PRESS RELEASE - SEPTEMBER 6, 2000 FOR IMMEDIATE RELEASE:
1ST STATE BANCORP, INC. FOR MORE INFORMATION CONTACT:
JAMES C. MCGILL, PRESIDENT & CEO
(336) 227-8861
1ST STATE BANCORP, INC. ANNOUNCES RETURN OF CAPITAL
BURLINGTON, NORTH CAROLINA 1ST STATE BANCORP, INC. (NASDAQ: FSBC)
1st State Bancorp, Inc., the holding company for 1st State Bank today
announced that on September 5, 2000, its Board of Directors declared a special
cash distribution in the amount of $5.17 per share. The cash distribution will
be payable on October 2, 2000 to stockholders of record as of the close of
business on September 15, 2000. Management of the Company expects that most or
possibly all of the distribution will be a non-taxable return of capital,
although the exact amount of the distribution that could be considered
non-taxable cannot be confirmed until the Company determines its operating
results for the tax year ending December 31, 2000. The amount of the special
cash distribution that would be treated as a return of capital will be treated
as a reduction in the cost basis of each share and will not be subject to income
tax as a dividend to shareholders.
Because of the magnitude of the cash distribution in relation to the
Company's share price, rules of the Nasdaq Stock Market require that the stock
trade ex-dividend on the next business day after payment, which would be October
3, 2000. Shareholders who sell their shares before the ex-dividend date transfer
the right to receive the cash distribution to the buyers of the shares. On the
ex-dividend date, the price of the Company's shares is expected to decrease as a
result of the distribution.
James C. McGill, President and Chief Executive Officer stated "Our
Board of Directors is committed to managing our excess capital. The regulatory
process dictated that $47.6 million of stock was sold in the IPO. Returning
capital to shareholders affords us the opportunity to right-size the capital
level of the company. At June 30, 2000, the Company's equity to asset ratio was
approximately 21.2%. This special distribution would have reduced that capital
ratio to approximately 17.2% of assets, leaving the Company with considerable
capital to support future growth. The special cash dividend shows the Board's
commitment to enhance shareholder value."
The Company's Employee Stock Ownership Plan ("ESOP"), a qualified
retirement benefit plan covering all full-time employees, holds 253,050 shares
of Company stock. The trustees of the ESOP expect to purchase additional shares
in open market transactions beginning after the ex-dividend date with the $1.3
million it will receive from the distribution.
The Company expects that it will be required to record a charge to
compensation expense related to the payment of the distribution on shares of
stock in its restricted stock plan. The amount of the charge (after the related
income tax benefits) is estimated to be approximately $170,000 and $113,000 for
the fiscal years ended September 30, 2001 and 2002, respectively.
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1st State Bancorp, Inc. is the parent holding company of 1st State
Bank, a North Carolina-chartered commercial bank. The Bank serves Alamance
County in north central North Carolina from its six full service branch offices.
The Company's common stock trades on the Nasdaq National Market under the symbol
FSBC.
This press release contains statements that are forward-looking, as
that term is defined by the Private Securities Litigation Act of 1995 or the
Securities and Exchange Commission in its rules, regulations, and releases. The
Company intends that such forward-looking statements are based on current
expectations regarding important risk factors including, but not limited to, the
impact of interest rates on financing issues. Accordingly, actual results may
differ from those expressed in the forward-looking statements, and the making of
such statements should not be regarded as a representation by the Company or any
other person that results expressed therein will be achieved.
