilized by Seller in preparing and maintaining the accounting records of the Branches.

(f)           In the event that Buyer or Seller discovers any errors or omissions as contemplated by Section 2.5(e) above or any error with respect to the payments made under Section 2.5(c) above not later than six (6)months following the Supplemental Closing Date, Buyer and Seller agree to promptly correct any such error or omission, make any payments and effect any transfers or assumptions as may be necessary to reflect any such correction; provided, that interest shall not be paid with respect to any such payments.

2.6           Repurchase of Non-Conforming Loans.  If at any time on or prior to the Cut-Off Date Buyer shall have discovered a Non-Conforming Loan, Buyer may deliver written notice thereof to Seller not later than the Cut-Off Date (any such notice, a “Non-Conforming Loan Notice”), which notice shall include (i) such documentation as is reasonably available to Buyer in support of its discovery, and (ii) a statement of the then current Par Value of such Non-Conforming Loan.  If Buyer shall have given a Non-Conforming Loan Notice on or prior to the Cut-Off Date, Buyer shall have the right to cause Seller to purcha se, and Seller shall purchase from Buyer, such Non-Conforming Loan at the Par Value thereof as of the Non-Conforming

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Loan Closing Date (as defined below); provided that Buyer shall have represented to Seller as of the Non-Conforming Loan Closing Date that Seller owns such Non-Conforming Loan as of such date.  The closing of the purchase of the Non-Conforming Loan shall occur on a date specified in the applicable Non-Conforming Loan Notice, but in no event earlier than three (3) Business Days following Seller’s receipt of such Non-Conforming Loan Notice (the date of such closing, the “Non-Conforming Loan Closing Date”).  At the closing of the purchase and sale of the Non-Conforming Loan that is the subject of any Non-Conforming Loan Notice, Buyer and Seller shall enter into such standar d loan transfer documents customary for a loan transfer of this type and without recourse to Buyer, and the purchase price payable by Seller to Buyer on the applicable Non-Conforming Loan Closing Date shall be paid by wire transfer of immediately available funds to the account of Buyer specified by it in writing to Seller.  On the Non-Conforming Loan Closing Date in respect of a Non-Conforming Loan, Buyer shall deliver to Seller all loan documents relating to such Non-Conforming Loan, subject to Buyer’s retention obligations under applicable directions from law enforcement authorities.  The rights of Buyer hereunder shall be in addition to (but not in duplication of) any rights of Buyer under Article 11 hereunder, and nothing contained in this Section 2.6 shall be deemed to imply that a Non-Conforming Loan does not constitute an “Excluded Loan” ; for all purposes of this Agreement.  Any Non-Conforming Loan purchased by Seller under this Section 2.6 shall be treated as an adjustment to the purchase price paid by Buyer under this Agreement.  Notwithstanding anything to the contrary contained herein, Buyer shall have the right, without the consent of Seller, to assign and delegate Buyer’s rights and obligations under this Section 2.6 to any Person to whom Buyer shall have sold or otherwise transferred a Non-Conforming Loan; provided that not later than five (5) Business Days following such assignment and delegation Buyer shall give written notice thereof to Seller.  The Parties agree that Buyer shall be entitled to specific performance of the obligations of Seller under this Section 2.6 to the fullest extent permitted by applicable law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer that the statements contained in this Article 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then as though the Closing Date were substituted for the date of this Agreement throughout this Article 3).

3.1           Organization, Qualification, and Corporate Power.  Seller is a Missouri state chartered bank duly organized and validly existing under the laws of Missouri, with full corporate power and authority to conduct its business as now being conducted and to own or use the properties and assets that it purports to own or use.

3.2           Authorization of Transaction.  Seller has the full corporate power and authority to execute and deliver this Agreement and the other Seller Documents.  Subject to approval by any necessary federal or state banking regulatory authority, Seller has the corporate power and authority to perform Seller’s obligations hereunder and under the other Seller Documents, and to consummate the transactions contemplated hereby and thereby.  Each of this Agreement, and when executed and delivered, each of the other Seller Documents, constitutes the valid and legally binding obligation of Seller, enforceable in accordance with its terms and conditions,

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subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity.  Except for the Regulatory Approvals, the Landlord Consents and such other Consents as are listed on Schedule 3.2, Seller is not required to give any notice to, make any filing with, or obtain any authorization or Consent of any third party in order to execute and deliver this Agreement or consummate the Acquisition, including sale, transfer and assignment of the Acquired Assets and the Assumed Liabilities.  Seller has not received any indication from any federal or state governmental agency or authority that such agency would oppose or refuse to grant a Regulatory Approval, and to Seller’s Knowledge, there exists no fact or circumstance that would prevent or delay Seller’s ability to obtain promptly all Regulatory Approvals.

3.3           Noncontravention.  Subject to the required Consents described in Section 3.2 and the Landlord Consents, neither the execution and the delivery of this Agreement by Seller, nor the consummation of the Acquisition by Seller will, directly or indirectly:

(a)           Contravene, conflict with, or result in a violation of (i) any provision of the articles of incorporation or bylaws of Seller or (ii) any resolution adopted by the board of directors of Seller;

(b)           Contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge the Acquisition or to exercise any remedy or obtain any relief under, any Applicable Law or any Order to which Seller, or any of the assets or deposits owned or used by Seller, may be subject;

(c)           Except for matters which would not have a Seller Material Adverse Effect, contravene, conflict with, or result in a violation of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Seller or that otherwise relates to the Branches, the Acquired Assets or the Assumed Liabilities; or

(d)           Except for matters which would not have a Seller Material Adverse Effect, contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Contract relating to the Branches to which Seller is a party and included in the Acquired Assets or Assumed Liabilities.

3.4           Governmental Authorizations.  Seller has all Governmental Authorizations necessary for the lawful conduct of its business at each of the Branches as now conducted and, except as would not have a Seller Material Adverse Effect, all such Governmental Authorizations are valid and in good standing and (i) are not subject to any suspension, modification, revocation, or pending (or, to the Knowledge of Seller, threatened) proceedings related thereto, and (ii) no event has occurred or circumstance exists that may give rise to or serve as the basis for the commencement of any such proceeding.

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3.5           Brokers’ Fees. With the exception of Hovde Financial, Inc., Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the Acquisition, and Seller shall be solely liable for payment of any such fees or commission to Hovde Financial, Inc.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES CONCERNING THE BRANCHES

Seller represents and warrants to Buyer that the statements contained in this Article 4, as qualified by the Disclosure Schedules relating thereto, are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article 4, except for statements made as of a specific date, in which case such representations and warranties were correct and complete as of such specific date).

4.1           Title; Tangible Personal Property.  Seller has good and marketable title to or, in the case of any personal property lease, good and marketable leasehold interest in, all of the Acquired Tangible Personal Property and other Acquired Assets (other than the Owned Real Property and Leased Real Property, as to which Section 4.11 applies), in each case free and clear of all Encumbrances.  All Tangible Personal Property used by the Branches is in good condition, reasonable wear and tear excepted, and is usable in the Ordinary Course of Business.  Any Acquired Tangible Personal Property held under lease by Seller is held by Seller under a valid and enforceable lease with such exceptions as are not material and do not interfere in any material respect with the use made and proposed to be made of such property by Seller.

4.2           Deposits.

(a)           Seller has provided to Buyer a true and accurate data file of all deposits (including IRAs and Keogh Accounts), and related information, which are assigned to the Branches prepared as of a date within ten (10) days prior to the date of this Agreement, which data shall be updated at and as of a date first, not earlier than thirty (30) days prior to the Closing Date and, second, not earlier than five (5) days prior to the Closing Dateto list separately Deposits to be assumed under this Agreement and deposits that are not being assumed under this Agreement and which data shall be further updated on the date of delivery to Buyer by Seller of the Acquisition Closing Date Balance Sheet and on the Supplemen tal Closing Date, and, in each case as updated, shall be true and accurate as of such date.

(b)           The Deposits are insured to applicable limits by the FDIC in accordance with the Federal Deposit Insurance Act, 12 U.S.C. § 1813, and Seller has paid all assessments and opt-in fees and has filed all reports required to be paid or filed by it to or with the FDIC concerning the Deposits.

(c)           The Deposits were solicited and currently exist in material compliance with all applicable requirements of federal laws and regulations promulgated thereunder and to the extent, if any, that their applicability to Seller is not preempted by federal laws and regulations, state and local laws and regulations promulgated thereunder (for

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purposes of this clause, a Deposit would not be in material compliance if, among other things, the noncompliance subjects the depository institution to any penalty or liability other than the underlying liability to pay the Deposit).

(d)           Seller has the right to transfer or assign each of the Deposits to Buyer, subject to any pledges, liens, judgments, court orders and restrictions on transfer.

(e)           Except as otherwise disclosed by Seller on Schedule 4.2(e) hereof, each of the agreements relating to the Deposits has been duly authorized, executed, and delivered, and is valid, binding, and enforceable upon its respective parties in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights, and by the exercise of judicial discretion in accordance with general principles applicable to equitable and similar remedies.

(f)           Unless otherwise disclosed by Seller on Schedule 4.2(f) hereof, all agreements relating to the Deposits other than certificates of deposit legally permit Buyer to unilaterally terminate or modify such agreements within thirty (30) days after the Closing Date without the consent of the depositor or depositors and without penalty, subject to applicable law, delivery of any notice as may be specified in such agreements and any applicable provisions in such agreements.

4.3           Undisclosed Liabilities.  The Branches have no Liabilities except for (a) Liabilities set forth on the face of the Pre-Closing Balance Sheet (rather than in any notes thereto), (b) Liabilities which have arisen in the Ordinary Course of Business after the Pre-Closing Balance Sheet, and (c) Commitments made in the Ordinary Course of Business.

4.4           Tax Matters.

(a)           With respect to all interest bearing accounts assigned to Buyer, the records of Seller transferred to Buyer contain all information and documents (including, without limitation, properly completed Forms W-9) necessary to comply with all information reporting and Tax withholding requirements under federal and state laws, rules and regulations, and such records identify with specificity all accounts subject to backup withholding under the Code.

(b)           All Tax Returns required to be filed on or before the Closing Date by Seller and its Affiliates with respect to any Taxes payable in respect of the Acquired Assets or Assumed Liabilities or related to the Branches have been timely filed with the appropriate governmental agencies in all jurisdictions in which such Tax Returns are required to be filed and are true and correct in all material respects.

(c)           All Taxes owed by Seller and its Affiliates with respect to the Acquired Assets or Assumed Liabilities or related to the Branches (whether or not shown on any Tax Return) that are required have been timely paid in full.

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(d)           Seller and its Affiliates have withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid to any employee, independent contractor, creditor, stockholder, or other third party with respect to the Acquired Assets or the Assumed Liabilities or related to the Branches.

(e)           There are no claims, assessments, levies, administrative proceedings or lawsuits pending or, to the Knowledge of Seller, threatened by any taxing authority with respect to the Acquired Assets or Assumed Liabilities or related to the Branches; and no audit or investigation of any Tax Return of Seller or its Affiliates with respect to the Acquired Assets or Assumed Liabilities or related to the Branches is currently underway or, to the Knowledge of Seller, threatened.

(f)           As used in this Agreement, the term “Taxes” shall mean all taxes, charges, fees, levies or other like assessments, however denominated, including any interest, penalties or other additions to tax that may become payable in respect thereof and including any obligation to indemnify or otherwise assume or succeed to the tax liability of another Person, imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including, but not limited to, federal income taxes and state income taxes), real property gains taxes, pa yroll and employee withholding taxes, unemployment insurance taxes, social security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers’ compensation, and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which the Seller or its subsidiaries or Affiliates is required to pay, withhold or collect.  As used in this Agreement, the term “Tax Returns” shall mean all reports, estimates, declarations of estimated tax, information statements and returns relating to, or required to be filed in connection with, any Taxes, including any schedule or attachment thereto, and including any amendment thereof, and including information returns or reports with respect to backup withholding and other payments to third parties.

4.5           Employee Benefits.  There are no liens or other claims which affect or could affect the Acquired Assets of any nature, whether at law or in equity, asserted or unasserted, perfected or unperfected, arising out of or relating to any employee, officer, or director of Seller, or the operation, sponsorship or participation of any such persons or by Seller in any employee benefit plan, program, procedure or other employee benefit practice, whether or not subject to the Employee Retirement Insurance Security Act of 1974 (ERISA).  There are no liabilities, breaches, violations or defaults under any “Employee Welfare Benefit Plan” or “Employee Pension Benefit Plan” (a s such terms are defined in Section 3(1) and Section 3(2) of ERISA, respectively) or any other compensatory or benefit arrangement, plan, or program or contract, whether or not subject to ERISA, sponsored, maintained or contributed to by Seller or any of its Affiliates that would subject the Acquired Assets, Buyer, its employee benefit plans, or any fiduciaries thereof to any Tax, penalties or other liabilities.  Seller will retain all liabilities and assume all obligations with regard to all Employee Pension Benefit Plans, Employee Welfare Benefit Plans, deferred compensation plans, early retirement plans, bonus or incentive programs,

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severance pay plans, arrangements or programs, or any similar plans, programs or obligations sponsored by the Seller or its Affiliates.

4.6           Compliance with Applicable Laws.  The Branches are in compliance with Applicable Laws in all material respects, including, without limitation, all applicable Environmental Laws.  No event has occurred or circumstance exists that constitutes a material violation by the Seller in the operation of the Branches, or a failure on the part of the Seller with respect to the Branches to comply with, any Applicable Law in any material respect, including, without limitation, any Environmental Law.  Except for normal examinations conducted in the ordinary course of Seller’s banking business, no Governmental Body has initiated any formal proceeding or investigation into the busine ss or operations of the Seller or the conditions or operations at the Branches and no Governmental Body has initiated any regulatory proceeding or investigations into the business or operations of the Branches.  There is no unresolved violation, criticism or exception by any Governmental Body with respect to any report or statement relating to any examinations of the Seller relating to the Branches, the Acquired Assets or the Assumed Liabilities.

4.7           Legal Proceedings; Orders.

(a)           Except as set forth on Schedule 4.7(a) hereof, there is no pending Proceeding that has been commenced by or against Seller that relates to or arises from the business conducted by the Branches.  To the Knowledge of Seller, (i) no such Proceeding has been threatened and (ii) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding.

(b)           There is no Order to which Seller, or any of the assets owned or used by Seller, is subject that would have a Seller Material Adverse Effect.  Seller is not subject to any Order that relates to the business of, or any of the assets owned or used by, the Branches.

4.8           Employees.

(a)           Seller has provided Buyer a complete list, prepared as of a date within ten (10) days prior to the date of this Agreement, of the employees of the Branches and the Select Remote Employees identifying positions held, exempt or non-exempt status (for purposes of the Fair Labor Standards Act and comparable local wage hours law), current annual salaries or wage rates, target incentive opportunity and projected incentive pay-out for 2009 (if any), actual incentive compensation for 2008 (if any), period of service, and whether such employee is a part-time or full-time employee, and the information contained in such list remains true and complete as of the date hereof.

(b)           Except as set forth on Schedule 4.8(b) hereof, no employee of the Branches or Select Remote Employee is a party to, or is otherwise bound by, any employment contract, agreement or arrangement, including any confidentiality, noncompetition, or proprietary rights agreement, between such employee and Seller, or to Seller’s Knowledge, between any such employee and any third party.

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(c)           No employee at the Branches or Select Remote Employee is represented, for purposes of collective bargaining, by a labor organization of any type.  There is no labor strike, arbitration, dispute, or slowdown or stoppage pending, or to Seller’s Knowledge, threatened, involving the employees of the Branches or the Select Remote Employees, and Seller is unaware of any efforts during the past three (3) years to unionize or organize any employees at the Branches.

(d)           In relation to the Branches and except as set forth on Schedule 4.8(d) hereof, no causes of action, complaints, claims, charges or administrative investigations for unfair labor practices, wrongful discharge, violation of employment contract or employment claims based upon any state or federal law, statute, public policy, order or regulation is pending, or to Seller’s Knowledge, threatened against Seller or its Affiliates.  There are no suits, claims, grievances, or causes of action pending, or, to Seller’s Knowledge, threatened, against Seller (whether in court or before an administrative agency) arising out of or related to Seller’s employment, termination of employment, o r consideration for employment of individuals at the Branches or Select Remote Employees.

(e)           In relation to the Branches, Seller and its Affiliates have complied in all material respects with all laws (including reporting and disclosure requirements) relating to the employment of labor, including provisions relating to wages, hours, collective bargaining, occupational safety, discrimination, classification of employees as exempt or non-exempt for purposes of the Fair Labor Standards Act and comparable local wage and hour laws, and the payment of social security or other taxes, and worker’s compensation or other insurance premiums, and Seller has not received any notice alleging that it has failed to comply in any respect with such laws.

(f)           Buyer will not incur any liability under any severance agreement, deferred compensation agreement, employment agreement, or similar agreement or plan as a result of the transaction contemplated by this Agreement of which Seller is a party or to which it is bound in respect of any employees of the Branches or the Select Remote Employees.  Seller agrees that Buyer will not be bound to the terms of any employment, management, consulting, reimbursement, retirement, early retirement or similar agreement, whether active on the Closing Date or in discussion or negotiation, with any employees of the Branches or Select Remote Employee as to which Seller is a party or to which Seller is bound.

4.9           Environmental Matters.

(a)           Except as disclosed on Schedule 4.9(a) hereof or as discovered during the investigations conducted pursuant to Section 6.15, during Seller’s ownership or operation of the Branches: (i) Seller has not been notified in writing that either Seller or any of the Branches were or are now in violation of any Environmental Law, and (ii) the Branches and the Seller in connection with the Branches have been and are in material compliance with all applicable Environmental Laws.

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(b)           Except as discovered during the investigations conducted pursuant to Section 6.15, during Seller’s ownership or operation of the Branches, Seller has not been notified in writing that any of the Real Estate Interests, or Seller in connection with the Real Estate Interests, were or are in violation of any Environmental Law.  To Seller’s actual knowledge, none of the Branches or the Real Estate Interests, or the Seller in connection with the Real Estate Interests, are in material violation of Environmental Laws as a result of conditions, acts, or omissions existing or occurring prior to Seller’s ownership or operation of the Branches.

(c)           Except as discovered during the investigations conducted pursuant to Section 6.15, there are no Proceedings pending or, to Seller’s actual knowledge, threatened, nor have there been any past Proceedings (or, in the case of Proceedings during any period prior to Seller’s ownership or operation, any past Proceedings to Seller’s actual knowledge) relating to the Real Estate Interests, or Seller in connection with the Real Estate Interests, under any Environmental Law, including, without limitation, any notices, demand letters or requests for information from any federal or state Governmental Body.

(d)           Seller has not received any written notice of any violation of or liability or lien pursuant to any Environmental Laws with regard to the Branches.

(e)           Except as discovered during the investigations conducted pursuant to Section 6.15, Seller has not generated, stored, released, or disposed of any Hazardous Materials at, in, from, on, under or about any of the Branches except in full compliance with Environmental Laws.  To Seller’s actual knowledge, prior to Seller’s ownership or operation of the Branches, no Hazardous Materials were generated, stored, released, disposed or are otherwise present at, in, on, under or about any of the Branches or from any of the Branches except in full compliance with Environmental Laws.

(f)           Except as discovered during the investigations conducted pursuant to Section 6.15, during Seller’s ownership or operation of the Branches, no release (as defined at CERCLA, 42 U.S.C. 9601(22)) of Hazardous Materials has occurred at or from any Branch.  To Seller’s actual knowledge, prior to Seller’s ownership or operation of the Branches, no release (as defined at CERCLA, 42 U.S.C. 9601(22)) of Hazardous Materials has occurred at or from any Branch.  To Seller’s actual knowledge, no condition exists at or in connection with any Branch for which applicable Environmental Laws required or require notice to any third party, further investigation, or response acti on.

(g)           To Seller’s actual knowledge and except as disclosed on Schedule 4.9(g) hereof or as discovered during the investigations conducted pursuant to Section 6.15, no asbestos, mold or lead-based paint is contained in any Branch or property owned, leased or operated by the Seller in connection with the Branches.

(h)           Except as discovered during the investigations conducted pursuant to Section 6.15, to Seller’s Knowledge, there are no underground storage tanks on or under any Branch, nor any Hazardous Material at, in, on, or under or emanating from any

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Branch in any quantity or concentration in violation of any standard or limit established pursuant to Environmental Laws.

(i)           Seller is not required to have any Governmental Authorization under Environmental Laws in connection with any of the Branches.

(j)           To Seller’s actual knowledge and except as discovered during the investigations conducted pursuant to Section 6.15, during Seller’s ownership or operation of the Branches, no Hazardous Materials generated at any Branch have been treated, stored, or disposed of at a location that has been identified by a Governmental Body as a facility that is subject to any existing or potential claim under Environmental Laws.  To Seller’s actual knowledge, prior to Seller’s ownership or operation of the Branches, no Hazardous Materials generated at any Branch have been treated, stored, or disposed of at a location that has been identified by a Governmental Body as a facility that is s ubject to any existing or potential claim under Environmental Laws.

(k)           Seller has delivered to Buyer on or prior to the date hereof (or, at the latest, within ten (10) days following the date of this Agreement), true and complete copies of all documents, records, and information in its possession or control that identify environmental liabilities and other environmental matters, including, without limitation, previously conducted environmental site assessments, reports, studies, surveys and other similar documents or information, including, without limitation, related correspondence, relating to each of the Real Estate Interests.

4.10           Loans.  Seller has provided to Buyer a true and accurate data file of all Loans, including the outstanding principal balance of and the amount of accrued and unpaid interest and fees on such Loans, prepared as of a date within ten (10) days prior to the date of this Agreement, which data shall be updated at and as of the Closing Date, and, in each case as updated, shall be true and accurate in all material aspects as of such date.

(a)           Each Loan included in the Acquired Assets was made or acquired by Seller or its predecessor in the Ordinary Course of Business.  Except as set forth on Schedule 4.10(a) hereof, none of the loans of the Branches (including the Loans) consist of loans between Seller, on the one hand, and any employee or Affiliate of Seller or any of Seller’s Affiliates.

(b)           None of the Loans are presently serviced by third parties, and there are no obligations, agreements or understandings whatsoever that could result in any Loan becoming subject to any such third party servicing.

(c)           There are no misrepresentations of material facts made by officers or employees of Seller in the credit files relating to the Loans, provided that the term “facts” shall not include judgments or opinions of such officers or employees which were in good faith or information which is reflective of information supplied by the borrower or other third parties.

(d)           With respect to each Loan:

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(i)           Such Loan was solicited, originated, administered, serviced and currently exists in material compliance with all applicable requirements of federal laws and regulations promulgated thereunder, including, as applicable, any written SBA service guidelines, and to the extent, if any, that their applicability to Seller is not preempted by federal laws and regulations, state and local laws and regulations promulgated thereunder (for purposes of this clause (i), a Loan would not be in material compliance if the noncompliance adversely affects the value or collectibility of the Loan or subjects the lender to any penalty or liability);

(ii)           Each note, agreement or other instrument evidencing a Loan and any related security agreement and other document securing, governing or otherwise relating to such Loan (including, without limitation, any guaranty or similar instrument) is true, genuine and, in all material respects, complete, and constitutes a valid, legal and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium, laws governing fraudulent conveyance or equitable subordination principles and other laws of general applicability relating to or affecting creditors’ rights generally, and all actions necessary to perfect any related security interest in favor of Seller have been dul y taken;

(iii)           Such Loan (A) to the extent secured or purported to be secured by a lien in favor of Seller, is secured by a valid and enforceable, and duly perfected, lien in favor of Seller in the collateral therefor, which lien is assignable, and (B) contains customary and enforceable provisions such that the rights and remedies of the holder thereof shall be adequate for the practical realization against any collateral therefor;

(iv)           There has been no material modification, amendment or supplement to or material waiver of the terms of the applicable loan documents except as reflected in writing in the loan file made available to Buyer in respect of such Loan;

(v)           Such Loan is accruing interest in accordance with its terms;

(vi)           Such Loan is not pledged to a third party or otherwise encumbered, and no other party has filed a UCC financing statement in connection therewith;

(vii)           Seller is in possession of all (A) original notes or lost note affidavits, or (B) mortgages or certified copies of such mortgages and financing statements (or other lien filing documents), provided that such mortgages and financing statements (or other lien filing documents) have been returned by the local recording office;

(viii)           There is no valid claim or valid defense (including the defense of usury) to the enforcement of such Loan or a valid right of setoff or rescission;

(ix)           No claim or defense (including the defense of usury) to the enforcement of a Loan or a valid right of setoff or rescission has been asserted

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with respect to any Loan by the applicable borrower(s) under such Loan or, to the Knowledge of Seller, by any other Person;

(x)           Neither Seller nor any predecessor has taken or failed to take any action that would entitle any obligor or other party to assert successfully any claim against Seller or Buyer (including, without limitation, any right not to repay any such obligation or any part thereof);

(xi)           Such Loan was made substantially in accordance with Seller’s or Seller’s predecessor’s standard underwriting and documentation guidelines as in effect at the time of its origination, and has been administered substantially in accordance with Seller’s or Seller’s predecessor’s standard loan servicing and operating procedures as in effect from time to time;

(xii)           Seller may transfer or assign such Loan to Buyer without the approval or consent of any obligor thereunder;

(xiii)           Such Loan is not as of the date hereof, or is or has not been during the period beginning on the date hereof and ending on and as of the Closing Date, thirty (30) calendar days or more delinquent (without giving effect to any grace period, waiver, forbearance, reservation of rights, extension, modification or amendment);

(xiv)           Neither the borrower nor any guarantor of the Loan is in bankruptcy and, to Seller’s Knowledge, there are no facts, circumstances or conditions with respect to such Loan, the collateral therefor or the borrower’s credit standing, that could reasonably be expected to cause such Loan to become delinquent or adversely affect the collectibility, the value or the marketability of such Loan;

(xv)           No notice of default has been given or received by Seller with respect to any Loan and Seller has not received any notice of any violation of law with respect to any Loan or any collateral for any Loan;

(xvi)           There is no pending, or to Seller’s Knowledge, threatened, litigation or claims which may affect in any way the title or interest of the Seller or the borrower in and to such Loan, the collateral for such Loan and the promissory note or the mortgage or deed of trust;

(xvii)           There are no threatened or pending foreclosures, total or partial condemnation (to Seller’s Knowledge) or repossession proceedings or insurance claims (to Seller’s Knowledge) with respect to such Loan or the collateral for such Loan; and

(xviii)           Seller has not directed, controlled or overseen the management of environmental matters of any borrower or any real estate in which the Seller in connection with the Branches holds or has held a security interest and which

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constitutes a Loan so as to cause the Seller to act outside the exclusion under 42 U.S.C. § 9601(20)(E) or any other analogous provisions under applicable Environmental Laws.

