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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[X] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FIRST SAVINGS BANK
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Check box if any part of the fee is offset as provided by Exchange
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Notes:
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Newspaper Advertisement First Published on May 31, 2000
Page 1
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Important information for
shareholders and customers of First Savings Bancorp
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The Board of Directors
of First Savings responds to the
Committee's "16 Questions"
about the proposed merger with First
Bancorp
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Background
On December 16, 1999, we announced a merger agreement between ourselves and
First Bancorp, Troy, NC. Subsequently, a group of shareholders objected. As
part of their efforts, they submitted a series of 16 questions about the merger.
Our responses to these questions were delayed until the Proxy Statement was
filed. The Proxy Statement was mailed to shareholders on May 18, 2000. We can
now answer the questions. We think the answers will help shareholders now
understand the real value of a merger between First Savings and First Bancorp.
The Proxy Statement should be read in conjunction with the information contained
in this message.
Q1: WILL FIRST SAVINGS' SHAREHOLDERS BE FORCED TO ACCEPT 18% DILUTION OF BOOK
VALUE AND 10% DILUTION OF DIVIDEND WHILE BECOMING HOLDERS OF THE HIGHLY ILLIQUID
FIRST BANCORP STOCK?
Answer: First, the answer is yes, we do foresee a reduction of book value.
However, EARNINGS should be more important to shareholders than book value.
Second, as it relates to the dividend rate, First Bancorp has stated that upon
completion of the merger, it expects to begin paying dividends to shareholders
at an annual rate of 88 cents per share, which, after applying the exchange rate
of 1.2468, equals $1.10 per share to First Savings shareholders. The $1.10 per
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share dividend rate is higher than the current First Savings dividend rate of
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$1.04.
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Third, we don't agree with the premise that First Bancorp stock is "highly
illiquid." For the twelve months ended April 30, 2000, a total of 862,847
shares of FBNC stock traded on the NASDAQ market. Combining our shares with
those of FBNC shareholders should provide increased liquidity to First Bancorp's
stock.
Fourth, First Savings Bank has a good record of earnings, but not as good as
they could (or should) be. Our shareholders should take to heart that based on
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pro forma historical information that combines the past financial results of the
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two companies, earnings per share are higher for First Savings shareholders than
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we earned on our own - in
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fact, 14.5% higher for 1999. (See page 12 of the Proxy Statement.) And that may
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turn out to be a conservative estimate because it doesn't take into account the
effect of revenue increases and/or cost savings that may result from combining
our operations.
Before we leave this point of book value, shareholders should take note that our
studies show a merger with most any other acquiror -- especially a large
institution -- would result in even greater reductions in book value than we
will experience in the transaction with First Bancorp. __
Q2: IS IT ALSO TRUE THAT FIRST BANCORP SHAREHOLDERS WILL ENJOY A 27% ADDITION TO
BOOK VALUE AND A 69% INCREASE IN THEIR DIVIDEND PER SHARE?
Answer: This question misses a vital point: when we combine First Savings and
First Bancorp, we will create a new company - and our shareholders will own
almost half the shares of that new company.
It is certainly true that First Savings gives up some book value. It is also
true that First Bancorp's shareholders give up ownership of about half of their
company and accept a likely reduction in earnings per share and reduction of
return on shareholder equity.
From our point of view, this is a classic "win/win" situation. Shareholders of
both companies give up something to get something. All will become owners of a
stronger, better-positioned company with improved earnings potential. And this
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is another point our shareholders should take to heart: First Bancorp has been a
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powerful performer. Shareholders who invested in First Bancorp common stock on
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December 31, 1994 and reinvested all dividends, would have earned an annualized
return of 21.7%, as of December 31, 1999. This compares to First Savings'
annualized five-year return as of June 30, 1999 of 6.7%. For a savings
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institution, there's no doubt we have done well for our shareholders. When we
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combine with First Bancorp, we expect to do even better.
