Business World

First Banks Inc., parent of First Bank and the eighth largest bank in St. Louis, lost another $91 million in the third quarter as bad loans kept piling up.

The quarterly loss brought losses for the year to date to $274 million, following a $287 million loss for 2008.

As of September, 8.8 percent of the bank’s loans had gone sour, up from 5.1 percent at the beginning of the year. The September bad-loan percentage was roughly double the number at banks that regulators consider First Bank’s peers.

The Clayton-based bank continued to suffer from its foray into the financing of housing development in California. The bank reported $402 million in troubled loans and foreclosed property in California and $109 million in Chicago. By contrast, bad loans in St. Louis were only $47 million.

St. Louis’ comparatively good record may be short-lived. The bank listed $198 million in "potential" problem loans in St. Louis, higher than its other regions. The count included two real estate construction loans worth $60 million, along with general business loans and real estate loans.

In phone interview, CEO Terrance McCarthy said there are a "couple of quarters to go" before the bank can stop putting aside large amounts of money to cover loans that won’t be repaid payday loan companies. The bank put aside $107 million to cover bad loans in the latest quarter. Such money comes directly from profits.

Losses continued to eat into capital. The parent company’s capital slipped below the level that regulators deem "well capitalized" into the "adequately capitalized" bracket. The First Bank subsidiary remained "well capitalized," but just barely.

First Banks raised more than $400 million in new capital as its troubles mounted last year and in January. That included $295 million from the federal government’s bank bailout fund and more than $100 million from the bank’s owner, Jim Dierberg and family.

The bank has been trying to shrink its way to greater soundness, selling off its banks in Chicago and Texas, the Adrian N. Baker & Co. insurance firm, and bank branches in Lawrenceville and Springfield, Ill. It has generally made a profit on those sales, which boosts capital.

Capital is measured as a percentage of a bank’s assets. By selling off assets, the bank improves its capital ratio, the key measure of soundness.

First Banks has $10.6 billion in assets.

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