Letter to Shareholders
February 16, 2000
Page 1
The following letter was mailed to all shareholders of First Savings Bancorp,
Inc. on or about February 16, 2000.
[LETTERHEAD OF FIRST SAVINGS BANCORP, INC.]
February 16, 2000
Dear Shareholder:
Like you, we are shareholders of First Savings Bancorp. We have the
same goals for our personal investments that you do. So, our recently announced
merger with First Bancorp is very important to us. We would not have agreed to
it if we were not convinced that it is the best way we know to increase the
value of your investment and ours.
For many years, we have sought the best ways to maximize the value of
First Savings to its shareholders. As directors, we finally determined that
combining our strengths with those of a commercial bank would be the best way to
reach these goals. On December 16, 1999, First Savings Bancorp announced its
merger with First Bancorp, a commercial bank with over $550 million in assets,
headquartered just 35 miles away in Troy, NC.
In searching for a partner, we approached many well-known banks of
varying sizes to determine their interest in a merger. First Savings Bancorp
representatives held discussions with eleven banks from four states. After a
series of negotiations, three offers were received. The directors, after careful
deliberation, agreed to join forces with First Bancorp. At the time we decided
to negotiate a final agreement with First Bancorp, its offer was valued at
$24.00/share. No one offered a superior offer to the one presented by First
Bancorp.
We believe that combining our two corporations will create an exciting,
new one - almost a billion-dollar company headquartered here in the Sandhills -
that will be greater than the sum of the parts. First Bancorp has a level of
earnings that we cannot match; we bring capital which they need. Together we
will have substantial resources and we will be positioned for future growth. We
will be the 10th largest bank in North Carolina and the preeminent bank in Moore
County.
We believe that a merger with First Bancorp is a great opportunity for
enhancing First Savings shareholder value. First Bancorp is a high performing
company. During 1999, it returned 15.56% on equity. In a press release issued on
January 18, 2000, it announced that 1999 earnings grew 16.5% over 1998 earnings.
First Savings capital and First Bancorp earnings will be a powerful combination.
Some of our shareholders have questioned the merger. We are happy to respond to
those questions.
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Letter to Shareholders
February 16, 2000
Page 2
o We believe that our shareholders will receive fair value. We
will receive shares in the combined company that we believe
will be stronger and more profitable and have better prospects
than either First Savings or First Bancorp individually. We
will receive 1.2468 shares in First Bancorp for each share in
First Savings.
o Our merger agreement with First Bancorp provides for an
anticipated annual dividend rate of at least $0.76 per share.
However, on a comparable basis after giving effect for the
additional shares received, that dividend is equivalent to
$0.95 per share, compared to the current dividend of $1.04 per
share. As is the case with First Savings' dividends, the
payment of dividends will always be subject to market,
financial, regulatory and other conditions; but this was the
highest anticipated dividend level offered to us.
o The benefits provided for our management are fair and they are
in line with industry precedents. Our outside directors
approved those benefits after thorough discussion. We are
fortunate to be able to place seven of our directors on the
new First Bancorp board, which will make the transition easier
and also give us a voice in the bank going forward.
o We consulted with independent financial advisors. When we
learned that First Bancorp made the best offer and that First
Bancorp's advisors were affiliates of our advisors, both First
Savings and First Bancorp got new, separate financial
advisors.
We pledge to you that our sole objective at every point has been to
make decisions that are in the best interests of our shareholders. We are
shareholders. We think like shareholders.
We know that you may have questions about the merger. Good. Before you
are asked to vote on the merger, you will receive our proxy statement. It will
contain detailed information about the merger. After you receive it, we will
want to answer any remaining questions.
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Letter to Shareholders
February 16, 2000
Page 3
Sincerely,
William E. Samuels, Jr. John F. Burns
Chairman of the Board President, CEO and Director
Virginia C. Brandt H. David Bruton, M.D.
Director Director
Felton J. Capel J. Edwin Causey
Director Director
Frank G. Hardister Henry A. Clayton
Director Director
Dr. W. Harrell Johnson Thomas E. Phillips
Director Director
Please read the proxy statement/prospectus regarding our proposed
merger with First Bancorp when it is mailed to you. It will contain important
information. You may also obtain a copy of the proxy statement/prospectus and
other relevant documents filed by First Savings and First Bancorp with the SEC,
for free at the SEC's web site (http://www.sec.gov). You may also obtain a free
copy from us by writing or calling our Corporate Secretary at First Savings
Bancorp, Inc., P. O. Box 1657, Southern Pines, North Carolina 28388-1657,
telephone (910) 692-6222.
The persons sending this letter are all of the directors of First
Savings Bancorp. Some of us are also officers. We are all shareholders. A
description of our security holdings and other interests in First Savings is set
forth in our September 24, 1999 proxy statement, which is available for free at
the SEC web site described above or by writing or calling us at the address set
forth above. Copies may also be obtained at prescribed rates from the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. The
proxy statement may be read and copied at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's Regional Offices located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048.