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Q3: WAS THE PRICE FOR FIRST SAVINGS AT THE TIME THE SALE WAS ANNOUNCED
MEASURABLY LOWER THAN PRICES ANNOUNCED BY SIMILARLY SITUATED COMPANIES DURING
THE SAME PERIOD OF TIME?
Answer: No.
After soliciting offers from eleven potential acquirors in four states, we
received three legitimate bids. (The Proxy Statement contains more details about
the process.) In a meeting of the Directors on November 19, 1999, consideration
was given to all three bids. The offer from First Bancorp was chosen as the best
one. In the selection process, our financial advisor, Trident reviewed with us
sixty-six thrift mergers that had taken place in the US in the twelve months
before our transaction was announced. Of those sixty-six transactions, Trident
identified those institutions that were most directly comparable to our company
in terms of capital, return on equity, return on assets, asset size and other
pertinent facts. Trident compared the pricing of these mergers to the three
offers we had received. Based upon all the facts at hand, we felt the price
offered for the company by First Bancorp was fair and that the merger
represented an excellent opportunity to enhance shareholder value. The
Directors' judgment was confirmed by the independent investment firm of Ferguson
& Company.
Q4: WHAT OTHER POTENTIAL BUYERS WERE SOLICITED AND WHAT CRITERIA WERE THEY
GIVEN?
Answer: As explained in the Proxy Statement, the company solicited offers from
eleven potential acquirors in four states. Each company was told that our
overriding objective was to produce the best value for First
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Savings shareholders. Each company was presented with a list of factors we
wished for them to consider as part of their response. However, none of them was
a required term or condition to the transaction.
For information, here's the list of factors given to each potential acquiror:
(1) highest per share and aggregate value; (2) consideration in marketable
stock; (3) continued payment of cash dividends to shareholders; (4) honoring
existing employment agreements; (5) representation on acquiror's board in a
manner consistent with the size and pro forma percentage of ownership; (6)
continued commitment to the community; (7) continued meaningful employment for
the maximum number of employees and fair treatment for all employees terminated
as a result of the merger; and (8) continued indemnification for officers and
directors and continuation of officer's and director's liability coverage for
six years.
Q5: WERE OTHER POTENTIAL BUYERS TOLD THAT THEY MUST RAISE THEIR DIVIDEND TO MORE
CLOSELY APPROXIMATE THE DIVIDEND PAID BY FIRST SAVINGS - AS WAS SUGGESTED AT THE
MEETING BY FIRST SAVINGS DIRECTOR DR. DAVID BRUTON?
Answer: You misunderstood what Dr. Bruton said. All potential buyers were told
that dividends were among important factors that First Savings would evaluate
when it reviewed proposals. But potential buyers clearly understood that
producing the best value for First Savings shareholders was the overriding
objective.
Q6: WERE OTHER POTENTIAL BUYERS TOLD THAT THEY MUST ACCEPT ALL OF FIRST SAVINGS'
BOARD MEMBERS WHO WERE NOT YET 75 YEARS OF AGE?
Answer: No. There was no requirement that board members must be accepted. We
did anticipate that board representation would reflect percentage ownership, as
is normal; but that was not a requirement. You should know that we believe
there that having seven of our directors serve on the First Bancorp board will
be a significant advantage to the shareholders and customers of the combined
company.
Q7: WERE OTHER POTENTIAL BUYERS TOLD THAT THEY MUST CONTINUE TO EMPLOY ALL
SENIOR OFFICERS AT APPROXIMATELY THEIR HISTORIC SALARIES AND THEY MUST ALSO MAKE
SIGNIFICANT "GOLDEN PARACHUTE" PAYMENTS TO SOME OF THOSE SAME OFFICERS?
Answer: Nothing was required regarding retention of any employee. As you would
expect, existing employment contracts would have to be honored, because they
were contractual obligations of First Savings Bank.