4.11           Owned Real Property, Leased Real Properties and Tangible Personal Property.

(a)           Schedule 4.11(a)(i) hereof lists and describes briefly all real property owned by Seller and used as Branch premises (the “Owned Real Property”).  With respect to each parcel of the Owned Real Property, Seller has good and marketable fee title to such parcel of Owned Real Property free and clear of any Encumbrance except for Permitted Encumbrances.  With respect to each Leased Real Property, Seller has a good and valid leasehold interest in such Leased Real Property on and subject to the terms of its applicable Lease, it being understood that Seller makes no representations or warranties about matters affec ting the respective landlords’ fee title to the Leased Real Properties).  Except as set forth on Schedule 4.11(a)(ii), there are no tenants or other parties claiming by, through or under Seller that have a possessory right in and to any space in respect of the Owned Real Property (all such agreements listed on Schedule 4.11(a)(ii), the “Tenant Leases”).  Seller has delivered to Buyer a true, correct and complete copy of each Tenant Lease as amended, modified or supplemented.  Each Tenant Lease is an existing legal, valid and binding obligation of Seller and, to Seller’s Knowledge, each other party thereto, subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity; and there does not exist with respect to Seller’s obligations thereunder, or, to Seller’s Knowledge, with respect to the obligations of the tenant thereunder, any default, or event or condition which constitutes or, after notice or passage of time or both, would constitute a default, on the part of Seller or the tenant under any such Tenant Lease.

(b)           Except as set forth in Schedule 4.11(b) hereof, with respect to the Acquired Tangible Personal Property, the Owned Real Property and the Leased Real Properties (it being understood that Seller is not the fee owner of any Leased Real Property and so, notwithstanding anything to the contrary herein, to the extent the representations relating to the real property parcel of which a Leased Real Property is a part set forth below are qualified to the “Seller’s Knowledge,” such knowledge shall be limited to the actual knowledge (without inquiry or investigation) of Seller’s officers or directors or senior managers or Branch managers; provided, however, that Seller shall be deemed to have knowledge of any matter, fact, event, default, violation, breach, noncompliance, notice, consent or other circumstance if any of the same shall have been delivered in writing to Seller at anytime prior to the Closing):

(i)           there are no pending or, to Seller’s Knowledge, threatened, condemnation proceedings, claim of violation of zoning laws, governmental investigation, lawsuits, or administrative actions relating to the Owned Real Property, Seller’s interest in the Leases or the Leased Real Properties, or the Acquired Tangible Personal Property, or, to Seller’s Knowledge, in the case of each Leased Real Property, the real property parcel of which such Leased Real

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Property forms a part, affecting, or which might affect, adversely in any material respect, the current use, occupancy, or value thereof;

(ii)           there are no outstanding options or rights of first refusal to purchase any parcel of the Owned Real Property, the Leases or Seller’s interest in the Leased Real Properties, or the Acquired Tangible Personal Property, or any portion thereof or interest therein, or, to Seller’s Knowledge, in the case of any Leased Real Property, the real property parcel of which such Leased Real Property forms a part, or any portion thereof or interest therein except, in the case of the Leased Real Properties, such options or rights as set forth in the Leases;

(iii)           no written notice of any violation of zoning laws, building or fire codes or other statutes, ordinances, or regulations or of restrictive covenants relating to the use or operation of the Real Estate Interests has been received by Seller which has not been corrected and, if required, accepted in writing by the applicable Governmental Body, and Seller has not undertaken or completed any construction or improvements on the Real Estate Interests within the past one hundred fifty (150) days which could result in the imposition of any mechanics, materialmen or other similar liens on the Real Estate Interests (other than minor repairs made in the Ordinary Course of Business, all of which have been paid in full);

(iv)           there is no pending or, to Seller’s Knowledge, contemplated rezoning proceeding or special assessment affecting the Real Estate Interests or, to Seller’s Knowledge, in the case of each Leased Real Property, the real property parcel of which such Leased Real Property forms a part;

(v)           to Seller’s Knowledge, the Real Estate Interests are not subject to any special tax valuation or special tax exemption, which upon a change in use or ownership of the Real Estate Interests will result in a “rollback tax” or similar assessment, and to Seller’s Knowledge, with respect to any real property parcel of which any Leased Real Property forms a part, such parcel is not subject to any special tax valuation or special tax exemption, which upon a change in use or ownership of such parcel will result in a “rollback tax” or similar assessment that would be payable by Seller under any Lease;

(vi)           to Seller’s Knowledge, (A) access to each of the Owned Real Property and each the Leased Real Property (or in the case of any Leased Real Property, the real property parcel of which such Leased Real Property forms a part) is available over public streets, (B) all water, sewer, gas, electric, telephone, cable, drainage and other utility equipment, facilities and services required by applicable laws and regulations or necessary for the current operation of the Real Estate Interests are installed, connected and adequate to serve the Real Estate Interests for their current use, and (C) all utility lines servicing the Real Estate Interests are located either within the boundaries of the applicable Owned Real Property or Leased Real Properties (or in the case of any Leased Real Property,

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the real property parcel of which such Leased Real Property forms a part), within lands dedicated to the public use or within recorded easements for such purpose, and are serviced and maintained by the appropriate public or quasi-public entity;

(vii)           to Seller’s Knowledge, Seller possesses all rights, privileges, licenses, franchises, permits and other authorizations (including certificates of occupancy, if applicable) that are material to the current use, occupancy, and operation of the Real Estate Interests;

(viii)           all permits that are material to the current use, occupancy and operation of the Real Estate Interests and, to Seller’s Knowledge, in the case of any Leased Real Property, the real property parcel of which such Leased Real Property forms a part, are in full force and effect and Seller has not received written notice of any pending or threatened revocation, suspension or termination proceedings concerning such permits;

(ix)           all improvements located on the Owned Real Property and, to Seller’s Knowledge, on the Leased Real Properties, the roofs thereon, and all mechanical systems (including, without limitation, all HVAC, plumbing, electrical, elevator, security, utility, sprinkler and safety systems) therein, are in good working order, and, to Seller’s Knowledge, are in sound structural condition and free from material defect or deficiency;

(x)           Seller has not received any written notice (which remains outstanding) from a Governmental Body or other party alleging the existence of such defect or deficiency as set forth in subclause (ix) of this Section 4.11(b); and

(xi)           there has been no casualty damage affecting all or any material portion of the Owned Real Property or the Leased Real Properties which has not been restored except for any damage for which either adequate insurance proceeds will be transferred to Buyer at Closing, with Seller being responsible for deductibles or, in the case of any Leased Real Property, the landlord under the Lease is responsible to restore under the terms of such Lease and which damage has been disclosed to Buyer.

4.12           Leased Real Property.  Schedule 4.12 attached hereto lists all leases, subleases, occupancy agreements or similar agreements under which Seller occupies (or has the right to occupy) pursuant to a lease, license or similar arrangement any real property interest (i) used as a Branch, or (ii) used in connection with the operation of such Branch if such real property interest is incidental to and located at or in immediate and close proximity to such Branch (including any separate parking lot leases where customers of such Branch are permitted to park) (collectively, the “Leases”), and Seller is entitled to possession of the Leased Real Properties as lessee in accordance with the terms of the respective Leases.  The Leases are accurately described on Schedule 4.12 attached hereto and, except as shown on Schedule 4.12, have not been amended, modified or supplemented.  Seller has delivered to Buyer a true, correct and complete copy of each Lease as amended, modified or supplemented.  Each Lease is an existing legal, valid and

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binding obligation of Seller and, to Seller’s Knowledge, each other party thereto, subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity; and there does not exist with respect to Seller’s obligations thereunder, or, to Seller’s Knowledge, with respect to the obligations of the lessor thereof, any default, or event or condition which constitutes or, after notice or passage of time or both, would constitute a default, on the part of Seller or the lessor under any such Lease.  There are no tenants or other parties claiming by, through or under Seller that have a possessory right in and to any space in respect of the Leased Real Properties.  As used in thi s Section 4.12, the term “lessor” includes any sub-lessor of the property to Seller.  There are no subleases relating to any Leased Real Property created or suffered to exist by Seller, or to Seller’s Knowledge, created or suffered to exist by any other Person.  Subject to Seller obtaining any consents necessary for the valid assignment to Buyer of the Leases, which consents are listed on Schedule 4.12 (the “Landlord Consents”), the assignment of such Leases will transfer to Buyer on the Closing Date all of Seller’s rights under the Leases.

4.13           Acquired Contracts.  Seller has delivered to Buyer a correct and complete copy of each written Acquired Contract (as amended to date) and a written summary setting forth the terms and conditions of each oral Acquired Contract, if any.  With respect to each such Acquired Contract:  (i) it is a legal, valid, binding and enforceable contract, and in full force and effect, as against Seller and, to the Knowledge of Seller, each other party thereto, subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity; (ii) it will conti nue to be such a legal, valid, binding and enforceable contract, and in full force and effect, as against Seller and, to the Knowledge of Seller, each other party thereto on identical terms following the consummation of the transactions contemplated hereby, (iii) neither Seller nor, to the Knowledge of Seller, each other party thereto is in breach or default thereunder and  no event has occurred that with notice or lapse of time, or both, would constitute a breach or default thereunder or permit termination, modification, or acceleration thereunder, and (iv) neither Seller, nor to Seller’s Knowledge, any other party thereto has repudiated any provision thereof.

4.14           Absence of Certain Changes and Events.  Since October 1, 2009 Seller has not:

(a)           suffered any change which would have a Seller Material Adverse Effect;

(b)           except in the Ordinary Course of Business and consistent with prudent banking practices, (i) sold, transferred, leased, pledged, mortgaged, or otherwise encumbered or (except for this Agreement) agreed to sell, transfer, lease, pledge, mortgage or otherwise encumber, any of the Acquired Assets or rights with respect thereto, (ii) canceled, waived, compromised or agreed to cancel, waive or compromise any debts, claims or rights with respect to the Acquired Assets or the Assumed Liabilities,or (iii) amended, modified or supplemented any of the terms or conditions governing the Loans;

(c)           made or permitted any amendment, termination or lapse of any contract, lease, agreement, license or permit, if such amendment, termination or lapse (individually

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or in the aggregate) would reasonably be expected to have a Seller Material Adverse Effect;

(d)           made any change in any method of management or operation of the Branches not in the Ordinary Course of Business or any accounting change, except as may be required by generally accepted accounting principles or general regulatory requirements;

(e)           except as set forth in Schedule 4.14(e) hereof, granted any general increase in the compensation (including bonuses) of its officers or employees located at the Branches or the Select Remote Employees (including any increase pursuant to any bonus, pension, profit sharing or other plan or commitment), except for, to the extent permitted by Section 6.1(b)(i) hereof for the period between the date hereof and the Closing Date, normal periodic increases made pursuant to established compensation policies applied on a basis consistent with that of the prior year, and increases and payments necessary, in the Seller’s reasonable discret ion, to maintain and preserve the operation of the Branches, all of which increases that relate to employees located at the Branches or the Select Remote Employees shall be promptly disclosed in writing to Buyer by Seller within forty-five (45) days prior to the Closing Date;

(f)           caused the Branches to transfer to Seller’s other operations any deposits other than deposits that are not Deposits for purposes of this Agreement, except in the Ordinary Course of Business at the unsolicited request of depositors, or caused any of Seller’s other operations to transfer to the Branches any deposits, except in the Ordinary Course of Business at the unsolicited request of depositors;

(g)           made any change to its customary policies for setting rates on deposits offered at the Branches, including any increase in interest rates paid except as otherwise contemplated by Section 6.1(b)(v) hereof; or

(h)           entered into any other transaction or agreement, incurred any capital expenditures, or conducted its affairs, in each case as related to the Acquired Assets or the Assumed Liabilities, other than in the Ordinary Course of Business and consistent with prudent banking practices except as contemplated by this Agreement.

4.15           Escheat Deposits.  All of the deposits and other property (including the contents of safe deposit boxes) held or maintained at the Branches that would constitute escheated deposits or property at any time prior to the Closing were properly reported and transmitted to the applicable Governmental Body.

4.16           Books and Records.  The Books and Records accurately reflect in all material respects as of their respective dates the Book Value of the Acquired Assets and Assumed Liabilities being transferred to Buyer hereunder.  The Books and Records are true and complete in all material respects and fairly reflect and also include all customary Branch, customer and customer-related information reasonably necessary to service the Deposits and Loans on an ongoing basis, and to otherwise operate the business in respect of the Acquired Assets and Assumed Liabilities being acquired or assumed under this Agreement in substantially the manner

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currently operated by Seller.  The Books and Records, including, but not limited to, IRA and Keogh Account documentation, are in compliance in all material respects with all requirements of applicable law.

4.17           Insurance.  Seller maintains in full force and effect insurance on the Acquired Assets in such amounts and against such risks and losses as are (based on advice of its insurance broker) customary and adequate for comparable entities engaged in the same business and industry.

4.18           Disclosure.  No representation or warranty of Seller contained herein, when read together with the Disclosure Schedule, is false or misleading in any material respect or omits to state a fact herein or therein necessary in order to make the statements contained herein or therein not false or misleading in any material respect.

4.19           Community Reinvestment Act Designations.  As of the date of this Agreement, each of the subsidiaries or Affiliates of Seller that is an insured depository institution was rated “Satisfactory” or “Outstanding” following its most recent Community Reinvestment Act examination by the regulatory agency responsible for its supervision.  To Seller’s Knowledge, Seller has not received any notice of and has not been made aware of any planned or threatened objection by any community group to the transaction contemplated hereby.

4.20           No Knowledge of Fraud.  Seller is not aware (based on Seller’s Knowledge) of: (i) any Loan, Deposit, lending relationship or deposit relationship held or maintained at the Branches that is or may reasonably be considered to be fraudulent in nature, notwithstanding that any Loan may be current and performing; or (ii) any device, artifice or scheme, whether by customers or Seller’s employees, to commit fraud with respect to any activities conducted at the Branches, including but not limited to deposit or lending functions conducted at the Branches.

4.21           Limitation on Warranties.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE OWNED REAL PROPERTY, LEASED REAL PROPERTIES, OR THE ACQUIRED TANGIBLE PERSONAL PROPERTY OR WITH RESPECT TO ANY ACQUIRED ASSETS OR ASSUMED LIABILITIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller that the statements contained in this Article 5 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then as though the Closing Date were substituted for the date of this Agreement throughout this Article 5).

5.1           Organization, Qualification, and Corporate Power.  Buyer is a national banking association duly organized and validly existing under the laws of the United States, with full

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corporate power and authority to conduct its business as now being conducted and to own or use the properties and assets that it purports to own or use.

5.2           Authorization of Transaction.  Buyer has the full corporate power and authority to execute and deliver this Agreement and the other Buyer Documents.  Subject to approval by any necessary federal or state banking regulatory authority, Buyer has the corporate power to perform Buyer’s obligations hereunder and under the other Buyer Documents, and to consummate the transactions contemplated hereby and thereby.  Each of this Agreement, and when executed and delivered, each of the other Buyer Documents, constitutes the valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms and conditions, subject to bankruptcy, insolvency, reor ganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity.  Except for the Regulatory Approvals or as otherwise provided herein, Buyer is not required to give any notice to, make any filing with, or obtain any authorization, or Consent of any Governmental Body in order to execute and deliver this Agreement or consummate the Acquisition.

5.3           Noncontravention. Subject to the required Consents described in Section 5.2, neither the execution and the delivery of this Agreement by Buyer, nor the consummation of the Acquisition by Buyer, will directly or indirectly:

(a)           Contravene, conflict with, or result in a violation of (i) any provision of the charter or bylaws of Buyer or (ii) any resolution adopted by the board of directors or the shareholders of Buyer;

(b)           Contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge the Acquisition or to exercise any remedy or obtain any relief under, any Applicable Law or any Order to which Buyer, or any of the assets owned or used by Buyer may be subject;

(c)           Except for matters which would not have a Buyer Material Adverse Effect, contravene, conflict with, or result in a violation of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Buyer or that otherwise relates to the business of, or any of the assets owned or used by, Buyer; or

(d)           Except for matters which would not have a Buyer Material Adverse Effect, contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Contract to which Buyer is a party.

5.4           Brokers’ Fees.  Except for fees payable to RBC Capital Markets Corporation, Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the Acquisition, and Buyer shall be solely liable for payment of any such fees or commissions payable to RBC Capital Markets Corporation.

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5.5           Legal Proceedings; Orders.  There are no pending proceedings or an Order pending against Buyer that would prohibit Buyer’s fulfillment of obligations agreed to in this Agreement.

5.6           Financial Condition.  The financial condition of Buyer is sufficient to enable Buyer to consummate the Acquisition without any external financing.

5.7           Regulatory Condition.  Buyer has not received any indication from any federal or state governmental agency or authority that such agency would oppose or refuse to grant a Regulatory Approval, and to Buyer’s Knowledge, there exists no fact or circumstance that would prevent or delay Buyer’s ability to obtain promptly all Regulatory Approvals.

ARTICLE 6

PRE-CLOSING COVENANTS

The Parties agree as follows with respect to the period from and after the execution of this Agreement.

6.1           Operation of Business.

(a)           From the date of this Agreement through the Closing Date, Seller shall use Commercially Reasonable Efforts to maintain the level of customer accounts of the Branches existing on the date hereof.

(b)           From the date of this Agreement through the Closing Date, Seller will not, and will not cause or allow the Branches to, engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business, and, without the prior written consent of Buyer, Seller shall not with respect to the Branches:

(i)           increase the rate of compensation of any of the Branches officers or employees or Select Remote Employees, or enter into any employment contracts with any Potential Employee except in the Ordinary Course of Business; provided, however, prior to or on the Closing Date, Seller shall pay in full to the Retained Employees the performance, incentive or other bonuses required to be paid to them pursuant to Section 6.7(c) hereof;

(ii)           authorize or make any capital expenditure(s) which, individually or in the aggregate, exceeds $5,000 for any single Branch;

(iii)           extend any new, or renew any existing, loan (or Commitment), credit, lease, or other type of financing or renew any such type of financing in which the maximum principal amount thereunder would pursuant to the terms thereof exceed $1,000,000;

(iv)           extend any new, or renew any existing, loan, credit, lease, or other type of financing or renew any such type of financing, or purchase any loan

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participation interest, which does not meet Seller’s loan policy requirements as of the date of this Agreement;

(v)           make any change to (A) the interest rates or price or rates of fees, (B) the policies or programs, or (C) the period of time applicable to any promotional period, in each case as in existed on the date of this Agreement with respect to the loans or deposits of, or offered by, the Branches other than in the Ordinary Course of Business and as determined to be necessary or advisable by Seller in the reasonable bona fide exercise of its discretion based on changes in market conditions applicable to the Branches; provided, however, that (1) an interest rate increase on any deposit in excess of  25 basis points or a decrease in the interest rate of any loan in excess of 50 basis points shall not be deemed to be in the Ordinary Course of Business and shall require Buyer’s prior written consent (it being understood that Buyer shall not unreasonably withhold or delay its consent with respect to such actions), and (2) Seller shall be permitted to offer interest rates on any certificates of deposits or money market deposit accounts at rates that are lower than the rates offered as of the date of this Agreement without the prior written consent of Buyer;

(vi)           authorize or allow Potential Employees to take vacation or other voluntary leaves of absence during the five (5) Business Day periods preceding or following the Closing Date, other than any leave of absence that is required to be granted pursuant to the Family Medical Leave Act;

(vii)           deliver or distribute, in writing or electronically, to any customer of the Seller, any notice, letter or other correspondence that is related to the Acquisition or matters of transition related thereto, including the status of such customer’s accounts or loans with Seller (it being understood that Buyer shall not unreasonably withhold or delay its consent with respect to such actions);

(viii)           forward to vendors of Seller the names and other contact information of depositors and other customers of the Branches if such vendors are permitted to use such information to solicit credit card, debit card or prepaid card business, or brokerage, investment or insurance business or any other business customarily conducted by a bank, from such depositors and other customers, except that nothing contained in this clause (viii) shall restrict Seller from forwarding such names to First Brokerage America, LLC (or its insurance company subsidiary) to enable them to carry on the brokerage and insurance business carried on by them out of the Branches consistent with past practices;

(ix)           make any material changes to the terms and conditions governing the Deposit accounts, other than as required by applicable law, rule or regulation;

(x)           enter into any interest rate swap, collar, floor or other hedging or derivative agreement or amend, modify or supplement any thereof, or agree to any provision in any Loan entered into after the date hereof under which the borrower

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under such Loan shall be required or permitted, with respect to such Loan, to enter into any interest rate swap, collar, floor or other hedging or derivative agreement;

(xi)           amend, terminate, extend or waive any right in any material respect, or sell, assign or transfer, any Lease or Acquired Contract; provided, however, that (A) in the case of any Lease, Seller may, without the consent of Buyer, exercise any renewal option on the renewal terms expressly set forth under such Lease as of the date hereof (and without modification, for the avoidance of doubt, to the payment amount or obligations thereunder) if such Lease shall expire prior to the Closing Date unless Buyer shall have delivered written notice instructing Seller not to renew or extend such Lease within ten (10) Business Days following notice from Seller of its intention to extend or renew such Lease (and Seller hereby agrees to give notice to Buyer of its intention to so extend or renew any such Lease), and (B) in the case of any Acquired Contract, Seller may, without the consent of Buyer, amend, terminate or extend such Acquired Contract that involves the payment or receipt of not more than $2,500 during any one (1) year period;

(xii)           except as required by law or the terms of the documents governing any Loan, (A) release any collateral or any party from any liability on or with respect to such Loan, (B) compromise or settle any material claims of any kind or character with respect to such Loan, or (C) amend or waive any of the material rights or other terms of such Loan as set forth in the Loan documents; provided, however, that Buyer agrees not to unreasonably withhold or delay its consent to any of the actions described in clause (C) above provided that such actions are taken in accordance with the underwriting standards, pricing levels and other par ameters or terms of Seller as in effect on the date hereof or as mutually agreed upon by the Buyer and Seller in writing from time to time;

(xiii)           sell, transfer, assign, encumber or otherwise dispose of, or enter into any contract, agreement or understanding to sell, transfer, assign, encumber or dispose of, any of the assets or deposits of the Branches, except in the Ordinary Course of Business consistent with past practice; provided, however, in no event shall Seller take any of the foregoing actions with respect to (A) any of the Owned Real Property, (B) any of the Leases, (C) any of the Deposits, or (D) any Loan;

(xiv)           except as permitted by this Section 6.1(b), knowingly take, or knowingly permit its Affiliates to take, any action (A) impairing Buyer’s rights in any Deposit or Acquired Asset, (B) impairing in any way the ability of Buyer to collect upon any Loan, or (C) waiving any material right, whether in equity or at law, that it has with respect to any Loan; or

(xv)           directly or indirectly agree or commit to take any of the foregoing actions.

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(c)           From the date of this Agreement through the Closing Date, Seller will not, and will not cause or allow the Branches to, distribute or deliver any marketing materials to the customers of the Branches without consulting with the Buyer other than customary marketing materials in the Ordinary Course of Business.

6.2           Notice of Potential Material Adverse Effect.  Seller will give prompt written notice to Buyer of any fact or circumstance which would result in a Seller Material Adverse Effect, or cause a breach or threatened breach of any of the representations and warranties in Article 3 or 4 above.  Buyer will give prompt written notice to Seller of any fact or circumstance which would result in a Buyer Material Adverse Effect or cause a breach or threatened breach of any of the representations and warranties in Article 5.

6.3           Reasonable Access.  Buyer, its vendors and agents shall be given onsite access to the Branches, both during and outside of normal business hours, as reasonably necessary or appropriate beginning within five (5) calendar days following the execution of this Agreement to investigate the Branches’ properties, books, contracts, commitments, records, operations and conditions (financial or otherwise) and inspect, among other things, the Seller’s Books and Records; provided that such investigation shall be related to the Acquisition and shall not interfere materially or unnecessarily with the Branches’ normal operatio ns.  Buyer shall, and shall cause its advisors and agents to, maintain the confidentiality of all confidential information furnished to it and shall not use such information for any purpose except in furtherance of the Acquisition.  Within five (5) calendar days of the execution of this Agreement, Buyer shall be permitted, at its expense, to install and test voice and data communication lines and WAN, both internal and external, from each Branch and prepare for the installation of hardware and software; provided that such installation and testing shall be conducted at mutually agreeable times and so as to minimize, to the extent reasonably practicable, interference with Seller’s operation of its business.  If this Agreement is terminated, Buyer shall promptly return or certify the destruction of all documents and copies thereof and all work papers containing confidential information received pursuant to this Section 6.3 concerning the Branches.  Seller shall allow Buyer to remove the Seller’s Books and Records for purposes related to the Acquisition, subject to such reasonable restrictions and limitations for confidentiality or security or other purposes as required by Seller.

6.4           Press Releases.  Prior to the Closing Date, the Parties will consult with each other as to the form and substance of any press release or other public disclosure materially related to the Acquisition; provided that no Party is prohibited from making any disclosure which its counsel deems necessary or advisable in order to satisfy any requirements of Applicable Law or the rules of any national securities exchange on which securities of a Party or Affiliate of a Party are listed, in which case the Party making such public announcement or disclosure shall give prior written notice to the other Party promptly after the disclosing Par ty is notified of the disclosure requirement.  Neither Party will be required to seek the other Party’s approval of any public notice required for any required regulatory filing.

6.5           Exclusivity.  From the date of this Agreement through the Closing Date, Seller will not and will cause its Affiliates not to, directly or indirectly, (a) solicit, initiate, or encourage the submission of any proposal or offer from any Person other than Buyer relating to the

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acquisition of any Branch or any of the assets, properties or deposits thereof, except as otherwise permitted by Section 6.l(b) hereof (it being understood that Seller shall have the right to sell, without the consent of Buyer, any Excluded Loan provided such Excluded Loan was originated prior to the date hereof as contemplated by Section 6.18 hereof) or (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing.  Seller will notify Buyer immediately if any Person makes any proposal, offer, inquiry, or contact with respec t to any of the foregoing.

6.6           Regulatory Matters and Approvals.  Each of the Parties will cooperate and use Commercially Reasonable Efforts to promptly prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary Governmental Authorizations.  Buyer shall file all requisite applications with the applicable Governmental Bodies no later than thirty (30) calendar days after the date of this Agreement (and shall use its Commercially Reasonable Efforts to file such applications not later than twenty (20) calendar days after the date of this Agreement); provid ed that Seller has supplied to Buyer all necessary Seller information required for such applications and Buyer shall have provided to Seller a copy of each such application (excluding confidential sections thereof) not less than three (3) Business Days prior to the date on which such application is to be filed.  Buyer shall respond (and Seller shall assist Buyer in responding) to all requests for information from a Governmental Body in a timely manner and shall use their respective Commercially Reasonable Efforts to respond to any request within three (3) Business Days.  Each of the Parties will (i) permit the other to review in advance and, to the extent practicable, will consult with the other Party on all characterizations of the information relating to the other Party which appear in any filing made with, or written materials submitted to, any Governmental Body in connection with the Acquisition; and (ii) consult with the other with respect to obtaining all Government al Authorizations necessary or advisable to consummate the Acquisition (unless prohibited by the applicable Governmental Body) and will keep the other Party apprised of the status of matters relating to completion of the Acquisition.  Each of the Parties will promptly furnish the other Party with copies of all written communications received by it, from, or delivered to, any Governmental Body in connection with and material to the Acquisition, except for any confidential portions thereof and shall update the other party on any non-written correspondence with Governmental Bodies relating to Governmental Authorizations.

6.7           Employment.

(a)           Buyer may, but shall be under no obligation to, extend offers of employment as of the Closing Date to (i) employees of Seller at the Branches and (ii) the Select Remote Employees (such employees and Remote Select Employees, collectively, the “Potential Employees”).  Seller shall assist, and shall cause its Affiliates to assist, Buyer’s solicitation of Potential Employees to accept employment with Buyer and/or Affiliates of Buyer.  From and after the date hereof through the Closing Date, Buyer may initiate contact and engage in reasonable communication with Potential Employees, including, without limitation, via electronic mail, physical delivery by mail o r facsimile, or telephone or in-person contact, and Seller shall use its reasonable efforts to assist in the facilitation of such communications.  Without limiting the foregoing, Seller shall permit

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Buyer to contact and solicit the Potential Employees promptly after the date of this Agreement and shall cooperate with Buyer to establish procedures for Buyer to interview the Potential Employees and to provide Buyer with appropriate information relating to the Potential Employees (including a copy of each such Potential Employee’s most recent performance review and access to each such Potential Employee’s entire personnel and employment file, excluding medical information unless such Potential Employee shall have otherwise consented to the disclosure thereof to Buyer).

(b)           Buyer shall notify Seller at least thirty (30) days prior to the Closing which Potential Employees Buyer desires to employ following Closing.  Buyer agrees that, with respect to each such Potential Employee to whom Buyer so desires to make an offer of employment, Buyer shall (i) make such offer at least fifteen (15) days prior to the Closing Date, and (ii) in the case of each Potential Employee receiving an offer and subject to the other provisions of Section 7.13 hereof, offer to such individual (A) base salary that is comparable to his or her base salary as of the date hereof and (B) incentive compensation and health and welfare benefits that are substantially comparable to the incentive compensation and health and welfare benefits offered by Buyer to similar level employees within Buyer’s workforce as of the date of Buyer’s offer to such Potential Employee.  Potential Employees who accept offers of employment by Buyer prior to the Closing Date and become employees of Buyer by reporting for work with Buyer on the first Business Day following the Closing Date or within five (5) Business Days after the Closing Date as may be applicable to Potential Employees shall be referred to herein as “Retained Employees.”  All Retained Employees will be removed from Seller’s payroll effective as of the Closing Date.

(c)           At Closing, (i) all wages and salaries, workers’ compensation payments, accrued and unused vacation pay and social security and unemployment taxes of employees at the Branches and Select Remote Employees (including Retained Employees) shall be paid by Seller for the period prior to and including the Closing Date, and (ii) Seller will make all severance and other payments and perform all obligations to Seller’s employees under any and all severance or stay-pay agreements executed between Seller and the employees of the Branches.  In addition, on the Closing Date, Seller shall (X) compute all performance and incentive bonuses and annual bonuses that a Retained Employee would otherwise be entitled to under any existing formula-based performance or incentive agreement or other existing formula-based bonus policy or arrangement applicable to such Retained Employee as though such Retained Employee shall have completed his or her service for the current annual or other period as to which such bonus relates (and a copy of such computation shall be delivered to Buyer at least five (5) Business Days prior to the Closing Date), and (Y) pay to such Retained Employee such bonus or incentive in an amount equal to the full amount of such bonus or incentive for such annual or other period multiplied by a fraction, the numerator of which shall be the number of days from the beginning of such annual or other period and ending on the Closing Date and the denominator of which shall be the total number of days in such annual or other period.

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(d)           Nothing contained herein shall (i) confer upon any former, current or future employee of Seller or its Affiliates or Buyer or its Affiliates or any legal representative or beneficiary thereof any rights or remedies, including, without limitation, any right to employment or continued employment of any nature, for any specified period, or (ii) cause the employment status of any former, present or future employee of Buyer or its Affiliates to be other than terminable at will.

(e)           Prior to the Closing Date, Seller and Buyer shall cooperate in order to permit Buyer to train Potential Employees, and Seller shall, as scheduled by Buyer for reasonable periods of time and subject to Seller’s reasonable approval, excuse such employees from their duties at the Branches for the purpose of training and orientation by Buyer.  Buyer agrees to reimburse Seller for any out-of-pocket overtime expenses of Seller for Potential Employees if such training is not available during Seller’s normal business hours for the Branches.

(f)           If for any reason the Acquisition is not consummated, in consideration of the access to and information regarding Seller’s employees, for a period of two (2) years following date of this Agreement, Buyer and its Affiliates shall not solicit for employment any Potential Employee or any of Seller’s other employees, without the prior consent of Seller; provided, however, that the foregoing shall not apply to responses to or follow-up hiring in respect of general solicitations or advertisements for job positions not specifically directed to the Potential Employees or Seller’s other employees.

6.8           Conveyance of Customer Accounts.

(a)           Deposit and Loan Accounts.  The Parties specifically acknowledge that Buyer has the regulatory duty for all communications regarding any change in terms of Deposit and Loan agreements.  In the event Buyer desires to change any such terms effective as of the Closing Date, Buyer shall have the right to distribute written communications to such customers prior to the Closing; provided, however, that Buyer shall provide proposed written communications for the Loan and Deposit customers of the Branches to Seller five (5) Business Days prior to Buyer’s sc heduled mailing or other provision of such notices for Seller’s review and approval.  Such written communications shall be mailed at Buyer’s expense and shall be mailed or otherwise provided to Loan and Deposit customers of the Branches at Buyer’s sole discretion.

(b)           Loans.  On the Closing Date, title to the Loans shall be transferred from Seller to Buyer by a Bill of Sale, together with an assignment of notes and liens for real estate and other secured loans. Seller shall provide Buyer with a Limited Power of Attorney, in the form of Exhibit C, to effectuate the assignment of the Loans (including the security interest in all collateral therefor). Seller will also endorse or execute an allonge with respect to each note to Buyer, “without recourse” and, except as otherwise specifically provided in this Agreement, without warranties except for warranties regarding title thereto and right and authority to transfer.  Seller will cooperate with Buyer and shall execute any other assignment documents (including mortgage assignment and UCC financing statement assignment documents and forms) that Buyer

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may reasonably request that are acceptable for filing or recording in accordance with any applicable law. Preparation of such additional documents shall be Buyer’s responsibility and at Buyer’s expense; all recording fees and expenses related to the recordation of the assignments shall be the responsibility of Buyer.

(c)           Other Notices Provided by Seller to Customers.  Notices provided by Seller to customers of the Branches after the date of this Agreement until the Closing related to the transaction contemplated by this Agreement shall be provided by Seller to Buyer prior to distribution for Buyer’s prior written approval, which approval shall not be unreasonably withheld.  For purposes of this Agreement, the term “customers” includes borrowers under the Loans.

(d)           General Communications by Buyer to Customers.  In addition to the duties and rights of Buyer under clause (a) of this Section 6.8 to communicate with customers, from and after the date of this Agreement, Buyer shall have the right to deliver communications to the customers of the Branches, by mail or electronically or otherwise, one or more communications regarding the pending Acquisition and the transition of ownership of the Branches (including a general introductory letter welcoming such customers to banking with Buyer), subject to the prior written approval of Seller (which approval shall not be unreasonably withheld, delaye d or conditioned).

6.9           Branch Access.  Seller shall provide physical access to space within each Branch facility to Buyer at least thirty (30) days prior to the Closing Date for equipment staging inside the Branch relating to the conversion; such access not to be unduly disruptive to the Branch.

6.10           Maintenance of Properties.  From the date of this Agreement and until the Effective Time, Seller will maintain the Branches in their current condition, ordinary wear and tear excepted consistent with the standard of maintenance Seller uses in its Non-Divested Branches.

6.11           Conversion Planning and Execution.  From the date of this Agreement until the Effective Time, Seller will provide reasonable cooperation with and assist Buyer in planning a conversion to transition the business of the Branches from Seller to Buyer including the transition of Seller’s electronic data (including data delivered pursuant to ancillary delivery channels, such as internet banking and bill pay, debit card and credit card and all other systems determined beyond the CBS/Signature system) to an electronic file format mutually agreeable to both Parties on the Closing Date.  Each Party shall pay its own cost relating to such conversion.  Within seven (7) Business Days (or, in the case of Buyer’s initial request as contemplated by this sentence, three (3) Business Days except with respect to commercial online banking customers on the Fundtech system) of up to each of four (4) separate requests of Buyer, Seller agrees to provide Buyer a complete set of data files/conversion tapes prior to the final set of data files/conversion tapes for the purposes of implementing the conversion as of the Closing Date (such conversion data files to include, among other things, the loan, deposit, CIF and other application systems processed on CBS/Signature and in the native CBS/Signature file format and other data files for systems other than the CBS/Signature System, including, but not limited to, internet banking and bill pay, debit card and credit card).  On the Closing Date, Seller shall

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provide a final set of data files/conversion tapes contemplated in this Section 6.11 to Buyer as of such date regardless of the number of requests for such information and material made by Buyer pursuant to this Section 6.11.  Further, Seller agrees that it will inform Buyer of required changes to record layouts that may be necessary in the Ordinary Course of Business, and Buyer and Seller agree to cooperate on timely making such required modifications; provided, however, that in the event such changes are made by Seller, Seller shall provide to Buyer any additional file s required by Buyer to support Buyer's testing of such changes not later than three (3) Business Days following Buyer’s request therefor (except with respect to commercial online banking customers on the Fundtech system).The Parties shall comply with their respective conversion-related responsibilities as set forth on Schedule 6.11; provided that such schedule may be revised and updated as reasonably requested by Buyer from time to time as necessary to effect the intent of this Section 6.11.

6.12           General Third Party Consents.  From the date of this Agreement until all Landlord Consents and other Consents are obtained, Seller and Buyer shall cooperate with all reasonable requests of each other, and Seller shall use Commercially Reasonable Efforts, to obtain (i) all Landlord Consents to transfer Seller’s rights as lessee to each Leased Real Property (including those rights that are personal to Seller pursuant to the respective Lease) to Buyer, and (ii) all other Consents (other than Regulatory Approvals, as to which the provisions of Section 6.6 shall apply) as shall be required under the terms of any Contr act or applicable law to transfer and assign to Buyer on the Closing Date the Acquired Assets and the Assumed Liabilities.  If Seller is unable to obtain a Landlord Consent with respect to a Lease, and Buyer and Seller fail to reach an agreement within thirty (30) calendar days after receipt of the landlord’s indication that a Landlord Consent will not be granted in form and substance reasonably satisfactory to Buyer and Seller, then Buyer may elect to exclude the applicable Leased Real Property (and the Lease thereto) from the Acquisition, and the Payment Amount shall be reduced accordingly.  Buyer agrees to assume the Deposits for any Branch excluded from the Acquisition pursuant to this Section 6.12, subject to Buyer’s or Seller’s ability to satisfy all applicable regulatory requirements.

6.13           Title Insurance and Surveys.  Within forty-five (45) days after the date of this Agreement, Seller will provide Buyer, at Seller’s expense, with an ALTA 2006 standard form owner’s commitment (containing the endorsements described in Section 8.1(e) below) for title insurance with respect to each parcel of real property comprising the Owned Real Property (including legible copies of all documents, instruments or agreements evidencing or creating the exceptions referenced in such commitment to the extent available from the public records) from Chicago Title Insurance Company and an ALTA/ACSM Land Title Survey prepared i n accordance with the 2005 minimum requirements therefor as adopted by American Land Title Association and the National Society of Professional Surveyors (prepared and certified, in form reasonably acceptable to Buyer as to all matters shown thereon, by a surveyor licensed by the State of Illinois and reasonably acceptable to Buyer, which shall include a notation stating whether or not a portion of the premises are located in a 100 year flood plain, flood-prone area of special flood hazard and if so, depicting the location of such flood-prone area of special flood hazard).  With respect to any such parcel or parcels of real property collectively comprising the Owned Real Property used for any single Branch location (each, an “Owned Location”), Buyer shall have fifteen (15) Business Days after the receipt of the commitment for title insurance and

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the land title survey applicable to any such Owned Location to object, in writing, to the exceptions or other matters contained therein if and only if such exceptions or matters would, in Buyer’s reasonable discretion, (i) materially impair the use or occupancy (consistent with current use or occupancy) of the applicable Owned Location as a banking branch, or (ii) cost, at such Owned Location, more than $150,000 to remediate, cure or correct (it being agreed that if such exception or matter is not capable of being cured, remediated or corrected, the cost to cure, remediate or correct such exception or matter shall be deemed to exceed $150,000) (any of item (i) or (ii), an “Objectionable Title Matter”).  Buyer shall not have the right to object to any exceptions or other matters contained in the commitment for title insurance and/or the land title survey applicable to any such Owned Location, except for Objectionable Title Matters; by way of clarification and not limitation, Objectionable Title Matters shall not include exceptions for current taxes not delinquent, printed exceptions in the commitment generally contained in any owner’s standard coverage policy of title insurance (except to the extent that the same may be removed by a customary owner’s affidavit from Seller or any other customary delivery reasonably requested by the title company), or rights of government entities to make cuts and fills in connection with construction and/or maintenance of any public roadways adjoining the real property and easements and reservations of record that do not prevent or materially impair the use of such parcel of real property for general banking purposes.  If Buyer gives timely notice of its objection to any Objectionable Title Matter, Seller shall have the opportunity (but not the obligation) for ten (10) days from the date of Buyer’s notice to cure such objection (which cure may include, to the extent expressly consented to by Buyer in its sole discretion, a written undertaking (with collateral, if required) on the part of Seller to cure such objection prior to Closing).  If the Seller shall have failed to cure, to the reasonable satisfaction of Buyer, any Objectionable Title Matter to which Buyer’s objections were timely made as provided in this Section 6.13 with respect to any such Owned Location, then Buyer may elect to exclude the applicable parcel or parcels of Real Estate Interests from the Acquisition (along with, if such parcel of Real Estate Interests is material to the operation of any Owned Location as determined in the sole, reasonable discretion of Buyer, any other parcel of Real Estate Interests applicable to such Owned Loc ation), and the Payment Amount shall be reduced accordingly.  Buyer agrees to assume the Deposits for any Branch excluded from the Acquisition pursuant to this Section 6.13, subject to Buyer’s or Seller’s ability to satisfy all applicable regulatory requirements.

6.14           Insurance Proceeds and Casualty Payments.  In the event of any damage, or destruction affecting the Acquired Assets between the date hereof and the time of the Closing, Seller shall deliver to Buyer notice of such damage or destruction and, at Buyer’s election, shall either fix or repair such damage or destruction (which repair must be completed prior to the Closing Date in accordance with Applicable Laws and in a workmanlike manner, using materials consistent with the quality of the damaged or destroyed materials) or pay to Buyer the insurance proceeds, to the extent of the applicable amount set forth in Section 2.2(a) hereof with respect to the Owned Real Property and Leasehold Improvements, and the replacement cost with respect to the Acquired Tangible Personal Property as the case may be, received (or with respect to insurance proceeds, which would be received assuming Seller’s insurance policy had no deductible) by Seller as a result thereof; provided, however, that Buyer shall have the right to terminate this Agreement in the event that the Book Value of such Acquired Assets so damaged or destroyed is in excess of $100,000, unless Seller agrees to pay Buyer the difference between the Fair Market Value of such Acquired Assets and the insurance proceeds.  The terms and

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conditions of this Section 6.14 shall supersede entirely the provisions of the Uniform Vendor and Purchaser Risk Act, as enacted in Illinois; Buyer hereby waives any termination rights that it may have under said Uniform Vendor and Purchaser Risk Act.

6.15           Environmental Reports and Investigations.  Consistent with Section 4.9(k) hereof, within ten (10) Business Days following the date of this Agreement, Seller will furnish Buyer with true and complete copies of all environmental assessments, reports, studies, surveys and other similar documents or information, including, without limitation, related correspondence, in its possession or control relating to each of the Real Estate Interests.  Buyer shall be entitled to conduct a Phase I Environmental Assessment and an assessment of Hazardous Materials and compliance w ith Environmental Laws (collectively, “Phase I Environmental and Hazardous Materials Assessment”), at Buyer’s sole expense, for any of the Owned Real Properties upon one (1) Business Day’s notice to Seller.  Buyer shall also be entitled to conduct a Phase I Environmental and Hazardous Materials Assessment, at Buyer’s sole cost and expense, of any Leased Real Property, only upon receipt of written approval from the landlord for that Leased Real Property.  In addition, if a Phase I Environmental Assessment identifies any Recognized Environmental Conditions for any Owned Real Property, Buyer shall have the right, at any time prior to Closing, to conduct, at Buyer’s sole cost and expense, a Phase II Environmental Assessment to investigate any Recognized Environmental Conditions identified in any Phase I Environmental Assessment report for such Owned Real Property.  Buyer’s work plans for any Phase I Environmental and Hazardous Materials Assessment or any Phase II Environmental Assessment conducted pursuant to this Section 6.15 shall be subject to Seller’s approval, which approval shall not be unreasonably withheld, delayed or conditioned, and Buyer shall, at its sole cost and expense, repair and/or correct any damage to the subject property resulting from the work conducted by Buyer or its contractors in connection with any such assessment.  If a Phase I Environmental Assessment identifies any Recognized Environmental Conditions for any Leased Real Property upon the written consent by the landlord, Buyer shall have the right, at any time prior to Closing, to conduct, at Buyer’s sole cost and expense, a Phase II Environmental Assessment to investigate any Recognized Environmental Conditions identified in any Phase I Environmental Assessment report for any Leased Real Property.  All such Phase II Environmental Assessments shall be conducted by an independent environmental investigation and testing firm selected by the Buyer.  Buyer will notify Seller no fewer than five (5) Business Days in advance of its desire to conduct a Phase II Environmental Assessment at any Owned Real Property, and upon receipt of such notice Seller will grant Buyer access to the Owned Real Property for such investigation.  With respect to the Leased Real Properties, Buyer will notify Seller no fewer than five (5) Business Days in advance of its desire to conduct either a Phase I Environmental and Hazardous Materials Assessment or a Phase II Environmental Assessment at any Leased Real Property and Seller shall use its Commercially Reasonable Efforts to obtain written permission from the landlord for that Leased Real Property for Buyer to conduct such investigations.  If any Phase I Environmental and Hazardous Materials Assessment or any Phase II Environmental Assessment confirms the exis tence of a condition which could be subject to Liability under applicable Environmental Laws, and the aggregate costs of remediating such conditions are reasonably estimated by Buyer’s consultant not to exceed $25,000 with respect to any single Branch, then Buyer shall purchase the Owned Real Property, or accept an assignment of the Leases, relating to such Branch on the terms set forth in Section 2.2 and shall assume liability for such condition except as otherwise contemplated by Section 2.1(c)(iv) hereof.  If

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(i) the costs of remediation any such condition with respect to any single Branch are reasonably estimated by Buyer’s consultant to exceed $25,000 for such single Branch and Buyer and Seller fail to reach an agreement with respect to such remediation within thirty (30) calendar days after receipt of the estimated remediation costs (or, if less, within the period beginning on the date of receipt of the report regarding the estimate of such costs and ending ten (10) Business Days prior to the Closing Date), or (ii) access to conduct a Phase I Environmental and Hazardous Materials Assessment or a Phase II Environmental Assessment is not given to Buyer or its representatives, in the case of a Phase I Environmental and Hazardous Materials Assessment, at least forty-five (45) Business Days prior to the Closing Date, and in th e case of a Phase II Environmental Assessment, at least twenty (20) Business Days prior to the Closing Date, then, in each case, Buyer may elect to exclude the applicable parcel or parcels of Real Estate Interests from the Acquisition (along with, if such parcel of Real Estate Interests is material to the operation of any single Branch as determined in the sole, reasonable discretion of Buyer, any other parcel of Real Estate Interests applicable to such single Branch, whether Owned Real Property or Leased Real Property), and the Payment Amount shall be reduced accordingly.  Buyer agrees to assume the Deposits for any Branch excluded from the Acquisition pursuant to this Section 6.15, subject to Buyer’s or Seller’s ability to satisfy all applicable regulatory requirements.  During the period between the date hereof and the Closing Date (and, if the Closing shall not occur, at all times thereafter), Buyer and its e mployees, agents and representatives shall hold all contents of any Phase I Environmental Assessment and Phase II Environmental Assessment reports confidential and disclose the contents thereof only with prior written consent of Seller or as may be required under applicable law.  During the period between the date hereof and the Closing Date (and, if the Closing shall occur, at all times thereafter), Seller and its employees, agents and representatives shall hold all contents of any Phase I and Phase II reports confidential and disclose the contents thereof only with prior written consent of Buyer or as may be required under applicable law.  Buyer shall deliver to Seller a true, correct and complete copy of the results of any Phase I Environmental and Hazardous Materials Assessment and any Phase II Environmental Assessment conducted by Buyer pursuant to this Section 6.15 in respect of any Owned Real Property or Leased Real P roperty (together with any attachments thereto) not later than five (5) Business Days following receipt thereof by Buyer.  Buyer shall not disclose to or solicit any Governmental Body regarding the investigation or remediation of Hazardous Materials identified in Buyer’s Phase I Environmental Assessments or Phase I Environmental and Hazardous Materials Assessments, Phase II Environmental Assessments, or items, reports or conditions identified on Schedule 4.9(a) or 4.9(g) hereof or the documents (or attachments to the documents) referenced on Schedule 4.9(a) or 4.9(g) hereof unless such disclosure is made in response to a written or oral request from a Governmental Body or such disclosure is required by Applicable Law.

6.16           Condemnation.  If prior to Closing all or any portion of the Real Estate Interests is taken or is made subject to eminent domain or other governmental acquisition proceedings, then Seller shall promptly notify Buyer thereof, and on the Closing Date pay to the Buyer all payments received in respect thereto (or to be received after the Closing Date in the event payment has not been made by the applicable Governmental Body prior to the Closing Date); provided, however, that the Buyer shall have the right to terminate this Agreement in the event that the Book Value of the portion of the Real Estate Interests and improvements so taken or

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made subject to eminent domain is in excess of $50,000, unless Seller agrees to pay Buyer the difference between the Fair Market Value of such portion and the condemnation award.

6.17           Exclusion of Non-Core Deposits.  Buyer may, at anytime prior to the Closing, exclude in its sole discretion from the Deposits to be assumed any Non-Core Deposit.  On or before the fortieth (40th) day prior to the Closing Date, Seller shall provide to Buyer a list of all Non-Core Deposits originated on and prior to the date of delivery of such list, and Seller shall send to Buyer a supplemental list (i) on the fifteenth (15th) day prior to the Closing Date and (ii) on the day prior to the Closing Date (prepared as of the close of business on such day), which supplemental lists shall list all Non- Core Deposits originated since the cut-off date of the Non-Core Deposit list most recently delivered to Buyer pursuant to this Section 6.17.  On or before the date that is ten (10) days prior to the Closing Date, Buyer shall deliver to Seller a list of excluded Non-Core Deposits as of such date and shall, no later than 9:00 a.m. on the morning of the Closing, deliver to Seller a final list of all excluded Non-Core Deposits.