Q8: IN CONSIDERING COMPENSATION MATTERS, IS IT TRUE THAT THE STANDARD WAS TO PAY
AS MUCH AS POSSIBLE - LIMITED ONLY BY WHAT WAS LEGAL, VERSUS WHAT WAS
APPROPRIATE BASED UPON PERFORMANCE BY THE EXECUTIVE OFFICERS AND THE BOARD?
Answer: No.
Q9: IN VIEW OF THE PERFORMANCE ISSUE, IS IT TRUE THAT A PRIMARY REASON FOR THE
SALE WAS THE FEAR BY FIRST SAVINGS' DIRECTORS AND EXECUTIVE OFFICERS THAT FIRST
SAVINGS WAS LOSING ITS VIABILITY AS A PUBLICLY TRADED COMPANY DUE TO ITS
INABILITY TO COMPETE?
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Answer: No.
But for the record, it's not a matter of "inability to compete." It is a matter
of positioning our bank to take maximum advantage of future opportunities.
Consider our profitability, or return on equity. In past years, a very large
part of the bank's profitability happened because we kept operating expenses
very low. Even so, our profitability is not what it should be, or could be.
However, significant improvements to our profitability require growing the bank
with new lines of business. This growth would require an investment of millions
of dollars. Investments of that magnitude could have a negative effect on the
bank's earnings and, by extension, on shareholder value. Further, if growth was
going to be done prudently, it would be a slow process, taking many years to
complete.
On the other hand, the Directors believe that combining with First Bancorp is
the best (and most prudent) way to grow into a modern banking organization. The
merger means we can convert to a commercial bank. Merging with First Bancorp
means we will be able to keep our orientation as a community bank. We will join
with an organization that has a wonderful performance story of profitability and
growth. Readers of this message may be interested to note that from January 1,
1997 to December 31, 1999, First Bancorp's loans grew by 88% and deposits grew
by 61%. Net income for 1999 was 52% higher than 1996. (Speaking of First
Bancorp's stock performance, please refer to the Answer to Question 2.)
Q10: IS IT TRUE THAT FIRST SAVINGS HAS A HISTORY OF PAYING DIVIDENDS TO
EXECUTIVE OFFICERS AND DIRECTORS ON OPTIONS GRANTED TO THOSE INDIVIDUALS TO BUY
SHARES - EVEN THOUGH THE OPTIONS HAD NOT BEEN EXERCISED AND THE SHARES HAD NOT
BEEN ISSUED?
Answer: When First Savings Bank of Moore County converted to a stock institution
in 1994, the bank adopted a bonus compensation plan that linked the financial
interests of the Directors and Officers to the interests of the shareholders.
Under the terms of the plan, Directors and Officers received incentive
compensation based upon the number of shares that they were entitled to obtain
by exercising options. The plan was described in the offering materials
delivered at the time of the company's initial public offering (as well as in
subsequent proxy materials.) In June of 1998, that bonus plan was terminated.
Q11: WHEN, DURING THE MERGER PROCESS DID THE ADVISORS TO FIRST SAVINGS DISCLOSE
THAT THEY WERE A SUBSIDIARY OF THE ADVISOR TO FIRST BANCORP?
Answer: It was known from the beginning that First Bancorp's advisor was
McDonald Investments and that First Savings' advisor was Trident. The
relationship of each bank to their advisors existed prior to the merger
discussions. More to the point, after it was clear to our Directors that the
offer from First Bancorp was the best one, the Directors engaged Ferguson &
Company to advise the board about the financial fairness of the transaction to
our shareholders. Ferguson & Company is a well known, well-established financial
advisor to banks and thrifts.
Q12: ONCE THE CONFLICT WAS KNOWN AND ANOTHER FIRM WAS BROUGHT IN TO PROVIDE A
FAIRNESS OPINION TO FIRST SAVINGS, WHAT INFORMATION WAS GIVEN TO THE NEW FIRM,
I.E. WERE
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THEY GIVEN AN OPPORTUNITY TO ADVISE THE FIRST SAVINGS BOARD ON AN
INDEPENDENT BASIS OR WERE THEY GIVEN THE TERMS AND STRUCTURE OF THE DEAL AS
FIXED AND UNALTERABLE?