6.18           Additions to Loans; Removal of Certain Loans.  Prior to the Closing Date, Buyer may, in its sole discretion, include on Schedule 1.1 any loan, loan participation or Commitment originated by Seller and attributable to the Branches (“New Loan”), whether such New Loan was originated prior to the date hereof and not included on Schedule 1.1 as of the date hereof or originated after the date hereof.  Any such New Loan added to Schedule 1.1 shall be deemed a Loan for purposes of this Agreement.  Buyer will notify Seller on or before the 30th day prior to the Closing Date of any New Loan that Buyer intends to add to Schedule 1.1; provided, however, the Parties agree that New Loans may be added to Schedule 1.1 after the 30th day prior to the Closing Date.  In addition, Buyer may, (i) by the giving of written notice to the Seller at least five (5) Business Days prior to the Closing Date, remove from Schedule 1.1 any Loan that Sel ler determines, in its reasonable good faith judgment, constitutes as of such date or will constitute as of the Closing Date a Non-Conforming Loan, in which case such Non-Conforming Loan shall be deemed removed from Schedule 1.1 and for all purposes of this Agreement shall be deemed to constitute an Excluded Loan, and (ii) by the giving of written notice (the “Special Acceptance Notice”) to Seller at least five (5) Business Days prior to the Closing Date, agree to accept and purchase any Loan that constitutes as of such date or will constitute as of the Closing Date a Non-Conforming Loan, in which case such Non-Conforming Loan shall be deemed to be a Loan for all purposes of this Agreement and included on Schedule 1.1 (it being understood that Seller has the right to sell, without Buyer’s conse nt, to any third party any Excluded Loan that was originated prior to the date hereof as contemplated by Section 6.5 hereof unless Buyer shall have delivered a Special Acceptance Notice with respect thereto prior to the date Seller shall have agreed to sell such Excluded Loan to such third party).  Notwithstanding anything to the contrary contained herein, any Non-Conforming Loan that Buyer accepts pursuant to the Special Acceptance Notice shall remain subject to the provisions of Section 2.6 from and after the Closing Date to and including the Cut-Off Date, and Buyer shall have the right, at its election, to put back to Seller such Non-Conforming Loan during such period pursuant to the provisions of Section 2.6.

6.19           Subordination, Non-Disturbance and Attornment Agreements.  Seller shall use its Commercially Reasonable Efforts to obtain subordination, non-disturbance and attornment

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agreements (“SNDAs”) from the Landlord’s lenders holding mortgages, deeds of trust or other liens against the Leased Real Property superior to the applicable Leases (except that no such SNDA shall be required for any such Lease which is, as of the date hereof, subject to an SNDA affording customary non-disturbance protection and which contains successor and assigns provisions entitling Buyer to enjoy, as reasonably determined by Buyer upon the advice of counsel, the benefits thereof upon the assignment to Buyer of such Lease), which SNDAs shall be on forms provided by Landlord’s lenders; provided, however, that Buyer may , at its sole cost and expense, elect to negotiate SNDAs on forms other than those provided by the Landlord’s lenders.

6.20           Assumption of IRA and Keogh Account Deposits.

(a)           With respect to Deposits in IRAs, Seller will use Commercially Reasonable Efforts and will cooperate with Buyer in taking any action reasonably necessary to invite depositors of IRAs to accomplish the appointment of Buyer as successor custodian of all such IRA deposits (except self-directed IRA deposits), including, but not limited to, sending to the depositors thereof appropriate notices, cooperating with Buyer in soliciting consents from such depositors, and filing any appropriate applications with applicable Governmental Bodies.  The expenses payable to third parties associated with Buyer’s efforts to assume IRAs shall be borne by Buyer.

(b)           With respect to Deposits in Keogh Accounts, Seller shall use Commercially Reasonable Efforts and cooperate with Buyer to invite depositors thereof, at Buyer’s sole expense, to direct a transfer of each such depositor’s Keogh Account and the related Deposits to Buyer (or an Affiliate of Buyer), as trustee thereof, and to adopt Buyer’s (or such Affiliate’s) form of Keogh Master Plan as a successor to that of Seller.  Buyer (or such Affiliate) will not be required to assume a Keogh Account unless Buyer (or such Affiliate) has received the documents reasonably necessary for such assumption at or before the Closing.  With respect to any owner of a Keogh Account who does no t adopt Buyer’s form of Keogh Master Plan, Seller will use Commercially Reasonable Efforts in order to enable Buyer (or such Affiliate) to retain such Keogh Accounts at the Branches.  The expenses payable to third parties associated with Buyer’s efforts to assume Keogh Accounts shall be borne by Buyer.

(c)           If, notwithstanding the foregoing, as of the Closing Date Buyer shall be unable to retain deposit liabilities in respect of an IRA or Keogh Account, such deposit liabilities, which shall be set forth on Schedule 6.20(c) and delivered on, and prepared as of, the Closing Date, shall be excluded from Deposits for purposes of this Agreement and shall constitute “Excluded IRA/Keogh Account Deposits.”

6.21           Naperville Branch.  Buyer shall have the right, by the giving of written notice to Seller at least thirty (30) days prior to the Closing Date, to reject and exclude from the Acquisition the Branch located at 3020 State Route 59 in Naperville, Illinois (the “Naperville Branch”), in which case the Owned Real Property and all other Leased Real Properties associated with the Naperville Branch shall be excluded from the Acquisition and the Payment

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Amount shall be reduced accordingly.  Buyer agrees to assume the Deposits for the Naperville Branch subject to Buyer’s or Seller’s ability to satisfy all applicable regulatory requirements.

6.22           Post-Signing Selection of Certain Excluded Tangible Personal Property.  Not later than thirty (30) days following the execution and delivery hereof, Buyer shall have the right, by the giving of written notice to Seller, to select for purchase at net book value by Buyer at the Closing any item of Excluded Tangible Personal Property described in clause (B) or (C) of Section 2.1(b)(i).  In the event that Buyer selects to purchase any such Excluded Tangible Personal Property, Buyer and Seller shall enter into an amendment of this Agreement, including an amendment to Schedule 2.1(b)(i) hereof, for purposes of including the Excluded Tangible Personal Property so selected by Buyer pursuant to such notice among the Acquired Assets to be purchased hereunder.

ARTICLE 7

POST-CLOSING COVENANTS

7.1           Continued Cooperation.  The Parties agree in case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as the other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless such expense is otherwise allocated in this Agreement or the requesting Party is entitled to indemnification therefore under Article 11 below).

7.2           Transitional Matters Concerning Deposits.

(a)           Following the Effective Time and without limiting the generality of the other provisions of this Agreement, Buyer will pay in accordance with law, customary banking practices, and the respective terms of the Deposits and related Acquired Contracts all properly drawn and presented checks, drafts and withdrawal orders (including, in all cases under this Section 7.2, transactions initiated with debit cards used by the Branches) with respect to the Deposit accounts presented to Buyer by mail, over the counter, through the check clearing system of the banking industry or any other method of general acceptance within the banking industry, whether such checks, drafts and withdrawal orders are on forms provide d by Buyer or Seller, and in other respects to discharge, in the usual course of the banking business, the duties and obligations of Seller with respect to the Deposits.

(b)           Buyer agrees, at its cost and expense, to assign new account numbers effective as of the Effective Time to all deposits of the Branches assumed by Buyer pursuant to the terms of this Agreement and to furnish such depositors with checks on the forms of Buyer, and to instruct such depositors to utilize Buyer’s newly furnished checks, drafts and withdrawal order forms and cease using Seller’s checks, drafts and withdrawal forms previously supplied by Seller.

(c)           Seller agrees that it will reimburse Buyer for the amount of any uncollectible check, draft, or withdrawal order drawn on a Deposit to the extent such

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amount is incurred by Buyer as a result of any failure by Seller after the Closing Date to expeditiously return, revoke any prior settlement of, give notice of dishonor or nonpayment of, or otherwise reject, before the applicable midnight deadline or other applicable deadline, any check, draft or withdrawal order drawn on Seller with regard to the deposit account and presented to Seller before the Closing Date, that is not properly payable due to insufficient funds in the applicable deposit account, an outstanding stop payment order, or a forged check. Should any of the Branches “due from” accounts be charged any sums with respect to any of the Deposits by reason of a forged endorsement or otherwise (hereinafter the “Reclaimed Amount”), then Buyer as assignee of such Deposit shall forthwith upon request by Seller assert a right of setoff against such Deposit for the whole amount of the Reclaimed Amount or such portion thereof that may be on deposit with Buyer in such Deposit account from time to time, and shall remit such sums to Seller forthwith thereafter, in accordance with this Section 7.2.

(d)           Buyer agrees that it will reimburse Seller for the amount of any uncollectible check, draft, or withdrawal order drawn on a Deposit to the extent such amount is incurred by Seller as a result of any failure by Buyer after the Closing Date to expeditiously return, revoke any prior settlement of, give notice of dishonor or nonpayment of, or otherwise reject, before the applicable midnight deadline or other applicable deadline, any check, draft or withdrawal order drawn on Seller with regard to the Deposit account and presented any date after the Closing Date, that is not properly payable due to insufficient funds in the applicable deposit account, an outstanding stop payment order or otherwise.

(e)           With respect to any Deposit that has a negative balance as of the close of business on the Closing Date due to an overdraft caused by Seller’s final payment and settlement, on or before the Closing Date, of one or more checks, drafts or other items drawn against such account, other than any Deposit account that has been excluded as an asset or liability being acquired or assumed under the terms of this Agreement (the “Overdraft Items”), which negative balance continues to exist at the close of business on the fifth day after the Closing Date after exercise by Buyer of any setoff rights of which Buyer is aware, Buyer shall be entitled to reimbursement in immediately available funds fro m Seller for the amount of any such negative balance of which Buyer gives Seller notice within fifteen (15) days after the Closing Date.  Thereafter, Buyer shall continue as Seller’s agent, for a period of sixty (60) days after the Closing Date, or such shorter period as Seller shall request, to assert set off rights and promptly forward the amount set off to Seller in immediately available funds.  Buyer shall immediately deliver to Seller all Overdraft Items in Buyer’s possession (if any) for which it demands reimbursement and any payments or amounts received in respect thereof from time to time, and Seller shall be vested with all rights, title and interest in, to and in connection with such Overdraft Items which Buyer otherwise would have had, and Seller shall be entitled to enforce and collect all rights, remedies, claims, and causes of action against all persons and entities, including, without limitation, the drawer and depositor(s) which Seller or Buyer shall have or wo uld have had in connection with the Overdraft Item.

(f)           Seller and Buyer shall make arrangements to provide for the daily settlement with immediately available funds by Buyer of checks, drafts, withdrawal

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orders, debit card trailing activity and returns presented and paid by Seller for the period between the Closing Date and sixty (60) days following the Closing Date drawn on or chargeable to accounts in respect of Deposits assumed by Buyer hereunder; provided, however, Seller shall be held harmless and indemnified by Buyer for funds not reimbursed by Buyer for Seller acting in accordance with such arrangements. Buyer shall be responsible for any costs incurred for courier or overnight shipping of information related to the daily settlements.  At any time prior to the expiration of the sixty (60) days referenced herein, Seller shall discontinue such payments on behalf of Buyer upon written request by Buyer. Any checks, drafts, withdrawal orders, trailing debit card activity and returns presented to Seller following the expiration of the sixty (60) day period, shall be returned by Seller.

(g)           Starting on the Business Day following the Closing Date or as otherwise expressly agreed by the Parties, Seller, at its expense, shall notify all Automated Clearing House (“ACH”) originators of the transfers and assumptions and retention of deposits made pursuant to this Agreement by sending a notification of change (NOC) as transactions are presented; provided, however, that Buyer may, at its option, notify all such originators itself (on behalf of Seller), also at Seller’s expense.  For the sixty (60) day period immediately following the Closing Date, Seller will, without any obligation to investigate the accuracy of such request or the balance in the accuracy of such request or the balance in the underlying account, honor all ACH items related to accounts assumed under this Agreement that are routed or presented to Seller, and Buyer will reimburse Seller for all such ACH payments on a daily basis.  Seller will not charge any fee to Buyer for honoring such items and will electronically transmit such ACH to Buyer.  If Buyer cannot receive such electronic transmissions, Seller will make available to Buyer, at Seller’s operation center, receiving items from the ACH tapes containing such ACH data.  Following the sixty (60) day period referenced herein, Seller will not honor any ACH item presented to Seller unless Buyer has requested that Seller extend the time for clearing ACH items.  Upon such request, in the event that Seller agrees to such an extension of time, Buyer shall pay Seller a One Dollar ($1.00) fee per transaction cleared during the extension period and Buyer and Seller must agree, in writing, to the duration period; provided, however, any extension period will not be greater than sixty (60) days. If no extension period is agreed to by the Parties, items mistakenly routed or presented to Seller after the sixty (60) day period will be returned to the presenting party.  At any time prior to the initial sixty (60) days or prior to the ending date of any extension period, Seller shall discontinue honoring ACH items upon the written request of Buyer.

(h)           On the Closing Date, Seller shall provide Buyer with a written listing and electronic data file of each stop payment order, tax lien, levy, garnishment, pledge, guardianship agreement, or other hold or restriction then in effect with respect to any of the Deposits (the “Holds”), and Buyer shall honor and comply with the terms of all valid Holds described in the above list.  If, following receipt of such list, Buyer makes any payment in violation of any such Hold, then it shall be solely liable for such payment and shall indemnify, hold harmless, and defend Seller from and against all claims, losses and liabilities, including reasonable attorneys’ fees and expenses, arising o ut of any such payment.  In the event that Buyer shall make any payment in violation of a Hold initiated prior to the Closing Date but not reflected in the above list, then Seller shall be solely

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liable for such payment and shall indemnify, hold harmless and defend Buyer from and against all claims, losses, and liabilities, including reasonable attorneys’ fees and expenses, arising out of any such payment.

(i)           On the Closing Date, Seller shall cycle, prepare and pay all accrued interest for each checking, savings or money market account constituting a Deposit.  Seller shall mail such closing statements within five (5) Business Days following the Closing Date, and contemporaneously therewith provide Buyer with a true and correct copy thereof.  Interest on time deposits shall be accrued and included in the data conversion files.

(j)           Within thirty (30) days from this Agreement, Seller and Buyer shall establish a mutually agreeable post-conversion trailing activity process for settlement of converted account activities relating to trailing transactions.

7.3           Transitional Matters Concerning Loans.  As soon as reasonably practicable following the Closing, Buyer, at its expense, will issue new coupon or payment books for the Loans and will instruct customers to destroy any coupons furnished by Seller; Buyer will also notify customers of any applicable change in terms and provide Buyer’s information for payment remittance.  For a period of sixty (60) days following the Closing, Seller will forward to Buyer on a daily basis all loan payments received by Seller, in the form received by Seller, or as established in the post-conversion activity process referenced in Section 7.2(i).  After such sixty day period, Seller will forward any loan payments received on a weekly basis.

7.4           Transitional Matters Concerning Real Estate Interests.  For a period of sixty (60) days following the Closing, Seller will forward to Buyer on a daily basis all material correspondence, notices, documents or other instruments received by Seller relating to the Real Estate Interests within two (2) Business Days following receipt thereof.  After such sixty (60) day period, Seller will forward any such material correspondence, notices, documents or other instruments received on a weekly basis.

7.5           Transfer of Books and Records.  As soon as commercially reasonable following the Closing Date, but in no event later than five (5) Business Days after the Closing Date, Seller shall provide the following documents which are in possession of Seller in connection with or relating to the Acquired Assets and the Assumed Liabilities (the “Books and Records”):

(a)           Loan Documents and Records:

(i)           Originals (or in alternative form, if originals are unavailable) of all documents retained by Seller in its Ordinary Course of Business or otherwise in its possession evidencing or supporting each Loan, including recorded mortgages and deeds of trust, recorded assignments, promissory notes, loan applications, loan closing statements, extension agreements, financing statements, security agreements, loan agreements, guaranties and guaranty agreements, loan commitments, letters of credit, title insurance commitments and policies, environmental survey reports, flood certifications, borrower financial statements, motor vehicle and trailer titles, appraisals, evidence of receipt by the debtor or

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mortgagor of disclosure statements, material correspondence, all default notices given or received and any notices from a Governmental Body; and

(ii)           An electronic database (or paper records, if an electronic database is not available) reflecting the payment history, balances and other relevant information respecting all Loans.

(b)           Deposit Records:  Originals (or an alternative form, if originals are unavailable) of all documents retained by Seller in its Ordinary Course of Business or otherwise in its possession evidencing or supporting each Deposit, including signature cards, taxpayer identification number certifications, deposit account agreements, account opening documentation, and trust or other legal documentation gathered as supporting evidence of authorization to establish a Deposit account.

(c)           Other Records:  Originals (or an alternative form, if originals are unavailable) of all documents retained by Seller in its Ordinary Course of Business or otherwise in its possession that may be reasonably related to the Acquired Assets or the operation of the Branches that are located on the Branch premises either in paper or electronic form, including investment customer records, safe deposit records, currency transaction reports, suspicious activity reports, and debit card transaction records and, including, without limitation, all notices given or received in connection with any Real Estate Interest.

(d)           Buyer Review of Records:  Within one hundred eighty (180) days of receipt of such records by Buyer, Buyer shall notify Seller of any deficiencies in the information provided.  Seller will cure such deficiencies at Seller’s expense.  For requests more than one hundred eighty (180) days after Seller has provided such records to Buyer, Seller will permit Buyer, for reasonable cause, at Buyer’s expense, to examine, inspect, copy and reproduce files, documents or records retained by Seller relating to the assets and liabilities transferred under this Agreement.

(e)           Form of Records:  Buyer acknowledges that some of Seller’s documents (except with respect to the Loans, as to which Seller’s representations and warranties contained in Section 4.10(d)(vii) apply) and records may be available only in the form of photocopies, file copies or other non-original and non-paper media, and represents and warrants to Buyer that the failure to provide Buyer with such originals will not result in any material diminution in value of the asset or other item as to which such non-original shall relate.

7.6           Electronic Records, Conversion, and Servicing.

(a)           From and after the Effective Time, Buyer shall service customer account inquiries and other third party requests for historical information owned by Seller and transferred to Buyer in a physical or electronic form on or after the Closing Date (the “Transferred Records”).

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(b)           From and after the Effective Time, each party to this Agreement agrees to cooperate with the other party in responding to any reasonable request for information regarding or contained in the Books and Records.  Buyer shall make available the Transferred Records and Seller shall make available the retained records, for inspection by the other Party, as applicable, during normal business hours of each, after reasonable prior notice, and each Party may, at their respective expense, have copies made of excerpts from the retained records or the Transferred Records, as each may deem necessary.  The requesting Party shall be responsible for any expenses relating to such request, including reasonable research fees charged by the other Party; provided, however, that Buyer shall not be responsible for any such expenses incurred by Seller pursuant to this provision until sixty-one (61) days or more after Closing.

(c)           From and after the Effective Time, Buyer and Seller each agrees to permit the Governmental Bodies with authority over Buyer or Seller, as the case may be, to access the Books and Records of which Buyer or Seller has custody, after the Closing Date, and to use, inspect, make extracts from or request copies of any such records in the manner and to the extent requested, and to duplicate, in the discretion of such Governmental Bodies, any record in the form of microfilm or microfiche pertaining to such Books and Records.

(d)           From and after the Effective Time, Buyer shall not destroy any of the Transferred Records unless Buyer complies with the retention requirements of applicable law or it receives the prior consent of Seller. Seller shall not destroy, or allow the destruction of any of the retained records, unless Seller complies with the retention requirements of applicable law or it receives the prior consent of Buyer.  If requested by Seller, the Transferred Records shall be delivered to Seller in lieu of being destroyed.

7.7           Tax Reporting Obligations.

(a)           Seller will report to applicable taxing authorities and holders of Deposits, with respect to the period from January 1 of the year in which the Closing occurs through the Closing Date, all interest (including dividends and other distributions with respect to money market accounts) credited to, withheld from and any early withdrawal penalties imposed upon the Deposits.  Buyer will report to the applicable taxing authorities and holders of Deposits, with respect to all periods from the day after the Closing Date, all such interest credited to, withheld from and any early withdrawal penalties imposed upon the Deposits.

(b)           Any amounts required by any governmental agencies to be withheld from any of the Deposits through the Closing Date will be withheld by Seller in accordance with applicable law or appropriate notice from any governmental agency and will be remitted by Seller to the appropriate agency on or prior to the applicable due date.  Any such withholding required to be made subsequent to the Closing Date will be withheld by Buyer in accordance with applicable law or appropriate notice from any governmental agency and will be remitted by Buyer to the appropriate agency on or prior to the applicable due date.

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(c)           Within five (5) calendar days after the date hereof, Seller shall provide Buyer in an electronic format a file setting forth (i) the names, addresses, account numbers and federal tax identification numbers of each holder of Deposits for which Seller has received a certification of such holder’s tax identification number, and (ii) the names, addresses and account numbers of each holder of Deposits which is subject to back-up withholding.

(d)           Within five (5) calendar days after the Closing Date, Seller shall deliver to Buyer all original forms, records and documents in its possession (or copies thereof if originals are not in Seller’s possession) regarding tax identification number certification and back-up holding requests, including, without limitation, all Forms W-8 and Forms W-9 related to the Deposits, provided that Seller shall be entitled to retain a copy of all such forms, records and documents for its files.

(e)           Seller shall be responsible for delivering to payees all IRS notices with respect to information reporting and tax identification numbers required to be delivered through the Closing Date with respect to the Deposits, and Buyer shall be responsible for delivering to payees all such notices required to be delivered following the Closing Date with respect to the Deposits.

(f)           Seller will make all required reports to applicable taxing authorities and to obligors on Loans purchased on the Closing Date, with respect to the period from January 1 of the year in which the Closing occurs through the Closing Date, concerning all interest and points received by Seller.  Buyer will make all required reports to applicable taxing authorities and to obligors on Loans purchased on the Closing Date, with respect to all periods from the day after the Closing Date, concerning all such interest and points received.

7.8           Credit Life Insurance Refunds.  Seller, or its successor, agrees to refund to Buyer the portion of premiums on the accident and health insurance and/or credit life insurance (the “Insurance”) that may be required to be refunded by banking and insurance regulations on the Loans transferred by Seller to Buyer upon presentation on a monthly basis by Buyer of such premium refunds.  This Section 7.8 shall survive until all Loans upon which the Insurance has been purchased shall mature. &# 160;Buyer shall have all legal rights under Missouri law or Illinois law, as applicable, including the right to recoup legal fees incurred, in collecting such funds from Seller or its successor.

7.9           Non-Solicitation of Employees.  From the date hereof until the Closing Date, Seller and its Affiliates shall not relocate, or agree to relocate, any Potential Employee to another branch or office of Seller or any Affiliate of Seller unless Buyer has notified Seller that Buyer does not intend to make an offer of employment to such Potential Employee.  From and after the Closing, and for a period of four (4) years following the Closing Date, Seller and its Affiliates and their respective successors and assigns shall not directly or indirectly hire any Retained Employee, without the prior consent of Buyer, unless such person’s employment was terminated by Buyer.

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7.10           Non-Solicitation of Business.  In consideration of the purchase of the Acquired Assets and the assumption of Assumed Liabilities by Buyer, neither Seller nor its Affiliates (including the directors, officers, employees or principal shareholders), successors or assigns will, for a period of four (4) years after the Closing Date, solicit or service, on behalf of itself or others, deposits, loans, brokerage, credit or debit or prepaid card, or other business from customers whose Deposits are assumed or whose Loans, safe deposit or any other business are acquired by Buyer hereunder; provided, however, that nothing contained in this Section 7.10 shall be deemed to prohibit general solicitations in major metropolitan (i) newspapers, (ii) television or (iii) radio and not specifically directed or targeted to customers of the Branches, but no direct mail or local market solicitation or advertising shall be permissible.  Notwithstanding the provisions of this Section 7.10 and subject to the provisions of Section 7.11(d) hereof, Seller or any Affiliate thereof may (X) continue to engage in all customary communications, including distribution of loan solicitations and loan promotional materials, with and service any former customers of the Branches with whom Seller or any Affiliate thereof maintains a banking, lending, brokerage or other financial relat ionship on the date hereof not otherwise prohibited by the terms of this Agreement after the Closing Date, (Y) maintain an office and employees for the purposes of servicing any non-performing loan originated prior to the date of this Agreement or any other Commitment, overdraft or other extension of credit that is not a Loan and is originated prior to Closing (in each case which may include renewing, extending the maturity of, or restructuring such extensions of credit), and servicing deposits of the Branches that are excluded as Deposits, and (Z) maintain an office and employees with respect to any Branch that Buyer has excluded from the Acquisition pursuant to Section 6.12, 6.13, 6.15 or 6.21 hereof and is not able to acquire the Depos its of which on the Closing Date due to regulatory requirements.

7.11           Covenant Not to Compete.

(a)           From and after the Closing, and for a period of four (4) years following the Closing Date, Seller and its Affiliates, successors or assigns shall not, and shall not enter into any agreement to, (i) acquire, lease, purchase, own, operate or use any building, office or other facility or premises located within the 100 mile radius of the City of Chicago (the “Geographic Region”) for the purpose of making loans, accepting deposits, cashing checks, issuing credit cards, debit cards, or prepaid cards, or engaging in all of the businesses in which the Branches are engaged at the Closing Date, which shall be deemed to include, without limitation, provision of brokerage, investment and insuranc e services, or (ii) use, authorize, license or permit any other Person to use the name “First Bank” (or any variation thereof) for any purpose within the Geographic Region.  Notwithstanding the foregoing and subject to the provisions of Section 7.11(d) hereof, the Parties agree that (i) Seller may maintain an office and employees for the purposes of servicing any loan, Commitment, overdraft or other extension of credit that is not a Loan and is originated prior to the Closing (which may include renewing, extending the maturity of, or restructuring such extension of credit), and the Loans that are repurchased from Buyer in accordance with Section 2.6 hereof, and servicing deposits of the Branches that are excluded as Deposits, and (ii) maintain an office and employees with respect to any Branch that Buyer has excluded from the Acquisition p ursuant to Section 6.12, 6.13, 6.15 or 6.21 hereof and is not able to acquire the Deposits of which on the Closing Date

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due to regulatory requirements; provided, however, that Buyer agrees that (A) the prohibitions contained in this Section 7.11 shall not be applicable to a Person that is not an Affiliate of the Seller on the date hereof and that becomes the successor in interest to Seller after the Closing Date if such Person’s banking activities at least one (1) year prior to becoming such successor would, upon becoming such successor, result in such successor being in breach of this Section 7.11(a), and (B) the prohibitions contained in this Section 7.11 shall not apply to the asset-based lending activities (and only the asset-based lending activities) of First Bank Business Capital, Inc. (it being understood that nothing contained herein shall limit any covenant not to compete or other restrictive covenant of First Bank Business Capital, Inc. under the ABL Purchase Agreement).  Nothing contained in this Section 7.11 shall be construed to prevent Buyer from seeking and recovering from Seller damages sustained by it as a result of any breach or violation by Seller of the covenants or agreements contained herein.

(b)           It is recognized and hereby acknowledged by the Parties hereto that a breach or violation by Seller of any or all of the covenants and agreements contained in this Section 7.11 may cause irreparable harm and damage to Buyer in a monetary amount which may be virtually impossible to ascertain.  As a result, Seller recognizes and hereby acknowledges that Buyer shall be entitled to an injunction from any court of competent jurisdiction enjoining and restraining any breach or violation by Seller or any of its Affiliates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other rights or remedies Buyer may possess her eunder, at law or in equity.

(c)           The restrictions against competition set forth above are considered by the Parties to be both reasonable and essential to protect the business and goodwill of the Branches being acquired by Buyer pursuant to this Agreement.  If any such restriction is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too broad a range of activities or over too large a geographic area, such restriction shall be interpreted and reformed to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

(d)           The rights of Seller under the last sentence of Section 7.10 and the penultimate sentence of Section 7.11(a) hereof shall be subject to the following limitations:  Not later than sixty (60) days following the Closing Date, Seller shall apply to, and use its Commercially Reasonable Efforts to obtain from, each Governmental Body as shall be necessary to authorize Seller to close the Rejected Branches and any other banking branch maintained by Seller within the Geographic Region for the purpose of (i) engaging in the activities described in clauses (X), (Y) and (Z) of the last sentence of Section 7.10 or (ii) the activities described in the penultimate sentence of Section 7.11(a).  Not later than the later to occur of (A) the date that is one (1) year following the Closing Date and (B) the granting of authorization from the applicable Government Body to close the applicable Rejected Branch or other banking branch within the Geographic Region, Seller shall close such Rejected Branch or other branch and cease conducting such activities.  Nothing contained in this clause (d) shall restrict the Seller seeking another buyer for a Rejected Branch or other banking branch within the Geographic

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Region during the one-year period subsequent to the Closing Date or from maintaining one or more offices within the Geographic Region not open to the general public for banking business in order to administer and wind down the Excluded Assets and the Excluded Liabilities or any other purpose not expressly prohibited by this Agreement.

7.12           Legal Inquiries.  The Parties hereby agree to the following with respect to subpoenas and certain process matters: Following the Closing, Seller will handle and process all civil and criminal subpoenas, IRS summons, court-ordered or government or agency or regulatory demands for documents and all similar legal notices or other information, and all notices, claims, demands of any kind from customers or third parties (collectively, “Subpoenas”) served on Seller prior to the Closing Date that relate to the Acquired Assets or the Deposits.  Following the Closing Date, each party shall use good faith efforts to promptly forward any such Subpoenas that relate to the Acquired Assets or the Deposits to the other party, as applicable, to the following addresses: FirstMerit Bank, N.A., III Cascade Plaza, CAS 81, Akron, Ohio 44308; and shall also send a facsimile of same to (330) 384-7133, Attention: Legal Department, and First Bank, Deposit Services, 600 James S. McDonnell Blvd., Hazelwood, Missouri 63042, Mail Stop M1-199-042, Attention Kurt Eisleben.

7.13           Employment.

(a)           Retained Employees shall be employed by Buyer after the Closing Date upon terms and conditions of employment offered by Buyer as provided by Section 6.7(b) hereof (except as otherwise provided in Section 7.13(b) below).  However, for purposes of Buyer’s defined contribution Employee Pension Benefit Plan (“Buyer’s 401(k) plan”) and any Employee Welfare Benefit Plans (including paid time off (PTO) policies), time of service with the Seller prior to the Closing Date will be credited to the Retained Employees (based on, in the case of a Retained Employee, such person’s date of hire by Seller) for purposes of determining eligibility and calculating vesting (if applicable) to the greatest extent permitted under such plans and applicable law, provided that, for elective benefits, the Retained Employee elects to enroll in the plan on or before thirty-one (31) days from the date such Retained Employee first becomes eligible to participate in the plan.  Each Retained Employee shall be permitted, to the extent permitted by law and the provisions of Buyer’s 401(k) plan, to participate in Buyer’s 401(k) plan and to roll over any eligible rollover contributions into such plan.  Furthermore, to the extent permitted by any applicable insurer, Buyer will waive any pre-existing condition exclusions, evidence of insurability provisions, waiting period requirements or any similar provision under the Buyer’s health benefit plans, provided that the Retained Employee elects to enroll in the plan on or before thirty-one (31) days from the date such Retained Employee first becomes eligible to participate in the plan.

(b)           Notwithstanding anything to the contrary in this Agreement, for the period commencing on the Closing Date and ending at the end of the last day of the calendar month in which the Closing Date occurs, Seller shall, at its expense, continue to provide medical, dental and vision benefits under Seller’s Employee Welfare Benefit Plans to the Retained Employees at the same level provided to such Retained Employees prior to the Closing.

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(c)           Buyer shall have no liability to any current or former employees of Seller and/or its Affiliates for any accrued wages, sick leave, vacation time, pension obligations or any other employee benefits accrued as employees of Seller and/or its Affiliates.  Buyer will have no liability and will not assume obligations under any Employee Pension Benefit Plan or Employee Welfare Benefit Plan sponsored, maintained or contributed to by Seller or its Affiliates or any other obligations (including, without limitation, health continuation coverage, severance obligations, fringe benefit or deferred compensation arrangements, bonus plans, incentive programs, or retiree medical coverage) to the employees or former employees at any of the Branches.  Seller and/or its Affiliates will be solely responsible for fulfilling, and resolving any disputes concerning, its liabilities or obligations (including, without limitation, health continuation coverage, bonus, incentive, severance obligations, fringe benefit or deferred compensation arrangements, bonus plans, incentive programs, or retiree medical coverage) to the employees at the Branches under any such employee benefit plan or with regard to any similar plans, programs, or arrangements.

(d)           Nothing contained herein shall (i) confer upon any former, current or future employee of Seller or its Affiliates or Buyer or its Affiliates or any legal representative or beneficiary thereof any rights or remedies, including, without limitation, any right to employment or continued employment of any nature, for any specified period, or (ii) cause the employment status of any former, present or future employee of Buyer or its Affiliates to be other than terminable at will.

7.14           Removal of Seller’s Name from Signs.  As soon as reasonably practicable following the Closing, but in no event later than thirty (30) days following the Closing Date, Seller shall either remove and discard all signs at the Branches incorporating Seller’s name (or, at the request of Seller in the case of Seller’s logo boxes and channel letter sets, make available for return to Seller such logo boxes and channel letter sets) or cause Seller’s name contained in such signs (other than such logo boxes and channel letter sets, which are to be made available for return to Seller) to be replaced with Buyer’s name.

ARTICLE 8

CONDITIONS TO OBLIGATION TO CLOSE

8.1           Conditions to Obligation of Buyer.  Buyer’s obligation to purchase the Acquired Assets and assume the Assumed Liabilities as provided in Article 2 and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part):

(a)           Buyer and Seller shall have procured all of the Consents (including all Regulatory Approvals) required to consummate the Acquisition (other than any approvals of the Board of Directors, shareholders or lenders of Buyer or Seller as necessary to authorize the Buyer or Seller, as the case may be, to enter into this Agreement and consummate the transactions contemplated hereby, all of which having been obtained prior to the date hereof) and all applicable waiting periods (and any extensions thereof) shall have expired or otherwise been terminated, unless such regulatory approval imposes

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any condition or requirement which in the reasonable judgment of Buyer would materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement or otherwise would in the reasonable judgment of the Buyer be so burdensome as to render inadvisable the consummation of the transactions contemplated by this Agreement.

(b)           The representations and warranties of Seller set forth in Article 3 and Article 4 above shall be true and correct in all material respects (or in all respects, as to any representation or warranty qualified by a standard of materiality) on the date of this Agreement and at and as of the Closing Date (except for representations and warranties made as of a specific date, which shall be true and correct in all material respects (or in all respects, if qualified by a standard of materiality) as of such specific date and except for such breaches of representations and warranties as of the date of this Agreement that have been cured on or prior to the earlier to occur of (i) the 30th day after written notice to the effect of any breach, and (ii) the fifth calendar day prior to the Closing Date).

(c)           Seller shall have performed and complied with all of the covenants and agreements required by the terms hereof to be performed or complied with by Seller on or prior to the Closing Date.

(d)           Buyer shall have received all of the documents described in Section 9.1.

(e)           Subject to the satisfaction of Buyer’s obligations set forth in Section 9.2(c), Seller shall have caused Chicago Title Insurance Company to have irrevocably committed to issue to Buyer title policies in favor of Buyer for each Acquired Owned Real Property in the amount of the Book Value of such Acquired Owned Real Property in accordance with the procedures set forth in Section 6.13, together with endorsements for same as survey zoning (insuring the use of the property as a commercial banking branch and the current us e of the property, if different), comprehensive, contiguity (if applicable), location, access, separate tax lot, subdivision (if applicable), and arbitration deletion, to the extent available in the State of Illinois.

(f)           No court or other Governmental Body of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits or makes illegal the consummation of the transaction contemplated hereby.

(g)           Buyer shall have received Landlord Consents with respect to the Leases (except Leases associated with a Rejected Branch as contemplated by Section 6.12 hereof), which Landlord Consents must be in form and substance reasonably satisfactory to Buyer.

(h)           There shall not have occurred a Seller Material Adverse Effect unless such Seller Material Adverse Effect has been cured on or prior to the earlier to occur of (i) the 30th day after written notice to the effect of any breach and (ii) the fifth calendar day prior to the Closing Date.

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(i)           The Book Value of the Loans included in the Acquired Assets as of the Closing Date shall be not less than $315,000,000 (or $335,000,000 if Buyer shall not have purchased from First Bank Business Capital, Inc. pursuant to the ABL Purchase Agreement at least $100,000,000 at “Par Value” (as defined in the ABL Purchase Agreement) of asset-based loans as determined on the closing date thereunder).

(j)           The Book Value of all Deposits included in the Assumed Liabilities as of the Closing Date shall be not less than $1.0 billion; provided that for purposes of the computation contemplated by this clause (j) 20% of the Deposits of the Rejected Branches shall be excluded.

(k)           Seller will be a “well capitalized” institution pursuant to Federal banking regulations, as determined by Seller in good faith and in consultation with Buyer on a pro forma basis after giving effect to the Acquisition.

(l)           Buyer shall not have excluded from this Acquisition pursuant to the provisions of Section 6.12 (which relates to Landlord Consents), Section 6.13 (which relates to title insurance and land surveys) and Section 6.15 (which relates to environmental liabilities) more than one (1) Branch.

(m)           The employment agreements between Buyer and the persons listed on Schedule 8.1(m), which employment agreements have been executed on or prior to the date hereof and made effective as of the Closing Date, shall remain in full force and effect on and as of the Closing Date and Buyer shall be satisfied that such person intends to honor and not rescind such employment agreement.

(n)           At least eighty percent (80%) of the total number of commercial lenders and business bankers who are Potential Employees to whom Buyer has made an offer of employment shall have accepted Buyer’s offer of employment.

(o)           Seller shall have terminated or amended to Buyer’s satisfaction all agreements and arrangements pursuant to which any other Person is required or permitted to use the name “First Bank” or any variation thereof in connection with issuing credit cards, debit cards, or prepaid cards within the Geographic Region.

(p)           FB Parent shall have delivered to Buyer (i) a guaranty, pursuant to which it shall have guaranteed the obligations of Seller under this Agreement, and (ii) a pledge agreement, pursuant to which it shall have pledged and delivered to Buyer $2,000,000 in cash for a period of two (2) years as collateral security for FB Parent’s obligations under such guaranty, which guaranty and pledge agreement shall be in form and substance reasonably acceptable to Buyer.

(q)           Buyer shall have received the funds, if any, and documents described in Section 9.1 below.

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8.2           Conditions to Obligation of Seller.  The obligation of Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(a)           Buyer and Seller shall have procured all of the Regulatory Approvals required to consummate the Acquisition and all applicable waiting periods (and any extensions thereof) shall have expired or otherwise been terminated.

(b)           The representations and warranties of Buyer set forth in Article 5 above shall be true and correct in all material respects (or in all respects, as to any representation or warranty qualified by a standard of materiality) on the date of this Agreement and at and as of the Closing Date(except for such breaches of representations and warranties as of the date of this Agreement that have been cured on or prior to the earlier to occur of (i) the 30th day after written notice to the effect of any breach, and (ii) the fifth calendar day prior to the Closing Date).

(c)           Buyer shall have performed and complied with all of the covenants and agreements required by the terms hereof to be performed or complied with by Buyer on or prior to the Closing Date.

(d)           Seller shall have received the funds, if any, and documents described in Section 9.2 below.

ARTICLE 9

ITEMS TO BE DELIVERED AT OR PRIOR TO CLOSING

9.1           By Seller.  Seller shall execute and/or deliver, as applicable, to Buyer (or shall have caused to be executed and/or delivered to Buyer) prior to or at the Closing:

(a)           A certificate duly executed by an authorized officer of Seller stating that as of the Closing Date, each of the conditions specified in Section 8.1(a) through Section 8.1(c) are satisfied in all respects;

(b)           A Bill of Sale with respect to the Acquired Assets in a form mutually acceptable to Buyer and Seller;

(c)           Special warranty deeds conveying the Acquired Owned Real Property, together with such instruments and documentation that may reasonably be requested to transfer the Acquired Owned Real Property in a form mutually acceptable to Buyer and Seller;

(d)           Subject to Buyer’s compliance with the provisions of Section 9.2(c) hereof, title policies issued by Chicago Title Insurance Companyin the Book Value of the Acquired Owned Real Property in accordance with the procedures set forth in Section 6.13;

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(e)           Assignment of the Leases in respect of the Leased Real Property in a form mutually acceptable to Buyer and Seller;

(f)           Such other instruments, documents or certificates as may be reasonably requested by Buyer in order to effect or carry out the intent of this Agreement, including a certificate of the Secretary of Seller certifying as to Seller’s corporate authorizations, organizational documents, good standing and the incumbency of the officers of Seller executing the Seller Documents;

(g)           Contents, keys, documents and other records maintained at the Acquired Branches directly pertaining to the safe deposit boxes maintained at the Acquired Branches (whether rented or unrented) as the same may exist as of the close of business on the Closing Date;

(h)           All funds required to be paid to Buyer pursuant to the terms of this Agreement in immediately available funds;

(i)           A certificate of non-foreign status pursuant to Treasury Regulations Section 1.1445-2(b)(2) from Seller;

(j)           For Loans that are a portion of the Acquired Assets:

(i)           The Limited Power of Attorney, attached hereto as Exhibit C; and

(ii)           Endorsement of, or allonge for, the applicable notes; and

(iii)           Execution of any additional assignment documents provided by Buyer pursuant to Section 6.8(b); and

(k)           Such other Acquired Assets as shall be capable of physical delivery.

9.2           By Buyer.  Buyer shall deliver to Seller at or prior to the Closing:

(a)           Any funds required to be paid to Seller pursuant to the terms of this Agreement in immediately available funds;

(b)           A certificate duly executed by an authorized officer of Buyer stating that, as of the Closing Date, each of the conditions specified in Section 8.2(a) through Section 8.2(c) is satisfied in all respects;

(c)           Such other documents or instruments as may be reasonably required by Chicago Title Insurance Company as customarily delivered by buyers (as opposed to sellers or other third parties) in connection with its commitments to issue the title policies described Section 8.1(e) including, without limitation any documents or information required pursuant to any requirements set forth in the title commitments; and

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(d)           Such other instruments, documents or certificates as may be reasonably requested by Seller in order to effect or carry out the intent of this Agreement, including a certificate of the Secretary of Buyer certifying as to Buyer’s corporate authorizations, organizational documents, good standing and the incumbency of the officers of Buyer executing the Buyer Documents.

ARTICLE 10

TERMINATION

10.1           Termination of Agreement.

(a)           The Parties may terminate this Agreement by mutual written consent at any time prior to the Closing Date.

(b)           Buyer may terminate this Agreement by giving written notice to Seller any time prior to the Closing Date (i) in the event Seller has breached any representation, warranty, or covenant contained in this Agreement in any material respect, Buyer has notified Seller of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach, (ii) if the Closing shall not have occurred on or before February 28, 2010, by reason of the failure of any conditions precedent under Section 8.1 (unless the failure results primarily from Buyer breaching any representation, warranty, or covenant contained in this Agreement); or (iii) there shall h ave occurred a Seller Material Adverse Effect and such Seller Material Adverse Effect has not been cured on or before the earlier to occur of (Y) the 30th calendar day following receipt by Seller of written notice from Buyer of a Seller Material Adverse Effect, and (Z) the fifth calendar day prior to the Closing Date.

(c)           Seller may terminate this Agreement by giving written notice to Buyer at any time prior to the Closing Date (i) in the event Buyer has breached any representation, warranty, or covenant contained in this Agreement in any material respect, Seller has notified Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach; (ii) if the Closing shall not have occurred on or before February 28, 2010, by reason of the failure of any condition precedent under Section 8.2 hereof (unless the failure results primarily from Seller breaching any representation, warranty, or covenant contained in this Agreement), or (iii) there sha ll have occurred a Buyer Material Adverse Effect and such Buyer Material Adverse Effect has not been cured on or before the earlier to occur of (Y) the 30th calendar day following receipt by Seller of written notice thereof from Buyer of a Buyer Material Adverse Effect, and (Z) the fifth calendar day prior to the Closing Date.

10.2           Effect of Termination.  If any Party terminates this Agreement pursuant to Section 10.1 above, all rights and obligations of the Parties hereunder shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach); provided, however, that the provisions contained in Section 6.3 (confidentiality) and Section 6.7(f) (n on-solicitation) shall survive termination.

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ARTICLE 11

REMEDIES FOR BREACH OF THIS AGREEMENT

11.1           Survival.  The Parties agree for all purposes of this Agreement that the representations and warranties made by a Party are strictly relied upon by the Party to whom they are made and may be relied upon and enforced by the Party to whom they are made, and shall survive (in accordance with the provisions hereof), regardless of any investigation made or to be made by or on behalf of the Party to whom they are made or whether such Party or its representatives or advisors knew or should have known that such representations and warranties were inaccurate.  All representations and warranties of the Parties contained in this Agreement shall survive the Closing and continue in full force an d effect thereafter for a period of two (2) years following the Closing Date, except for those representations and warranties (a) of Seller (i) contained in Section 4.9 herein, which shall survive the Closing Date for a period of eight (8) years, (ii) contained in Section 4.4 herein, which shall survive the Closing Date for a period of sixty (60) days following the expiration of the statute of limitations (including any extension thereof) for the Taxes giving rise to such claim, and (iii) contained in Sections 3.1, 3.2, 3.3, 3.4, 4.1 and 4.11, which shall survive the Closing Date without end or termination, and (b) of Buyer contained in Sections 5.1, 5.2, 5.3 and 5.4, which shall survive the Closing Date without end or termination, and thereafter neither Party (or other Indemnitee) may claim any Loss in relation to a breach of any representation and warranty made by the other Party hereunder unless a claim for indemnification arising out of such breach shall have been properly made on or prior to such expiry date, in which case the obligation of the Indemnifying Party hereunder to indemnify the Indemnitee hereunder for such claim shall survive until such time as such claim shall have been resolved and fully satisfied. 0; After the end of such expiry period, Seller’s obligation to indemnify the Buyer Indemnitees, and Buyer’s obligation to indemnify the Seller Indemnitees, with respect to such representations and warranties shall expire except with respect to a matter set forth in a claim notice that shall have been properly given on or prior to such expiry date.  It is further agreed by the Parties that each Buyer Indemnitee’s rights to indemnification set forth in clauses (b) through (f) of Section 11.2 hereof, and each Seller Indemnitees rights to indemnification set forth in clauses (b) and (c) of Section 11.3 hereof, shall remain in full force and effect indefinitely; provided, however, that the obligation of Seller to indemnify th e Buyer Indemnities pursuant to Section 11.2(d) hereof on account of an Excluded Liability provided under Section 2.1(d)(ii) hereof shall survive the Closing and remain in full force and effect for a period of eight (8) years following the Closing.  The Parties agree that, notwithstanding anything to the contrary contained herein, the rights and remedies of an Indemnitee on account of the breach of or noncompliance with a representation, warranty, covenant or agreement made herein in favor of such Indemnitee shall not be limited due to the fact that the statement, fact, omission, conduct or occurrence upon which any claim of such breach of or noncompliance with such representation, warranty, covenant or agreement is based shall be the subject of any other representation, warranty, covenant or agreement contained herein that is not breached or inaccurate.

11.2           Indemnification by Seller.  Subject to the provisions of this Article 11, Seller shall indemnify, defend and hold harmless Buyer, its Affiliates and the respective officers, directors, employees, agents and representatives of Buyer and its Affiliates (each of whom may be an Indemnitee pursuant to this Article 11) (collectively, the “Buyer Indemnitees”) from and against, and pay and reimburse each such Buyer Indemnitee for, any and all Losses, whether or not any

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such Losses arise out of any Third Party Claim, directly or indirectly arising out of, from or in connection with:

(a)           any breach of any representation or warranty made by Seller under this Agreement (including in the case of any Third Party Claim any Losses suffered by such Buyer Indemnitee in the event that any third party unrelated to Buyer alleges facts that, if true, would constitute or result in a breach by Seller of any such representation or warranty);

(b)           any default or breach of any covenant, obligation or agreement on the part of Seller under this Agreement (including in the case of any Third Party Claim any Losses suffered by such Buyer Indemnitee in the event that any third party unrelated to Buyer alleges facts that, if true, would constitute or result in a breach by Seller of any such covenant, obligation or agreement);

(c)           any Excluded Asset;

(d)           any Excluded Liability;

(e)           any check or other instrument drawn on or deposited into a Branch Deposit account (i) on or prior to the Closing Date upon which a forgery (signature or endorsement) or alteration claim is asserted against Buyer or as to which a proper endorsement is lacking, or (ii) prior to or after the Closing Date that involves a check kiting scheme that was initiated on or prior to the Closing Date;

(f)           any chargeback occurring after the Closing Date on a Deposit account to the extent that such chargeback exceeds the funds in the account on the date of such chargeback but solely to the extent that such chargeback resulted from a violation of Seller’s expedited funds availability policy in effect on the date such funds were deemed collected on the account (provided that Buyer shall reimburse Seller for any sums so indemnified to the extent that Seller recoups any funds so charged back from subsequent deposits into the Deposit account so transferred); or

(g)           the ownership or operation of the Branches or their business and properties (including the Acquired Assets and the Deposits) on or prior to the Closing Date, but excluding all Assumed Liabilities.

11.3           Indemnification by Buyer.  Subject to the provisions of this Article 11, Buyer shall indemnify, defend and hold harmless Seller, its Affiliates and the respective officers, directors, employees, agents and representatives of Seller and its Affiliates (each of whom may be an Indemnitee pursuant to this Article 11) (collectively, the “Seller Indemnitees”) from and against, and pay and reimburse each such Seller Indemnitee for, any and all Losses, whether or not any such Losses arise out of a ny Third Party Claim, directly or indirectly arising out of, from or in connection with:

(a)           any breach of any representation or warranty made by Buyer under this Agreement (including in the case of any Third Party Claim any Losses suffered by such

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Seller Indemnitee in the event that any third party unrelated to Seller alleges facts that, if true, would constitute or result in a breach by Buyer of any such representation or warranty);

(b)           any default or breach of any covenant, obligation or agreement on the part of Buyer under this Agreement (including in the case of any Third Party Claim any Losses suffered by such Seller Indemnitee in the event that any third party unrelated to Seller alleges facts that, if true, would constitute or result in a breach by Buyer of any such covenant, obligation or agreement);

(c)           any physical damage to Seller’s Real Estate Interests caused by Buyer or its agent in connection with any Phase II Environmental Assessments conducted by Buyer; or

(d)           any of the Acquired Assets or the Assumed Liabilities, except in each case to the extent that indemnification for any thereof would be required by Seller pursuant to Section 11.2.

11.4           Limitations on Indemnity.

(a)           Seller will have no Liability to the Buyer Indemnitees for indemnification for any breach of any of Seller’s representations and warranties pursuant to Section 11.2(a) hereof (i) until the total of all Losses with respect to such matters exceeds $150,000 in the aggregate (the “Loss Threshold”), at which point Seller will be obligated to indemnify the Buyer Indemnitees from and against all such Losses relating back to the first dollar, and (ii) to the extent such Losses shall exceed sixty percent (60%) of the dollar amount of the premium computed on the Closing Date pursuant to Section 2.2(a)(i) hereof (the “Cap”); provided, however, that the obligation of Seller to indemnify the Buyer Indemnitees pursuant to Section 11.2(a) hereof on account of the breach by Seller of any representation and warranty made by Seller pursuant to Sections 3.1, 3.2, 3.3, 3.4, 4.1 (except as to that portion of the representation contained in Sections 4.1 relating to the physical condition of Acquired Tangible Personal Property), 4.10 (to the extent such Losses relate to Excluded Loans), 4.11 and 4.12 hereof shall not be subject to the Loss Threshold or the Cap.  Buyer will have no Liability to the Seller Indemnitees for indemnification for any breach of any of Buyer’s representations and warranties pursuant to Section 11.3(a) hereof (i) until the total of all Losses with respect to such matters exceeds the Loss Threshold, at which point Buyer will be obligated to indemnify the Seller Indemnitees from and against all such Losses relating back to the first dollar, and (ii) to the extent such Losses shall exceed the Cap; provided, however, that the obligation of Buyer to indemnify the Seller Indemnitees pursuant to Section 11.3(a) hereof on account of the breach by Buyer of any representation and warranty made by Buyer pursuant to Sections 5.1, 5.2, or 5.3 hereof shall not be subject to the Loss Threshold or the Cap.

(b)           If an Indemnitee desires to seek indemnification for any Loss for which it is entitled to be indemnified pursuant to this Article 11, such Indemnitee shall deliver written notice of its claim for indemnification to the Party against whom such

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indemnification is being sought, provided, however, no Indemnitee shall be entitled to be indemnified pursuant to Section 11.2(a) or 11.3(a) hereof in respect of the breach of any representation or warranty made by a Party unless the Indemnitee seeking indemnification shall have given such written notice to the indemnifying Party prior to the expiration of the survival period for such representation or warranty as set forth pursuant to Section 11.1 hereof.  Such written notice shall set forth in reasonable detail the basis (to the extent actually known by the Indemnitee) upon which such claim for indemnity is made.  In the event that any such claim is made within such prescribed period, the indemnity relating to such claim shall survive until such claim is resolved and fully satisfied.

(c)           The Buyer Indemnitees may seek payment and full and complete indemnity from Seller in respect of any and all Losses or Third Party Claims under Sections 11.2(b), 11.2(c), 11.2(d), 11.2(e) and 11.2(f), and the Seller Indemnitees may seek payment and full and complete indemnity from Buyer in respect of any and all Losses or Third Party Claims under Sections 11.3(b), 11.3(c) and 11.3(d), and such indemnity shall not be subject to the Loss Threshold or the Cap.

(d)           Notwithstanding anything to the contrary contained in this Agreement, the Parties agree that in the event that there shall arise or exist one or more Pre-Closing Environmental Liabilities for which the Buyer Indemnitees are otherwise entitled to be indemnified pursuant to Section 11.2(d) hereof, Buyer agrees to share with Seller, and remain liable for and not seek from Seller indemnification for, fifty percent (50%) of the first One Million Dollars ($1,000,000) of Losses arising out of all such Pre-Closing Environmental Liabilities unless, with respect to any Pre-Closing Environmental Liability, (i) such Pre-Closing Environmental Liability is attributable or related to a breach or violation of the representations and warranties made by Seller pursuant to Article 4 hereof, (ii) such Pre-Closing Environmental Liability was disclosed on Schedule 4.9(a) or 4.9(g) or in the documents (or attachments to the documents) referred to on Schedule 4.9(a) or 4.9(g), or (iii) such Pre-Closing Environmental Liability was revealed during or in connection with the Phase I Environmental and Hazardous Materials Assessment or Phase II Assessments conducted by Buyer pursuant to Section 6.15 hereof (other than any such Pre-Closing Environmental Liability so revealed on any such assessment to the extent that the remediation costs in respect thereof constitute an Assumed Liability pursuant to Section 2.1(c)(iv) hereof).

11.5           Third Party Claims.

(a)           In no event shall any Indemnifying Party under this Agreement be liable with respect to any Third Party Claim against any Indemnitee unless the following conditions are satisfied:

(i)           Except as provided in clause (ii) of this Section 11.5(a), no right to indemnification under this Article 11 for a Third Party Claim shall be available to an Indemnitee unless the Indemnitee shall have delivered to the Indemnifying Party within the Notice Period a notice describing in reasonable detail the facts (to the extent reasonably known by such Indemnitee) giving rise to such Third Party

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Claim (a “Claim Notice”) and stating that the Indemnitee intends to seek indemnification for such Third Party Claim from the Indemnitor pursuant to this Article 11.

(ii)           If, in the case of a Third Party Claim, a Claim Notice is not given by the Indemnitee within the Notice Period, the Indemnitee shall nevertheless be entitled to be indemnified under this Article 11 except to the extent that the Indemnifying Party can establish that the Indemnifying Party has been actually and materially prejudiced by such time elapsed.

(b)           Upon receipt of a Claim Notice from an Indemnitee with respect to a Third Party Claim and so long as the Indemnifying Party shall have acknowledged in writing its unconditional obligation to indemnify the Indemnitee for all Losses arising out of such Third Party Claim, the Indemnifying Party will have the right, at its expense, to assume and thereafter conduct the defense of the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnitee; provided, however, that the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prio r written consent of the Indemnitee (such consent not to be withheld or delayed unreasonably) unless the judgment or proposed settlement (i) involves only the payment of money damages pursuant to which each plaintiff or other claimant shall have agreed to unconditionally release the Indemnitee from all liability in respect thereof, and (ii) does not impose an injunction or other equitable relief upon the Indemnitee and does not relate to a claim under or related to any Environmental Laws.  The Indemnitee shall have the right to employ separate counsel at such Indemnitee’s expense in connection with any such Third Party Claim and to participate in the defense thereof; provided, however, that the reasonable fees and expenses of counsel employed by the Indemnitee shall be at the expense of the Indemnifying Party if (i) such counsel is retained pursuant to clause (c) of this Section 11.5, (ii) the named parties to any such Third Party Claim include both the Indemnitee and the Indemnifying Party and in the reasonable judgment of the Indemnitee, representation of the Indemnitee and the Indemnifying Party by the same counsel would be inadvisable due to actual or potential differing defenses or counterclaims or conflicts of interests between them, or (iii) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party.  Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume and control (but shall have the right to participate at its own expense in the defense of), and the Indemnitee shall be entitled to have sole control over (with counsel of its own choosing reasonably satisfactory to and at the expense of the Indemnifying Party), the defense or settlement of any Third Party Claim (without prejudicing the rig ht of the Indemnitee to enforce its claim for indemnification against the Indemnifying Party under this Agreement) to the extent such Third Party Claim seeks an order, injunction, non-monetary or other equitable relief against the Indemnitee which, if successful, could result in a material adverse effect upon the business, financial condition, results of operations or assets of the Indemnitee.

(c)           If the Indemnifying Party does not assume the defense of such Third Party Claim within twenty (20) days after receipt of the Claim Notice, the Indemnitee shall have the right (including prior to the time the Indemnifying Party shall have assumed

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such defense), with counsel of its own choosing reasonably satisfactory to and at the expense of the Indemnifying Party, to assume and control the defense of, and settle or agree to pay in full, such Third Party Claim; provided, however, that, so long as the Indemnifying Party has acknowledged in writing its unconditional obligation to indemnify the Indemnitee for such Third Party Claim, the Indemnitee shall not consent to the entry of a judgment or enter into any settlement with respect to such Third Party without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed) unless such Third Party Claim seeks an order, injunction, non-monetary or other e quitable relief against the Indemnitee which, if successful, could result in a material adverse effect upon the business, financial condition, results of operations or assets of the Indemnitee; and, provided, further, that the assumption of the defense of, and the consent to the entry of a judgment or entering into any settlement with respect to, such Third Party Claim as provided in this clause (c) shall be without prejudice to the right of the Indemnitee to enforce its claim for indemnification against the Indemnifying Party under this Agreement.

(d)           Notwithstanding anything to the contrary contained in this Section 11.5, if a Third Party Claim includes or would reasonably be expected to include both a claim for Taxes that are not Excluded Liabilities pursuant to Section 2.1(d) (“Buyer Taxes”) and a claim for Seller Taxes, and such claim for Seller Taxes is not separable from such a claim for Buyer Taxes, Buyer (if the claim for Buyer Taxes exceeds or reasonably would be expected to exceed in amount the claim for Seller Taxes) or otherwise Seller (Seller or Buyer, as the case may be, the “Controlling Party”) shall be entitled to control the defense of such Third Party Claim (such Third Party Claim, a “Tax Claim”).  In such case, the other party (Seller or Buyer, as the case may be, the “Non-Controlling Party”) shall be entitled to participate fully (at the Non-Controlling Party’s sole expense) in the conduct of such Tax Claim and the Controlling Party shall not settle such Tax Claim without the consent of such Non-Controlling Party (which consent shall not be unreasonably withheld, conditioned or delayed).  The costs and expenses of conducting the defense of such Tax Claim shall be reasonably apportioned based on the relative amounts of the Tax Claim that are Seller Taxes and that are Buyer Taxes.

(e)           After the Closing Date, Buyer and Seller shall (i) each cooperate fully with the other as to all Third Party Claims involving them, shall make available to the other, as reasonably requested, all information, records and documents relating to all Third Party Claims involving them and shall preserve all such information, records and documents until the termination of any Third Party Claim involving them, and (ii) make available to the other, as reasonably requested and at the reasonable cost and expense of the requesting party, personnel, agents and other representatives who are responsible for preparing or maintaining information, records or other documents, or who may have particular knowledge, with respect to any Third Party Claim involving them.< /div>

11.6           Losses Computed Without Giving Effect to Materiality.  The determination of whether there shall have occurred a breach of a representation or warranty for which indemnification is available under Section 11.2(a) or 11.3(a), as the case may be, and the amount of any Losses or Third Party Claims for which an Indemnitee is entitled to seek indemnification under such sections, as applicable, shall be made, determined and calculated without regard to

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any material adverse effect or other materiality qualification set forth in the relevant representation or warranty.

11.7           Indemnity Payments Treated as Adjustments to Purchase Price.  Buyer and Seller agree to treat any indemnification payments made by Buyer or Seller pursuant to this Article 11 as an adjustment to the purchase price unless Buyer or Seller receives a written opinion, reasonably satisfactory in form and substance to the other, of a law firm with appropriate experience and expertise to the effect that it is not or is not likely to be permissible to treat such payments in that manner on a federal, state or local income tax return.

11.8           After-Tax Nature of Indemnity Payments.  In the event that pursuant to Section 11.7 the Parties are unable to treat any indemnification payments as an adjustment to the purchase price, any such payment or indemnity required to be made pursuant to Section 11.2 or 11.3 hereof shall include any amount necessary to hold the Indemnitee harmless on an after-tax basis from all Taxes required to be paid with respect to the receipt of such payment or indemnity.  In determining the amount necessary to be added to any payment or indemnity in order to accomplish the foregoing, the parties hereto agree to treat all Taxes required to be paid by any Indemnitee as if such Indemnitee were subject to tax at the highest marginal tax rates (for both federal and state, as determined on a combined basis) applicable to such Indemnitee (or such ultimate taxpayers).

11.9           Third Party Beneficiaries.  All Persons included within the terms “Buyer  Indemnitees” and “Seller Indemnitees” are intended third party beneficiaries of this Article 11 and shall have the right to enforce the benefits intended to be conferred upon each of them under this Article 11 as though they were parties to this Agreement.

ARTICLE 12

MISCELLANEOUS

12.1           Governing Law.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Illinois without giving effect to any choice or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

12.2           Consent to Jurisdiction; Waiver of Jury Trial.

(a)           Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of any State or Federal court sitting in the State and City of Akron, Ohio and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Federal court.  Each of the parties hereto agrees that a final, non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other j urisdictions by suit on the judgment in any other manner provided by law.

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(b)           Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in any State or Federal court sitting in the State and City of Akron, Ohio.  Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by law, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such court.

(c)           Each of the parties hereto irrevocably consents to service of process in the manner provided for notices in Section 12.6 hereof.  Notwithstanding the foregoing, each of the parties hereto shall have the right to serve process in any other manner permitted by law.

12.3           Waiver of Punitive Damages and Jury Trial.

(a)           EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE DEFINITION OF LOSSES, THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO RECOVER PUNITIVE, EXEMPLARY, CONSEQUENTIAL OR SIMILAR DAMAGES IN ANY LAWSUIT, LITIGATION, ARBITRATION OR PROCEEDING ARISING OUT OF OR RESULTING FROM ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(b)           EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(c)           EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVERS SET FORTH IN CLAUSE (a) OF THIS SECTION 12.3, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN SUCH SECTION.

12.4           Successors and Assigns; No Third-Party Rights.  No Party may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other Parties.  This Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the Parties.  Except as otherwise provided in Article 11 hereof, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties any legal or equitable rig ht, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.  This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the Parties to this Agreement and their successors and permitted assigns.

12.5           Entire Agreement; Amendment.  This Agreement and the other documents delivered pursuant to this Agreement at the Closing and the Non-disclosure Agreement constitute the full and entire understanding and agreement between the Parties with regard to the subjects hereof and thereof, and supersede all prior agreements and merge all prior discussions, negotiations, proposals and offers (written or oral) between them, and no Party shall be liable or bound to any other Party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.  In the event of a conflict between the terms and provisions of the Non-disclosure Agreement and the ter ms and provisions of this Agreement, the terms and provisions of this Agreement shall be controlling.

12.6           Notices.  All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, postage prepaid, by telecopier or by national overnight delivery service, and addressed to the intended recipient as set forth below:

If to Seller:	With a Copy to:
Terrance M. McCarthy	Walt G. Moeling, IV, Esq.
President	Bryan Cave, LLP
First Bank	1201 West Peachtree St, NW
135 N. Meramec	Fourteenth Floor
Clayton, Missouri  63105	Atlanta, Georgia  30309
Facsimile:  (314) 854-5690	Facsimile:  (404) 420-0038
and	and
Peter D. Wimmer	B.T. Atkinson, Esq.
Senior Vice President and General Counsel	Bryan Cave, LLP
First Bank	One Wachovia Center
135 N. Meramec, Suite 410	301 S. College Street, Suite 3700
Clayton, Missouri  63105	Charlotte, North Carolina  28202
Facsimile:  (314) 854-4617	Facsimile:  (704) 749-9354

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If to Buyer:	With a Copy to:
FirstMerit Bank, N.A.	Jeffrey M. Werthan, Esq.
Paul G. Greig	Katten Muchin Rosenman LLP
Chairman, President and CEO	2900 K Street, NW, Suite 200
III Cascade Plaza, CAS 80	Washington, DC  20007
Akron, Ohio  44308	Facsimile:  (202) 339-8281
Facsimile:  (330) 384-7271
and	and
Judith A. Steiner, Esq.	Steven C. Schnitzer, Esq.
Executive V.P., Secretary & General Counsel	Katten Muchin Rosenman LLP
FirstMerit Bank, N.A.	2900 K Street, NW, Suite 200
III Cascade Plaza, CAS 80	Washington, DC  20007
Akron, Ohio  44308	Facsimile:  (202) 339-8293
Facsimile:  (330) 384-7271

Any notice given in the manner aforesaid shall be deemed to have been served, and shall be effective for all purposes hereof on the date of its receipt by the party to be notified.  Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth.

12.7           Amendments and Waivers.  Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Party against whom enforcement of any such amendment, waiver, discharge or termination is sought.  No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

12.8           Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.  A signature on a counterpart may be a facsimile or an electronically transmitted signature, and such signature shall have the same force and effect as an original signature.

12.9           Severability.  In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

12.10           Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement.

12.11           Construction.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this

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Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  All plural nouns and pronouns shall be deemed to include the singular case thereof where the context requires, and vice versa.  All pronouns shall be gender neutral unless the context otherwise requires.  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context otherwise requires.  The word “including” shall mean including without limitation.  Whenever the word “indemnification”, “indemnify” or “indemnified” is used herein with respect to any Indemnitee’s right to indemnification (or words of correlative meaning) from an Indemnifying Party hereunder, including as provided in Article 11 hereof or any other Article or Section hereof, then such Indemnitee’s right to “indemnification” or to be “indemnified” (or words of correlative meaning) shall be deemed to include the right to be defended or held harmless, and paid and reimbursed, with respect to such matter or claim or Loss or Liability as to which the word “indemnification” or “indemnified” or “indemnify” shall apply, unless otherwise expressly provided to the contrary.

12.12           Expenses.  Other than expressly provided herein, each Party will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement, filing any regulatory notices or applications, and the Acquisition, including all fees and expenses of agents, representatives, counsel, and accountants.  In the event of termination of this Agreement, the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement by another Party.

12.13           Waiver of Compliance with Bulk Sales Laws.  Buyer and Seller hereby waive compliance by them in connection with the transactions contemplated by this Agreement with the provisions of Article 6 of the Uniform Commercial Code as adopted in states where any of the Acquired Assets are located, and any other applicable bulk sales laws with respect to or requiring notice to any of Seller’s creditors or taxing authorities and any related withholding requirements, in effect as of the date of the Closing.  Seller shall fully indemnify, reimburse and hold harmless Buyer against all Liabilities, damages or expenses which Buyer may suffer or incur due to Seller’s failure to so comp ly.

12.14           Next Business Day.  In the event that either Party is required by this Agreement to perform any action or delivery on a Saturday, Sunday or any holiday observed by the Federal Reserve, such Party may perform the action or delivery on the following Business Day.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written.

FIRSTMERIT BANK, N.A.
By:	/s/	Terrence E. Bichsel
Name:		Terrence E. Bichsel
Title:		Executive Vice President and Chief
		Financial Officer
FIRST BANK
By:	/s/	Terrance M. McCarthy
Name:		Terrance M. McCarthy
Title:		Chairman, President and Chief Executive
		Officer

FIRST AMENDMENT

TO

PURCHASE AND ASSUMPTION AGREEMENT

FIRST AMENDMENT TO PURCHASE AND ASSUMPTION AGREEMENT, dated as of January 5, 2009 (the “Amendment”), by and between FIRSTMERIT BANK, N.A., a national banking association ("Buyer"), and FIRST BANK, a Missouri state chartered bank ("Seller").

RECITALS:

WHEREAS, Buyer and Seller are parties to that certain Purchase and Assumption Agreement, dated as of November 11, 2009 (as amended, modified or supplemented to date, the “Purchase Agreement”); and

WHEREAS, Buyer and Seller desire to further amend the Purchase Agreement, upon the terms provided herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as follows:

Section 1.                      Amendment to Section 2.5(a) of the Purchase Agreement.  Section 2.5(a) of the Purchase Agreement is hereby amended by deleting the proviso at the end of the last sentence of Section 2.5(a) and inserting the following proviso in substitution therefor:

“; provided, however, that unless Buyer shall have otherwise agreed by written notice to Seller, in no event shall the Closing occur prior to February 19, 2010 (the date on which the Closing shall have occurred, the “Closing Date”).”

Section 2.                      Ratification.  Except as expressly amended by this Amendment, the terms, covenants, conditions and agreements of the Purchase Agreement are in all respects ratified and confirmed and, except as amended hereby, shall continue in full force and effect.

Section 3.                      Miscellaneous.  This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.  A signature on a counterpart may be a facsimile or an electronically transmitted signature, and such signature shall have the same force and effect as an original signature.  This Amendment shall be governed by and construed in accordance with the domestic laws of the State of Illinois without giving effect to any choice or conflic t of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

IN WITNESS WHEREOF the parties hereto have executed this First Amendment as of the day and year first above written.

BUYER:
FIRSTMERIT BANK, N.A.
By:	/s/	Terrence E. Bichsel
	Name:	Terrence E. Bichsel
	Title:	Executive Vice President
		and Chief Financial Officer
SELLER:
FIRST BANK
By:	/s/	Terrance M. McCarthy
	Name:	Terrance M. McCarthy
	Title:	Chairman, President and Chief
		Executive Officer

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SECOND AMENDMENT

TO

PURCHASE AND ASSUMPTION AGREEMENT

SECOND AMENDMENT TO PURCHASE AND ASSUMPTION AGREEMENT, dated as of February 19, 2010 (the “Amendment”), by and between FIRSTMERIT BANK, N.A., a national banking association ("Buyer"), and FIRST BANK, a Missouri state chartered bank ("Seller").

RECITALS:

WHEREAS, Buyer and Seller are parties to that certain Purchase and Assumption Agreement, dated as of November 11, 2009 (as amended by that certain First Amendment, dated as of January 5, 2010, and as further amended, modified or supplemented to date, the “Purchase Agreement”); and

WHEREAS, Buyer and Seller desire to further amend the Purchase Agreement, upon the terms provided herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as follows:

Section 1.                      Amendment to Definition of Deposits Set Forth in Article 1 of the Purchase Agreement.  The definition of Deposits set forth in Article 1 of the Purchase Agreement is hereby amended by deleting clause (c) contained in the proviso thereof and inserting the following in substitution therefor:  “(c) intentionally omitted;”.

Section 2.                      Amendment to Definition of Loans Set Forth in Article 1 of the Purchase Agreement.  The definition of Loans set forth in Article 1 of the Purchase Agreement is hereby amended by deleting the words “(b) overdrafts of less than $1,000 in deposit accounts of the Branches;” and inserting the following in substitution therefor:  “(b) intentionally omitted;”.

Section 3.                      Additional Excluded Tangible Personal Property.  Buyer and Seller hereby agree that the ATM machines specifically listed on Appendix A hereto, together with the encoder machines and the cash advance machines or terminals specifically listed on Appendix B hereto (all such items listed on Appendix A and Appendix B hereto, co llectively, the “Additional Excluded Equipment”), shall be and constitute “Excluded Tangible Personal Property” for all purposes of the Purchase Agreement, and Schedule 2.1(b)(i) to the Purchase Agreement is hereby automatically amended and supplemented to include thereon the Additional Excluded Equipment.

Section 4.                      Additional Acquired Contracts.  Buyer and Seller hereby agree that the contracts listed on Appendix C hereto shall be and constitute “Acquired Contracts” for all purposes of the Purchase Agreement, and Schedule 2.1(a)(vii)(B) to the Purchase Agreement is

hereby automatically amended and supplemented to include thereon such additional Acquired Contracts.

Section 5.                      Amendment to Section 2.1(a)(ix) of the Purchase Agreement.  Section 2.1(a)(ix) of the Purchase Agreement is hereby amended by deleting such Section 2.1(a)(ix) in its entirety and inserting the following in substitution therefor:

“(ix)           all rights of Seller relating to pre-paid expenses (other than, for the avoidance of doubt, any FDIC deposit insurance assessments) associated with the foregoing Acquired Assets or any of the Deposits, as contemplated by Section 2.4 hereof; and”.

Section 6.                      Amendment to Section 2.4 of the Purchase Agreement.

(a)           The first sentence of Section 2.4(b) of the Purchase Agreement is hereby amended by deleting clause (ii) thereof in its entirety and inserting the following words in substitution therefor:  “(ii) intentionally omitted,”.

(b)           The first sentence of Section 2.4(b) is hereby further amended by inserting the following words at the end thereof but immediately before the period, as follows:  “; provided, however, that Buyer and Seller agree that any FDIC deposit insurance assessments, including any pre-paid FDIC deposit insurance assessments, shall not be prorated”.

(c)           Section 2.4(d) is hereby deleted in its entirety and the following is inserted in substitution therefor:

“(d)           intentionally omitted.”

Section 7.                      Reduction in Book Value of Naperville Branch.  Buyer and Seller hereby acknowledge that Buyer has objected to a certain negative covenant in the vesting deed relating to Seller’s owned Branch located in Naperville, Illinois (the “Naperville Branch”).  Accordingly, (i) for purposes of computing the Payment Amount pursuant to Section 2.2(a) of the Pu rchase Agreement, the purchase price of the Acquired Real Property relating to the Naperville Branch shall be reduced by an amount equal to $400,000, and (ii) Buyer hereby waives and terminates its right to exclude any Real Estate Interests from the Acquisition pursuant to the provisions of Section 6.13 of the Purchase Agreement.

Section 8.                      Amendment to Section 8.1 of the Purchase Agreement.   Section 8.1 of the Purchase Agreement is hereby amended as follows:

(a)           Section 8.1(i) of the Purchase Agreement is hereby deleted in its entirety and the following new Section 8.1(i) is inserted in substitution therefor:

“(i)           The Book Value of the Loans included in the Acquired Assets as of the  Closing Date shall be not less than $300,000,000; provided, however, that if the Book Value of the Loans included in the Acquired Assets as of the Closing Date is less than

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$315,000,000 but equal to or greater than $300,000,000 (such deficit, the “Loan Deficit Amount”), then Seller shall pay and deliver to Buyer at the Closing, by wire transfer of immediately available funds to the account of Buyer specified by it in writing, the following amount:  a sum of money equal to the amount of interest that would accrue on a notional amount of principal indebtedness equal to the Loan Deficit Amount over a twenty-seven (27) month period at an interest rate equal to three percent (3.0%) per annum, without compounding and assuming no principal curtailments or repayments during such twenty-seven (27) month period (the “Loan Deficit Adjustment Amount ”).  Buyer and Seller agree that the amount required to be paid to Buyer under this Section 8.1(i) shall be, for purposes of the Closing, estimated based on the estimate of the Book Value of the Loans as set forth in the Estimated Payment Amount Statement (which has been prepared as of January 31, 2010) and that such estimated sum of money (the “Estimated Loan Deficit Adjustment Amount”) shall be reconciled and adjusted as contemplated by Section 2.5(c) hereof on the Supplemental Closing Date.”

(b)           Section 8.1(o) of the Purchase Agreement is hereby deleted in its entirety and the following new Section 8.1(o) is inserted in substitution therefor:

“(o)           Seller shall have ceased any direct or indirect marketing of credit cards, debit cards, or prepaid cards in the Geographic Region under any agreements and arrangements pursuant to which any other Person is required or permitted to use the name “First Bank” or any variation thereof in connection with issuing any credit cards, debit cards, or prepaid cards.”

Section 9.                      Amendment to Section 2.5(c) of the Purchase Agreement.  Section 2.5(c) of the Purchase Agreement is hereby amended by adding the following sentence at the end of Section 2.5(c):

“In addition and in connection with the Supplemental Closing, if the Estimated Loan Deficit Adjustment Amount is higher or lower than the actual Loan Deficit Adjustment Amount, as computed in the same manner contemplated by Section 8.1(i) using the final Book Value of the Loans included on the Final Payment Amount Statement as finally determined pursuant to Section 2.2(c) (such higher or lower amount, the “Final Loan Deficit Adjustment Amount”), then, at the Supplemental Closing, (i) if the Final Loan Deficit Adjustment Amount is higher than the Estimated Loan Deficit Adjustment Amount, Seller shall pay to Buyer the absolute difference thereo f, and (ii) if the Estimated Loan Deficit Adjustment Amount is higher than the Final Loan Deficit Adjustment Amount, Buyer shall pay to Seller the absolute difference thereof, in each case by wire transfer of immediately available funds; provided, however, that in no event shall Buyer be required to pay to Seller under clause (ii) of this sentence an amount that exceeds the Estimated Loan Deficit Adjustment Amount paid to Buyer on the Closing Date.”

Section 10.                      Waiver of Right to Reject Branches Pursuant to Section 6.15, and  Further Amendment to Section 8.1.  Buyer and Seller acknowledge that Buyer conducted environmental assessments of the owned Branches prior to Closing and, under certain circumstances, has the

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right to elect to exclude from the Acquisition certain Branches.  Accordingly, Buyer hereby waives and terminates its right to exclude any Branch (and the Real Estate Interests in respect thereof) from the Acquisition pursuant to the provisions of Section 6.15 of the Purchase Agreement, and to induce Buyer to waive and terminate such rights, the parties hereto agree that Section 8.1 of the Purchase Agreement is hereby amended by inserting at the end thereof the following new clause (r):

“(r)           Seller shall pay and deliver to Buyer at the Closing, by wire transfer of immediately available funds to the account of Buyer specified by it in writing, $493,570.00 (the “Environmental Remediation Amount”) as compensation for the environmental conditions revealed in the Phase I Environmental and Hazardous Materials Assessment reports and the Phase II Environmental Assessment reports prepared by Buyer’s consultant pursuant to Section 6.15 with respect to the owned Branches listed on Exhibit A hereto and identified thereon as: (i) Zion Branch, (ii) Villa Park Branch, (iii) West 47th Street Branch and (iv) Lee Street Main Branch.”

Section 11.                      Amendment to Article 7 of the Purchase Agreement.  Article 7 of the Purchase Agreement is hereby amended by inserting at the end thereof the following new Sections:

“7.15           Certain Environmental Remediation Matters.  On the Closing Date, Seller is delivering to Buyer the Environmental Remediation Amount.  Buyer shall use the Environmental Remediation Amount to pay all costs and expenses (including the costs of site security, oversight, restoration, operation and maintenance plans, OSHA compliance and relocation of employees and equipment, as appropriate) incurred by Buyer to remove and, in Buyer’s good faith and commercially reasonable judgment, otherwise abate, to the extent practicable, the friable asbestos containing materials at the owned Branches listed on Exhibit A hereto and identified thereon as: (i) Zion Branch, (ii) Villa Park Branch, (iii) West 47th Street Branch and (iv) Lee Street Main Branch (collectively, the ”ACM Branches”, and the activities associated with all such removal and abatement activities, the “ACM Abatement Activities”).  Buyer shall use its commercially reasonable efforts to cost-effectively perform the ACM Abatement Activities (which shall include seeking and retaining qualified low-bidder removal contractors) and shall complete the ACM Abatement Activities not later than eight (8) months following the Closing Date; provided, however, that commercially reasonable efforts shall not be deemed to require Buyer to suffer undue business interruptions or other potential adverse effects to its business at the ACM Branches.  Within sixty (60) days after the completion of the ACM Abatement Activities, Buyer shall determine the total costs and expenses incurred or paid by it to complete the ACM Abatement Activities, and if the Environmental Remediation Amount shall exceed the actual costs and expenses so incurred or paid by Buyer, Buyer shall, within two (2) Business Days of such determination, return and deliver to Seller the excess amount by wire transfer of immediately available funds to an account specified by Seller to Buyer in writing.  Buyer agrees to accept the ACM Branches with the Recognized Environmental Conditions at such ACM Branches as identified in the Phase I Environmental and Hazardous Materials Assessments and the Phase II Environmental Assessments produced by Buyer’s consultant pursuant to Section 6.15 (the “ACM

4

Branches Reports”) and agrees that, notwithstanding anything to the contrary contained herein and except for the payment by Seller to Buyer of the Environmental Remediation Amount, Seller shall have no Liability to Buyer for, and Buyer shall release, indemnify, defend and hold harmless Seller for, from and against, Liability (including the costs of site security, oversight, restoration, operation and maintenance plans, OSHA compliance and relocation of employees and equipment, as appropriate) associated with or relating to, the remediation or abatement of the following (other than any Liabilities associated with or relating to any violation or noncompliance with Applicable Law (including Environmental Law) or any Proceeding, in any case to the extent arisin g out of or relating to any act, event, condition or other circumstance occurring or attributable to any period prior to the Closing):  (i) the Recognized Environmental Conditions (or any other environmental conditions) that were identified in the ACM Branches Reports, including the remediation of the underground storage tank at the above-referenced West 47th Street Branch and any non-friable asbestos, and (ii) any other asbestos or asbestos containing materials at the ACM Branches, whether now known or hereafter discovered (including any asbestos that is discovered during the ACM Abatement Activities by any contractor that is engaged to perform any ACM Abatement Activity).

Section 7.16                      No Marketing of Credit, Debit or Prepaid Cards.  Seller will not directly or indirectly market the issuance of any credit cards, debit cards, or prepaid cards in the Geographic Region under any agreements and arrangements pursuant to which any other Person is required or permitted to use the name “First Bank” or any variation thereof in connection with issuing any credit cards, debit cards, or prepaid cards.”

Section 12.                      Loans to Purchased by Buyer at the Closing.  Attached hereto as Appendix D is a reconciled list of the Loans to be purchased by Buyer at the Closing, after taking into account all New Loans agreed to be purchased by Buyer on or prior to the date hereof and all Non-Conforming Loans to be excluded from the Acquisition as of the date hereof.  Buyer and Seller acknowledge that the line item of “Loans and Accrued Interest on Loans” set forth in the Estimated Payment Amount Statement delivered in connection with the Closing was prepared before Buyer and Seller agreed to the reconciled list of Loans set forth on Appendix D, and Buyer and Seller further agree to defer to the Supplemental Closing procedures any reconciliation or adjustment in the consideration payable under the Purchase Agreement on account thereof.

Section 13.                      Interest Rate Litigation Affecting Certain of the Loans included in the Acquired Assets.   Seller has advised Buyer that DJL Properties, LLC filed on October 20, 2009, on behalf of itself and all persons similarly situated, a class action lawsuit against Seller in the Circuit Court of the Twentieth Judicial Circuit, St. Clair County, Illinois, assigned Case No. 09-L-238, pursuant to which the plaintiffs named therein have claimed, among other things, that Seller has violated certain provisions of law in connection with the manner in which interest is computed under or pur suant to loans made by Seller to such plaintiffs (the “Class Action Lawsuit”).  Seller acknowledges that certain of the Loans to be sold and transferred to Buyer on the Closing Date are, or may be, subject to or affected by the Class Action Lawsuit.  To induce Buyer to consummate the Acquisition on the Closing Date, Seller and Buyer hereby acknowledge, covenant and agree as follows (and the words “indemnify”, “indemnified” and

5

“indemnification” as used herein shall have the meanings specified in Section 12.11 of the Purchase Agreement):

(a)           Seller acknowledges, covenants and agrees that (i) the Class Action Lawsuit constitutes an Excluded Liability pursuant to the terms of the Purchase Agreement, and (ii) Seller is required to, and shall, indemnify the Buyer Indemnitees for all Losses directly or indirectly arising out of, from or in connection with such Class Action Lawsuit, in accordance with the terms of the Purchase Agreement;

(b)           Notwithstanding anything to the contrary contained in Article 11 of the Purchase Agreement, and regardless of whether any actual or potential differing defenses or counterclaims or conflicts of interests do not exist between them (as contemplated by Section 11.5(b) of the Purchase Agreement), Seller agrees that if any Third Party Claim is asserted against one or more Buyer Indemnitees in connection with or relating to the Class Action Lawsuit, the Buyer Indemnitees shall have the right, at Buyer’s election by giving written notice to Seller, to select and employ their own separate counsel, at the reasonable cost and expense of Seller provided such counsel shall be reasonably acceptable to Seller, and to assume and control the defense of such Third Party Claim (it being agreed that such Buyer Indemnitees shall not consent to the entry of a judgment or enter into any settlement of such Third Party Claim without the prior written consent of Seller, which consent shall not be unreasonably withheld or delayed, unless such consent is not required as contemplated by Section 11.5(c) of the Purchase Agreement); and

(c)            Buyer has advised Seller that Buyer may (but shall have no obligation to) amend or modify the terms or provisions governing, or take such other action (including the giving of notice) under or with respect to, the Loans that are subject to or affected by the Class Action Lawsuit (the “CAL Loans”) to alter the accrual, calculation or computation of interest thereon and, in connection therewith:

(i)           Seller, on behalf of itself and its current or future Affiliates and successors and assigns and all of their respective officers, directors, members, managers and shareholders (collectively, the “Seller Releasing Parties”), unconditionally, irrevocably and unequivocally waives and fully and forever remises, releases and discharges the Buyer Indemnitees from and against any and all claims, rights, duties, obligations, debts, losses, Liabilities, damages of any nature, expenses, actions, demands, causes of action and suits of every kind and nature, whether known or unknown, fixed or contingent, liquidated or unliquidated , in law or at equity, under statute or otherwise, whether now existing or hereafter arising, resulting from, based upon, arising out of or in connection with Buyer effecting (or proposing to effect) any such amendment or modification to, or taking (or proposing to take) any such other action with respect to, any such Loan;

(ii)           Seller, on behalf of the Seller Releasing Parties, agrees not to institute or participate in any way in any action or cause of action or file, make or assert or participate in the filing, making or assertion of any claim, law suit or

6

other legal proceeding against the Buyer Indemnitees on account of Buyer effecting (or proposing to effect) any such amendment or modification to, or taking (or proposing to take) any such other action with respect to, any such Loan;

(iii)           Seller agrees that no such amendment or modification of, or taking of such other actions with respect to, any such Loan so effected or taken (or proposed to be so effected or taken) by Buyer shall have the effect of invalidating, rendering unenforceable, vitiating or otherwise adversely affecting any of the rights or remedies of the Buyer Indemnitees under the Purchase Agreement (including their right to be fully indemnified for any Losses suffered or incurred by the Buyer Indemnitees on account of any Third Party Claim asserted or threatened against the Buyer Indemnitees relating to or with respect to the Class Action Lawsuit);

(iv)           Buyer hereby waives any breach by Seller of its representations and warranties made by it under the Purchase Agreement to the extent such breach arises out of the existence of the Class Action Lawsuit or the claims or allegations asserted against Seller therein; and

(v)           Buyer, on behalf of itself and its current or future Affiliates and successors and assigns and all of their respective officers, directors, members, managers and shareholders (collectively, the “Buyer Releasing Parties”), unconditionally, irrevocably and unequivocally waives and fully and forever remises, releases and discharges the Seller Indemnitees from and against any and all claims, rights, duties, obligations, debts, losses, Liabilities, damages of any nature, expenses, actions, demands, causes of action and suits of every kind and nature, whether known or unknown, fixed or contingent, liquidated or unliquidated, in law or at equity, under statute or otherwise, whether now existing or hereafter arising, resulting from, based upon, arising out of or in connection with Buyer effecting (or proposing to effect) any amendment or modification to, or taking (or proposing to take) any action with respect to, any of the CAL Loans other than those amendments, modifications or actions contemplated by the introductory language of this Section 13(c), provided, however, that the release provided by this Section 13(c)(v) (A) shall relate only to claims arising from or relating to the ownership of the CAL Loans subsequent to the Closing Date to the extent such claims arise out of events or circumstances occurring subsequent to the Closing Date and (B) in any event, shall not relate to any Pre-Closing Event Liability.

(d)           Neither the execution of this Amendment nor any provision or term hereof shall constitute an admission of liability, fault or violation of law on the part of Seller with respect to the allegations in the Class Action Lawsuit or any other matter.  Seller and Buyer acknowledge and agree that (A) Section 13(c) of this Amendment is intended solely to clarify and supplement the indemnification obligations of each party to the Purchase Agreement as they may relate to or arise from the Class Action Lawsuit; (B) the Class Action Lawsuit is believed by both Buyer and Seller to be without merit, (C) the

7

method of computing, accruing, and collecting interest on the CAL Loans is believed by Buyer and Seller to be valid,  proper and not in violation of any Applicable law or contractual provision in the documentation evidencing such CAL Loans; and (D) that any amendments, modifications or actions contemplated by the introductory language of  Section 13(c) of this Amendment shall not constitute an admission or accusation by implication by either Seller or Buyer that the method of computing, accruing, and collecting interest on such CAL Loans is in any way improper or violates any Applicable Law.

Section 14.                      Effective Time.  Buyer and Seller agree, as contemplated by Section 2.5(b) of the Purchase Agreement, that the Effective Time shall mean 6:00 p.m. Central Standard Time on the Closing Date.

Section 15.                      Ratification.  Except as expressly amended by this Amendment, the terms, covenants, conditions and agreements of the Purchase Agreement are in all respects ratified and confirmed and, except as amended hereby, shall continue in full force and effect.

Section 16.                      Miscellaneous.  This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.  A signature on a counterpart may be a facsimile or an electronically transmitted signature, and such signature shall have the same force and effect as an original signature.  This Amendment shall be governed by and construed in accordance with the domestic laws of the State of Illinois without giving effect to any choice or confli ct of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

8

IN WITNESS WHEREOF the parties hereto have executed this Second Amendment as of the day and year first above written.

BUYER:
FIRSTMERIT BANK, N.A.
By:	/s/	Judith A. Steiner
	Name:	Judith A. Steiner
	Title:	Secretary, Executive Vice
		President and Counsel
SELLER:
FIRST BANK
By:	/s/	Terrance M. McCarthy
	Name:	Terrance M. McCarthy
	Title:	Chairman, President and Chief
		Executive Officer

EX-10 3 ex10_19.htm EXHIBIT 10.19

EXHIBIT 10.19

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

Written Agreement by and among
FIRST BANKS, INC.	Docket Nos. 10-021-WA/RB-HC
St. Louis, Missouri	10-021-WA/RB-SM
THE SAN FRANCISCO COMPANY
Clayton, Missouri
FIRST BANK
Creve Coeur, Missouri
and
FEDERAL RESERVE BANK OF
ST. LOUIS
St. Louis, Missouri

WHEREAS, in recognition of their common goal to maintain the financial soundness of First Banks, Inc., St. Louis, Missouri (“First Banks”), The San Francisco Company, Clayton, Missouri (“SFC”), both registered bank holding companies (collectively, the “Companies”), and their subsidiary bank, First Bank, Creve Coeur, Missouri (the “Bank”), a state chartered bank that is a member of the Federal Reserve System, the Companies, the Bank, and Federal Reserve Bank of St. Louis (the “Reserve Bank”) have mutually agreed to enter into this Written Agreement (the “Agreement”); and

WHEREAS, on March 24, 2010, the boards of directors of the Companies and the Bank, at duly constituted meetings, adopted resolutions authorizing and directing Terrance M. McCarthy to enter into this Agreement on behalf of the Companies and the Bank, and consenting to compliance with each and every applicable provision of this Agreement by the Companies, the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”)(12 U.S.C. §§ 1813(u) and 1818(b)(3)).

NOW, THEREFORE, the Companies, the Bank, and the Reserve Bank agree as follows:

Source of Strength

1.         The board of directors of First Banks shall take appropriate steps to fully utilize First Banks’ financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 225.4(a)), to ensure that the Bank complies with this Agreement and any other supervisory action taken by the Bank’s federal regulator or the Missouri Division of Finance (the “Division”).

Board Oversight

2.         Within 60 days of this Agreement, the board of directors of the Bank shall submit to the Reserve Bank a written plan to strengthen board oversight of the management and operations of the Bank.  The plan shall, at a minimum, address, consider, and include:

(a)        The actions that the board of directors will take to improve the Bank’s condition and maintain effective control over, and supervision of, the Bank’s senior management and major operations and activities, including but not limited to, credit risk management, lending and credit administration, allowance for loan and lease losses (“ALLL”), capital, and earnings; and

2

(b)        the responsibility of the board of directors to monitor management’s adherence to approved Bank policies and procedures, and to require management to document exceptions thereto.

Credit Risk Management

3.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan to strengthen credit risk management practices.  The plan shall, at a minimum, address, consider, and include:

(a)        Strategies to minimize credit losses and reduce the level of problem assets;

(b)        enhanced stress testing of loan and portfolio segments; and

(c)        a schedule for reducing and the means by which the Bank will reduce the level of commercial real estate concentrations, and timeframes for achieving the reduced levels.

Lending and Credit Administration

4.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank acceptable revised written credit administration policies and procedures that shall, at a minimum, address, consider, and include:

(a)        Procedures and controls to ensure timely and consistent analyses of borrowers’ and guarantors’ current financial condition, global cash flow, and repayment sources;

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(b)        enhancements to the internal loan grading system to timely and accurately identify individual problem credits; and

(c)        procedures and controls to ensure the consistent adherence to loan grading standards.

Asset Improvement

5.         The Bank shall not, directly or indirectly, extend, renew, or restructure any credit to or for the benefit of any borrower, including any related interest of the borrower, whose loans or other extensions of credit are criticized in the report of examination of the Bank conducted by the Reserve Bank that commenced on July 6, 2009 (the “Report of Examination”) or in any subsequent report of examination, without the prior approval of a majority of the full board of directors or a designated committee thereof.  The board of directors or its committee shall document in writing the reasons for the extension of credit, renewal, or restructuring, specifically certifying that: (i) the Bank’s risk management policies and practices for loan wo rkout activity are acceptable; (ii) the extension of credit is necessary to improve and protect the Bank’s interest in the ultimate collection of the credit already granted and maximize its potential for collection; (iii) the extension of credit reflects prudent underwriting based on reasonable repayment terms and is adequately secured; and all necessary loan documentation has been properly and accurately prepared and filed; (iv) the Bank has performed a comprehensive credit analysis indicating that the borrower has the willingness and ability to repay the debt as supported by an adequate workout plan, as necessary; and (v) the board of directors or its designated committee reasonably believes that the extension of credit will not impair the Bank’s interest in obtaining repayment of the already outstanding credit and that the extension of credit or renewal will be repaid according to its terms.  The written certification shall be made a part of the minutes of the meetings of the board o f directors or its committee, as appropriate, and a copy of the signed certification, together with the credit analysis and related information that was used in the determination, shall be retained by the Bank in the borrower’s credit file for subsequent supervisory review.  For purposes of this Agreement, the term “related interest” is defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. § 215.2(n)).

4

6.         (a)        Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan designed to improve the Bank’s position through repayment, amortization, liquidation, additional collateral, or other means on each loan or other asset in excess of $3,000,000, including other real estate owned (“OREO”), that (i) is past due as to principal or interest more than 90 days as of the date of this Agreement; (ii) is on the Bank’s problem loan list; or (iii) was adversely classified in the Report of Examination.

(b)        Within 30 days of the date that any additional loan or other asset in excess of $3,000,000, including OREO, becomes past due as to principal or interest for more than 90 days, is on the Bank’s problem loan list, or is adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank an acceptable written plan to improve the Bank’s position on such loan or asset.

(c)        Within 45 days after the end of each calendar quarter thereafter, the Bank shall submit a written progress report to the Reserve Bank to update each asset improvement plan, which shall include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along with a copy of the Bank’s current problem loan list, a list of all loan renewals and extensions without full collection of interest in the last quarter, and past due/non-accrual report.

5

Allowance for Loan and Lease Losses

7.         (a)        The Bank shall, within 30 days from the receipt of any federal or state report of examination, charge off all assets classified “loss” unless otherwise approved in writing by the Reserve Bank.

(b)        Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in the Report of Examination, and submit a description of the revised methodology to the Reserve Bank.  The revised ALLL methodology shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank’s loan grading system, the volume of criticized loans, concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank’s loan portfolio, including adversely classified loans, and the impact of market conditions on loan and collateral valuations and collectibility.

(c)        Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written program for the maintenance of an adequate ALLL.  The program shall include policies and procedures to ensure adherence to the revised ALLL methodology and provide for periodic reviews and updates to the ALLL methodology, as appropriate.  The program shall also provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis.  Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income, by additional provisions.  The board of directors shall maintain written documentation of its review, including the fa ctors considered and conclusions reached by the Bank in determining the adequacy of the ALLL.  During the term of this Agreement, the Bank shall submit to the Reserve Bank, within 45 days after the end of each calendar quarter, a written report regarding the board of directors’ quarterly review of the ALLL and a description of any changes to the methodology used in determining the amount of ALLL for that quarter.

6

Capital Plan

8.         Within 60 days of this Agreement, First Banks shall submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at First Banks, on a consolidated basis, and First Banks and the Bank shall jointly submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at the Bank, as a separate legal entity on a stand-alone basis.  These plans shall, at a minimum, address, consider, and include:

(a)        First Banks’ current and future capital needs, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);

(b)        the Bank’s current and future capital needs, including compliance with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);

7

(c)        the adequacy of the Bank’s capital, taking into account the volume of classified credits, concentrations of credit, ALLL, current and projected asset growth, and projected retained earnings;

(d)        the source and timing of additional funds to fulfill the consolidated organization’s and the Bank’s future capital requirements; and

(e)        the requirements of section 225.4(a) of Regulation Y of the Board of Governors that First Banks serve as a source of strength to the Bank.

9.         First Banks and the Bank shall notify the Reserve Bank, in writing, no more than 45 days after the end of any quarter in which any of First Banks’ consolidated capital ratios or the Bank’s capital ratios (total risk-based, Tier 1 risk-based, or leverage) fall below the approved capital plan’s minimum ratios.  Together with the notification, First Banks and the Bank shall submit an acceptable written plan that details the steps First Banks or the Bank, as appropriate, will take to increase First Banks’ or the Bank’s capital ratios to or above the approved capital plan’s minimums.

Earnings Plan and Budget

10.        (a)       Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank a revised written business plan for 2010 to improve the Bank’s earnings and overall condition.  The plan, at a minimum, shall provide for or describe:

(i)         a realistic and comprehensive budget for calendar year 2010, including income statement and balance sheet projections; and

8

(ii)         a description of the operating assumptions that form the basis for, and adequately support, major projected income, expense, and balance sheet components.

(b)        A business plan and budget for each calendar year subsequent to 2010 shall be submitted to the Reserve Bank at least 30 days prior to the beginning of that calendar year.

Liquidity Funds Management

11.       Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable revised written contingency funding plan that, at a minimum, continues to identify available sources of liquidity and includes adverse scenario planning.

Dividends and Distributions

12.       (a)        The Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director of the Division of Banking Supervision and Regulation (the “Director”) of the Board of Governors.

(b)        The Companies shall not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director.

(c)        The Companies shall not directly or indirectly take dividends or any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank.

(d)        The Companies and their nonbank subsidiaries shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director.

9

(e)        All requests for prior approval shall be received by the Reserve Bank at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities.  All requests shall contain, at a minimum, current and projected information on the Companies’ capital, earnings, and cash flow; the Bank’s capital, asset quality, earnings, and allowance for loan and lease losses; and identification of the sources of funds for the proposed payment or distribution.  For requests to declare or pay dividends, the Companies and the Bank, as appropriate, must also demonstrate that the requested declaration or payment of dividends is consistent with the Board o f Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).

Debt and Stock Redemption

13.       (a)        The Companies and any of their nonbank subsidiaries shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank.  All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

(b)        The Companies shall not, directly or indirectly, purchase or redeem any shares of their stock without the prior written approval of the Reserve Bank.

10

Compliance with Laws and Regulations

14.       In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, the Companies and the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

15.       The Companies and the Bank shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).

Compliance with the Agreement

16.       Within 10 days of this Agreement, First Banks’ and the Bank’s boards of directors shall appoint a joint compliance committee (the “Compliance Committee”) to monitor and coordinate First Banks’ and the Bank’s compliance with the provisions of this Agreement.  The Compliance Committee shall include a majority of outside directors who are not executive officers or principal shareholders of First Banks and the Bank, as defined in sections 215.2(e)(1) and 215.2(m)(1) of Regulation O of the Board of Governors (12 C.F.R. §§ 215.2(e)(1) and 215.2(m)(1)).  At a minimum, the Compliance Committee shall meet at least quarterly, keep detailed minutes of each meeting, and report its findings to the boards of directors o f First Banks and the Bank.

17.       Within 45 days after the end of each calendar quarter following the date of this Agreement, the Companies and the Bank shall submit to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement and the results thereof.

11

Approval and Implementation of Plans, Policies, Procedures, and Program

18.       (a)        The Bank, and where applicable First Banks, shall submit written plans, policies, procedures, and program that are acceptable to the Reserve Bank within the applicable time periods set forth in paragraphs 3, 4, 6(a), 6(b), 7(c), 8, 9, and 11 of this Agreement.

(b)        Within 10 days of approval by the Reserve Bank, the Bank shall adopt the approved plans, policies, procedures, and program. Upon adoption, the Bank shall promptly implement the approved plans, policies, procedures, and program and thereafter fully comply with them.

(c)        During the term of this Agreement, the approved plans, policies, procedures, and program shall not be amended or rescinded without the prior written approval of the Reserve Bank.

Communications

19.       All communications regarding this Agreement shall be sent to:

(a) Mr. Timothy A. Bosch

Vice President

Federal Reserve Bank of St. Louis

P.O. Box 442

St. Louis, Missouri 63166-0442

(b) Mr. Terrance M. McCarthy

President and Chief Executive Officer

First Banks, Inc., The San Francisco Company, and First Bank

135 N. Meramec

Clayton, Missouri 63105

12

Miscellaneous

20.       Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole discretion, grant written extensions of time to the Companies and the Bank to comply with any provision of this Agreement.

21.       The provisions of this Agreement shall be binding upon the Companies, the Bank, and their institution-affiliated parties, in their capacities as such, and their successors and assigns.

22.       Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank.

23.       The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting the Companies, the Bank, any nonbank subsidiary of the Companies, or any of their current or former institution-affiliated parties and their successors and assigns.

13

24.       Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 24 day of March, 2010.

FIRST BANKS, INC.		FEDERAL RESERVE BANK
		OF ST. LOUIS
By:	/s/  Terrance M. McCarthy	By:	/s/  Timothy A. Bosch
			Timothy A. Bosch
			Vice President
THE SAN FRANCISCO COMPANY		FIRST BANK
By:	/s/  Terrance M. McCarthy	By:	/s/  Terrance M. McCarthy

14

EX-21 4 ex21_1.htm EXHIBIT 21.1

EXHIBIT 21.1

First Banks, Inc.

Subsidiaries

(As of December 31, 2009)

The following is a list of our subsidiaries and the jurisdiction of incorporation or organization:

Name of Subsidiary				Jurisdiction of Incorporation or Organization
The San Francisco Company				Delaware
	First Bank			Missouri
		First Land Trustee Corp.		Missouri
		First Bank Business Capital, Inc.		Missouri
		Missouri Valley Partners, Inc.		Missouri
		WIUS, Inc. (1)		Missouri
			WIUS of California, Inc. (2)	California
		Small Business Loan Source LLC		Nevada
		FB Holdings, LLC (3)		Missouri
		ILSIS, Inc.		Missouri
		FBIN, Inc.		Nevada

_______________

(1) Formerly Universal Premium Acceptance Corporation.

(2) Formerly UPAC of California, Inc.

(3) First Bank owned 53.23% of FB Holdings, LLC at December 31, 2009.

EX-31 5 ex31_1.htm EXHIBIT 31.1

EXHIBIT 31.1

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OR RULE 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Terrance M. McCarthy, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 25, 2010

FIRST BANKS, INC.
By:	/s/	Terrance M. McCarthy
		Terrance M. McCarthy
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31 6 ex31_2.htm EXHIBIT 31.2

EXHIBIT 31.2

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OR RULE 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Lisa K. Vansickle, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 25, 2010

FIRST BANKS, INC.
By:	/s/	Lisa K. Vansickle
		Lisa K. Vansickle
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32 7 ex32_1.htm EXHIBIT 32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

I, Terrance M. McCarthy, 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 to the best of my knowledge:

(1) The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2009 (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 25, 2010

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

EX-32 8 ex32_2.htm EXHIBIT 32.2

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

I, Lisa K. Vansickle, 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 to the best of my knowledge:

(1) The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2009 (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 25, 2010

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

EX-99 9 ex99_1.htm EXHIBIT 99.1

EXHIBIT 99.1

First Fiscal Year PEO and PFO Certification

I, Terrance M. McCarthy, certify, based on my knowledge, that:

(i)              Not applicable because the entity serving as the compensation committee (the “Committee”) of First Banks, Inc. (the “Company”) was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(ii)             The Committee has identified and limited during the applicable period any features of the senior executive officer (“SEO”) compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the Company and each entity aggregated with the Company as the “TARP Recipient” as defined in the regulations and guidance established under section 111 of EESA (collectively referred to as the “TARP Recipient”), and during that same applicable period has identified any features of the employee compensation plans that pose risks to the TARP Recipient and has limitedthose features to ensure that the TARP Recipient is not unne cessarily exposed to risks;

(iii)             Not applicable because the Committee was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(iv)            The Committee will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)             The Committee will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in:

(A)            SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the TARP Recipient;

(B)             Employee compensation plans that unnecessarily expose the TARP Recipient to risks; and

(C)             Employee compensation plans that could encourage the manipulation of reported earnings of the TARP Recipient to enhance the compensation of an employee;

(vi)            The TARP Recipient has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), to SEOs and any of the next twenty most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)           The TARP Recipient has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to an SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(viii)          The TARP Recipient has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(ix)             The board of directors of the Company has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP Recipient and Treasury; this policy has been provided to Treasury and its primary regulatory agency; the TARP Recipient and its employees have complied with this policy during the applicable period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)              The TARP Recipient will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xi)             The TARP Recipient will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)            The TARP Recipient will disclose whether the TARP Recipient, the board of directors of the Company, or the Committee has engaged during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)           The TARP Recipient has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xiv)           The TARP Recipient has substantially complied with all other requirements related to employee compensation that are provided in the agreement between the TARP Recipient and Treasury, including any amendments;

(xv)            The TARP Recipient has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)           I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 U.S.C. 1001.)

Date:  March 25, 2010

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

EX-99 10 ex99_2.htm EXHIBIT 99.2

EXHIBIT 99.2

First Fiscal Year PEO and PFO Certification

I, Lisa K. Vansickle, certify, based on my knowledge, that:

(i)              Not applicable because the entity serving as the compensation committee (the “Committee”) of First Banks, Inc. (the “Company”) was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(ii)             The Committee has identified and limited during the applicable period any features of the senior executive officer (“SEO”) compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the Company and each entity aggregated with the Company as the “TARP Recipient” as defined in the regulations and guidance established under section 111 of EESA (collectively referred to as the “TARP Recipient”), and during that same applicable period has identified any features of the employee compensation plans that pose risks to the TARP Recipient and has limitedthose features to ensure that the TARP Recipient is not unne cessarily exposed to risks;

(iii)             Not applicable because the Committee was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(iv)            The Committee will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)             The Committee will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in:

(A)            SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the TARP Recipient;

(B)             Employee compensation plans that unnecessarily expose the TARP Recipient to risks; and

(C)             Employee compensation plans that could encourage the manipulation of reported earnings of the TARP Recipient to enhance the compensation of an employee;

(vi)            The TARP Recipient has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), to SEOs and any of the next twenty most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)           The TARP Recipient has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to an SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(viii)          The TARP Recipient has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(ix)             The board of directors of the Company has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP Recipient and Treasury; this policy has been provided to Treasury and its primary regulatory agency; the TARP Recipient and its employees have complied with this policy during the applicable period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)              The TARP Recipient will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xi)             The TARP Recipient will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)            The TARP Recipient will disclose whether the TARP Recipient, the board of directors of the Company, or the Committee has engaged during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)           The TARP Recipient has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xiv)           The TARP Recipient has substantially complied with all other requirements related to employee compensation that are provided in the agreement between the TARP Recipient and Treasury, including any amendments;

(xv)           The TARP Recipient has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)           I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 U.S.C. 1001.)

Date:  March 25, 2010

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

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EX-10

EXHIBIT 10.19

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

Written Agreement by and among
FIRST BANKS, INC.	Docket Nos. 10-021-WA/RB-HC
St. Louis, Missouri	10-021-WA/RB-SM
THE SAN FRANCISCO COMPANY
Clayton, Missouri
FIRST BANK
Creve Coeur, Missouri
and
FEDERAL RESERVE BANK OF
ST. LOUIS
St. Louis, Missouri

WHEREAS, in recognition of their common goal to maintain the financial soundness of First Banks, Inc., St. Louis, Missouri (“First Banks”), The San Francisco Company, Clayton, Missouri (“SFC”), both registered bank holding companies (collectively, the “Companies”), and their subsidiary bank, First Bank, Creve Coeur, Missouri (the “Bank”), a state chartered bank that is a member of the Federal Reserve System, the Companies, the Bank, and Federal Reserve Bank of St. Louis (the “Reserve Bank”) have mutually agreed to enter into this Written Agreement (the “Agreement”); and

WHEREAS, on March 24, 2010, the boards of directors of the Companies and the Bank, at duly constituted meetings, adopted resolutions authorizing and directing Terrance M. McCarthy to enter into this Agreement on behalf of the Companies and the Bank, and consenting to compliance with each and every applicable provision of this Agreement by the Companies, the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”)(12 U.S.C. §§ 1813(u) and 1818(b)(3)).

NOW, THEREFORE, the Companies, the Bank, and the Reserve Bank agree as follows:

Source of Strength

1.         The board of directors of First Banks shall take appropriate steps to fully utilize First Banks’ financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 225.4(a)), to ensure that the Bank complies with this Agreement and any other supervisory action taken by the Bank’s federal regulator or the Missouri Division of Finance (the “Division”).

Board Oversight

2.         Within 60 days of this Agreement, the board of directors of the Bank shall submit to the Reserve Bank a written plan to strengthen board oversight of the management and operations of the Bank.  The plan shall, at a minimum, address, consider, and include:

(a)        The actions that the board of directors will take to improve the Bank’s condition and maintain effective control over, and supervision of, the Bank’s senior management and major operations and activities, including but not limited to, credit risk management, lending and credit administration, allowance for loan and lease losses (“ALLL”), capital, and earnings; and

2

(b)        the responsibility of the board of directors to monitor management’s adherence to approved Bank policies and procedures, and to require management to document exceptions thereto.

Credit Risk Management

3.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan to strengthen credit risk management practices.  The plan shall, at a minimum, address, consider, and include:

(a)        Strategies to minimize credit losses and reduce the level of problem assets;

(b)        enhanced stress testing of loan and portfolio segments; and

(c)        a schedule for reducing and the means by which the Bank will reduce the level of commercial real estate concentrations, and timeframes for achieving the reduced levels.

Lending and Credit Administration

4.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank acceptable revised written credit administration policies and procedures that shall, at a minimum, address, consider, and include:

(a)        Procedures and controls to ensure timely and consistent analyses of borrowers’ and guarantors’ current financial condition, global cash flow, and repayment sources;

3

(b)        enhancements to the internal loan grading system to timely and accurately identify individual problem credits; and

(c)        procedures and controls to ensure the consistent adherence to loan grading standards.

Asset Improvement

5.         The Bank shall not, directly or indirectly, extend, renew, or restructure any credit to or for the benefit of any borrower, including any related interest of the borrower, whose loans or other extensions of credit are criticized in the report of examination of the Bank conducted by the Reserve Bank that commenced on July 6, 2009 (the “Report of Examination”) or in any subsequent report of examination, without the prior approval of a majority of the full board of directors or a designated committee thereof.  The board of directors or its committee shall document in writing the reasons for the extension of credit, renewal, or restructuring, specifically certifying that: (i) the Bank’s risk management policies and practices for loan wo rkout activity are acceptable; (ii) the extension of credit is necessary to improve and protect the Bank’s interest in the ultimate collection of the credit already granted and maximize its potential for collection; (iii) the extension of credit reflects prudent underwriting based on reasonable repayment terms and is adequately secured; and all necessary loan documentation has been properly and accurately prepared and filed; (iv) the Bank has performed a comprehensive credit analysis indicating that the borrower has the willingness and ability to repay the debt as supported by an adequate workout plan, as necessary; and (v) the board of directors or its designated committee reasonably believes that the extension of credit will not impair the Bank’s interest in obtaining repayment of the already outstanding credit and that the extension of credit or renewal will be repaid according to its terms.  The written certification shall be made a part of the minutes of the meetings of the board o f directors or its committee, as appropriate, and a copy of the signed certification, together with the credit analysis and related information that was used in the determination, shall be retained by the Bank in the borrower’s credit file for subsequent supervisory review.  For purposes of this Agreement, the term “related interest” is defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. § 215.2(n)).

4

6.         (a)        Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan designed to improve the Bank’s position through repayment, amortization, liquidation, additional collateral, or other means on each loan or other asset in excess of $3,000,000, including other real estate owned (“OREO”), that (i) is past due as to principal or interest more than 90 days as of the date of this Agreement; (ii) is on the Bank’s problem loan list; or (iii) was adversely classified in the Report of Examination.

(b)        Within 30 days of the date that any additional loan or other asset in excess of $3,000,000, including OREO, becomes past due as to principal or interest for more than 90 days, is on the Bank’s problem loan list, or is adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank an acceptable written plan to improve the Bank’s position on such loan or asset.

(c)        Within 45 days after the end of each calendar quarter thereafter, the Bank shall submit a written progress report to the Reserve Bank to update each asset improvement plan, which shall include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along with a copy of the Bank’s current problem loan list, a list of all loan renewals and extensions without full collection of interest in the last quarter, and past due/non-accrual report.

5

Allowance for Loan and Lease Losses

7.         (a)        The Bank shall, within 30 days from the receipt of any federal or state report of examination, charge off all assets classified “loss” unless otherwise approved in writing by the Reserve Bank.

(b)        Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in the Report of Examination, and submit a description of the revised methodology to the Reserve Bank.  The revised ALLL methodology shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank’s loan grading system, the volume of criticized loans, concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank’s loan portfolio, including adversely classified loans, and the impact of market conditions on loan and collateral valuations and collectibility.

(c)        Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written program for the maintenance of an adequate ALLL.  The program shall include policies and procedures to ensure adherence to the revised ALLL methodology and provide for periodic reviews and updates to the ALLL methodology, as appropriate.  The program shall also provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis.  Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income, by additional provisions.  The board of directors shall maintain written documentation of its review, including the fa ctors considered and conclusions reached by the Bank in determining the adequacy of the ALLL.  During the term of this Agreement, the Bank shall submit to the Reserve Bank, within 45 days after the end of each calendar quarter, a written report regarding the board of directors’ quarterly review of the ALLL and a description of any changes to the methodology used in determining the amount of ALLL for that quarter.

6

Capital Plan

8.         Within 60 days of this Agreement, First Banks shall submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at First Banks, on a consolidated basis, and First Banks and the Bank shall jointly submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at the Bank, as a separate legal entity on a stand-alone basis.  These plans shall, at a minimum, address, consider, and include:

(a)        First Banks’ current and future capital needs, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);

(b)        the Bank’s current and future capital needs, including compliance with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);

7

(c)        the adequacy of the Bank’s capital, taking into account the volume of classified credits, concentrations of credit, ALLL, current and projected asset growth, and projected retained earnings;

(d)        the source and timing of additional funds to fulfill the consolidated organization’s and the Bank’s future capital requirements; and

(e)        the requirements of section 225.4(a) of Regulation Y of the Board of Governors that First Banks serve as a source of strength to the Bank.

9.         First Banks and the Bank shall notify the Reserve Bank, in writing, no more than 45 days after the end of any quarter in which any of First Banks’ consolidated capital ratios or the Bank’s capital ratios (total risk-based, Tier 1 risk-based, or leverage) fall below the approved capital plan’s minimum ratios.  Together with the notification, First Banks and the Bank shall submit an acceptable written plan that details the steps First Banks or the Bank, as appropriate, will take to increase First Banks’ or the Bank’s capital ratios to or above the approved capital plan’s minimums.

Earnings Plan and Budget

10.        (a)       Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank a revised written business plan for 2010 to improve the Bank’s earnings and overall condition.  The plan, at a minimum, shall provide for or describe:

(i)         a realistic and comprehensive budget for calendar year 2010, including income statement and balance sheet projections; and

8

(ii)         a description of the operating assumptions that form the basis for, and adequately support, major projected income, expense, and balance sheet components.

(b)        A business plan and budget for each calendar year subsequent to 2010 shall be submitted to the Reserve Bank at least 30 days prior to the beginning of that calendar year.

Liquidity Funds Management

11.       Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable revised written contingency funding plan that, at a minimum, continues to identify available sources of liquidity and includes adverse scenario planning.

Dividends and Distributions

12.       (a)        The Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director of the Division of Banking Supervision and Regulation (the “Director”) of the Board of Governors.

(b)        The Companies shall not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director.

(c)        The Companies shall not directly or indirectly take dividends or any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank.

(d)        The Companies and their nonbank subsidiaries shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director.

9

(e)        All requests for prior approval shall be received by the Reserve Bank at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities.  All requests shall contain, at a minimum, current and projected information on the Companies’ capital, earnings, and cash flow; the Bank’s capital, asset quality, earnings, and allowance for loan and lease losses; and identification of the sources of funds for the proposed payment or distribution.  For requests to declare or pay dividends, the Companies and the Bank, as appropriate, must also demonstrate that the requested declaration or payment of dividends is consistent with the Board o f Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).

Debt and Stock Redemption

13.       (a)        The Companies and any of their nonbank subsidiaries shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank.  All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

(b)        The Companies shall not, directly or indirectly, purchase or redeem any shares of their stock without the prior written approval of the Reserve Bank.

10

Compliance with Laws and Regulations

14.       In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, the Companies and the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

15.       The Companies and the Bank shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).

Compliance with the Agreement

16.       Within 10 days of this Agreement, First Banks’ and the Bank’s boards of directors shall appoint a joint compliance committee (the “Compliance Committee”) to monitor and coordinate First Banks’ and the Bank’s compliance with the provisions of this Agreement.  The Compliance Committee shall include a majority of outside directors who are not executive officers or principal shareholders of First Banks and the Bank, as defined in sections 215.2(e)(1) and 215.2(m)(1) of Regulation O of the Board of Governors (12 C.F.R. §§ 215.2(e)(1) and 215.2(m)(1)).  At a minimum, the Compliance Committee shall meet at least quarterly, keep detailed minutes of each meeting, and report its findings to the boards of directors o f First Banks and the Bank.

17.       Within 45 days after the end of each calendar quarter following the date of this Agreement, the Companies and the Bank shall submit to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement and the results thereof.

11

Approval and Implementation of Plans, Policies, Procedures, and Program

18.       (a)        The Bank, and where applicable First Banks, shall submit written plans, policies, procedures, and program that are acceptable to the Reserve Bank within the applicable time periods set forth in paragraphs 3, 4, 6(a), 6(b), 7(c), 8, 9, and 11 of this Agreement.

(b)        Within 10 days of approval by the Reserve Bank, the Bank shall adopt the approved plans, policies, procedures, and program. Upon adoption, the Bank shall promptly implement the approved plans, policies, procedures, and program and thereafter fully comply with them.

(c)        During the term of this Agreement, the approved plans, policies, procedures, and program shall not be amended or rescinded without the prior written approval of the Reserve Bank.

Communications

19.       All communications regarding this Agreement shall be sent to:

(a) Mr. Timothy A. Bosch

Vice President

Federal Reserve Bank of St. Louis

P.O. Box 442

St. Louis, Missouri 63166-0442

(b) Mr. Terrance M. McCarthy

President and Chief Executive Officer

First Banks, Inc., The San Francisco Company, and First Bank

135 N. Meramec

Clayton, Missouri 63105

12

Miscellaneous

20.       Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole discretion, grant written extensions of time to the Companies and the Bank to comply with any provision of this Agreement.

21.       The provisions of this Agreement shall be binding upon the Companies, the Bank, and their institution-affiliated parties, in their capacities as such, and their successors and assigns.

22.       Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank.

23.       The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting the Companies, the Bank, any nonbank subsidiary of the Companies, or any of their current or former institution-affiliated parties and their successors and assigns.

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24.       Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 24 day of March, 2010.

FIRST BANKS, INC.		FEDERAL RESERVE BANK
		OF ST. LOUIS
By:	/s/  Terrance M. McCarthy	By:	/s/  Timothy A. Bosch
			Timothy A. Bosch
			Vice President
THE SAN FRANCISCO COMPANY		FIRST BANK
By:	/s/  Terrance M. McCarthy	By:	/s/  Terrance M. McCarthy

14

EX-21

EXHIBIT 21.1

First Banks, Inc.

Subsidiaries

(As of December 31, 2009)

The following is a list of our subsidiaries and the jurisdiction of incorporation or organization:

Name of Subsidiary				Jurisdiction of Incorporation or Organization
The San Francisco Company				Delaware
	First Bank			Missouri
		First Land Trustee Corp.		Missouri
		First Bank Business Capital, Inc.		Missouri
		Missouri Valley Partners, Inc.		Missouri
		WIUS, Inc. (1)		Missouri
			WIUS of California, Inc. (2)	California
		Small Business Loan Source LLC		Nevada
		FB Holdings, LLC (3)		Missouri
		ILSIS, Inc.		Missouri
		FBIN, Inc.		Nevada

_______________

(1) Formerly Universal Premium Acceptance Corporation.

(2) Formerly UPAC of California, Inc.

(3) First Bank owned 53.23% of FB Holdings, LLC at December 31, 2009.

EX-31

EXHIBIT 31.1

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OR RULE 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Terrance M. McCarthy, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 25, 2010

FIRST BANKS, INC.
By:	/s/	Terrance M. McCarthy
		Terrance M. McCarthy
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31

EXHIBIT 31.2

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OR RULE 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Lisa K. Vansickle, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 25, 2010

FIRST BANKS, INC.
By:	/s/	Lisa K. Vansickle
		Lisa K. Vansickle
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

I, Terrance M. McCarthy, 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 to the best of my knowledge:

(1) The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2009 (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 25, 2010

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

EX-32

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

I, Lisa K. Vansickle, 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 to the best of my knowledge:

(1) The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2009 (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 25, 2010

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

EX-99

EXHIBIT 99.1

First Fiscal Year PEO and PFO Certification

I, Terrance M. McCarthy, certify, based on my knowledge, that:

(i)              Not applicable because the entity serving as the compensation committee (the “Committee”) of First Banks, Inc. (the “Company”) was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(ii)             The Committee has identified and limited during the applicable period any features of the senior executive officer (“SEO”) compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the Company and each entity aggregated with the Company as the “TARP Recipient” as defined in the regulations and guidance established under section 111 of EESA (collectively referred to as the “TARP Recipient”), and during that same applicable period has identified any features of the employee compensation plans that pose risks to the TARP Recipient and has limitedthose features to ensure that the TARP Recipient is not unne cessarily exposed to risks;

(iii)             Not applicable because the Committee was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(iv)            The Committee will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)             The Committee will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in:

(A)            SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the TARP Recipient;

(B)             Employee compensation plans that unnecessarily expose the TARP Recipient to risks; and

(C)             Employee compensation plans that could encourage the manipulation of reported earnings of the TARP Recipient to enhance the compensation of an employee;

(vi)            The TARP Recipient has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), to SEOs and any of the next twenty most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)           The TARP Recipient has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to an SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(viii)          The TARP Recipient has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(ix)             The board of directors of the Company has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP Recipient and Treasury; this policy has been provided to Treasury and its primary regulatory agency; the TARP Recipient and its employees have complied with this policy during the applicable period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)              The TARP Recipient will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xi)             The TARP Recipient will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)            The TARP Recipient will disclose whether the TARP Recipient, the board of directors of the Company, or the Committee has engaged during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)           The TARP Recipient has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xiv)           The TARP Recipient has substantially complied with all other requirements related to employee compensation that are provided in the agreement between the TARP Recipient and Treasury, including any amendments;

(xv)            The TARP Recipient has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)           I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 U.S.C. 1001.)

Date:  March 25, 2010

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

EX-99

EXHIBIT 99.2

First Fiscal Year PEO and PFO Certification

I, Lisa K. Vansickle, certify, based on my knowledge, that:

(i)              Not applicable because the entity serving as the compensation committee (the “Committee”) of First Banks, Inc. (the “Company”) was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(ii)             The Committee has identified and limited during the applicable period any features of the senior executive officer (“SEO”) compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the Company and each entity aggregated with the Company as the “TARP Recipient” as defined in the regulations and guidance established under section 111 of EESA (collectively referred to as the “TARP Recipient”), and during that same applicable period has identified any features of the employee compensation plans that pose risks to the TARP Recipient and has limitedthose features to ensure that the TARP Recipient is not unne cessarily exposed to risks;

(iii)             Not applicable because the Committee was not required to, and did not, meet with the senior risk officers within the applicable period as there was not a six month period between September 14, 2009 and the end of the Company’s fiscal year;

(iv)            The Committee will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)             The Committee will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in:

(A)            SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the TARP Recipient;

(B)             Employee compensation plans that unnecessarily expose the TARP Recipient to risks; and

(C)             Employee compensation plans that could encourage the manipulation of reported earnings of the TARP Recipient to enhance the compensation of an employee;

(vi)            The TARP Recipient has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), to SEOs and any of the next twenty most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)           The TARP Recipient has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to an SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(viii)          The TARP Recipient has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(ix)             The board of directors of the Company has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP Recipient and Treasury; this policy has been provided to Treasury and its primary regulatory agency; the TARP Recipient and its employees have complied with this policy during the applicable period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)              The TARP Recipient will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xi)             The TARP Recipient will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)            The TARP Recipient will disclose whether the TARP Recipient, the board of directors of the Company, or the Committee has engaged during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)           The TARP Recipient has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP Recipient and Treasury or June 15, 2009 and ending with the last day of the TARP Recipient’s fiscal year containing that date;

(xiv)           The TARP Recipient has substantially complied with all other requirements related to employee compensation that are provided in the agreement between the TARP Recipient and Treasury, including any amendments;

(xv)           The TARP Recipient has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)           I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 U.S.C. 1001.)

Date:  March 25, 2010

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