Answer: They were not told the terms were "fixed and unalterable." Ferguson &
Company understood that it was being retained because Trident and McDonald
Investments are related parties and the Board of Directors wanted independent
advice. All available information was provided to Ferguson & Company. The
Directors did not agree to the merger until after Ferguson rendered its fairness
opinion to the Board.
Q13: DID EACH MEMBER OF THE FIRST SAVINGS BOARD UNDERSTAND WHAT HE OR SHE WAS
DOING WHEN THEY ENTERED INTO THE MERGER AGREEMENT ON DECEMBER 15TH?
Answer: Yes. Each member of the Board is on record in favor of the transaction.
Q14: DID ANY OF THE DIRECTORS OF FIRST SAVINGS BELIEVE THEY WERE SELLING FIRST
SAVINGS FOR $24 PER SHARE WHEN THE TRANSACTION WAS ONLY VALUED AT $21.20 PER
SHARE AT THE TIME THEY ENTERED INTO THE MERGER AGREEMENT?
Answer: No. (Please note that this question and the one that follows deal with
essentially the same points. We have chosen to combine the answers to both in
Question 15.)
Q15: WAS THE EXCHANGE RATIO REALLY SET BASED ON A $19.25 PRICE FOR FIRST BANCORP
STOCK - A PRICE THE STOCK HAD NOT TRADED AT FOR NEARLY A MONTH BEFORE THE BOARD
ENTERED INTO THE MERGER AGREEMENT?
Answer:
No. In fact, the 1.2468:1 exchange ratio was based upon the maximum number of
shares First Bancorp was willing to pay for our company.
As mentioned in the answer to Question 3, at the November 19 meeting, our
Directors, with the assistance of our advisor, analyzed the three offers that
had come to us. At the November 19 meeting, the Directors understood that for
most of the previous month, First Bancorp's shares had traded between $19 and
$20. We noted that First Bancorp's trading price compared favorably to its
earnings, growth rate, profitability and other measures. We determined that it
was trading at a favorable price in comparison to its peers. We also considered
the "fit" between the two companies and concluded that the merger made good
business sense.
While the Directors determined on November 19 that the best offer was from First
Bancorp, the formal signing of the agreement did not take place until about one
month later, on December 15. Between the November 19 meeting and December 15,
four events took place: (a) the Thanksgiving holiday occurred; (b) each party
conducted a due diligence examination of the other; (c) both First Savings and
First Bancorp hired new financial advisors because of the relationship between
Trident and McDonald Investments; and (d) a definitive agreement was prepared.
In the intervening time, the price of First Bancorp's shares declined slightly,
trading between $17 and $19 per share. The trading prices of the shares of the
other two companies who made offers, and banks in general, had also declined.
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After discussing these interim developments at its meeting on December 15, the
Directors concluded that the reasons to merge with First Bancorp were still
sound and they outweighed any day-to-day fluctuations in First Bancorp's share
price. The Board believed on December 15, and continues to believe today, that
this decision was in the best interests of First Savings' shareholders.
Q16: HAVE ALL THE PERSONAL BUSINESS DEALINGS BETWEEN THE MEMBERS OF THE FIRST
BANCORP BOARD AND MEMBERS OF THE FIRST SAVINGS BOARD BEEN DISCLOSED? WHAT ARE
THOSE DEALINGS AND ARE THERE ANY CONFLICTS OF INTEREST THAT CAST DOUBT OVER THE
INDEPENDENCE OF THE FIRST SAVINGS DIRECTORS?
Answer: To our knowledge, there are no personal business dealings between
members of the respective boards.
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The above information has been provided by the Board of Directors of First
Savings Bancorp, Inc. First Bancorp and First Savings Bancorp have filed a
joint proxy statement/prospectus and other documents concerning the merger with
the United States Securities and Exchange Commission ("SEC") and have mailed the
joint proxy statement/prospectus to their shareholders. These documents contain
important information and we urge you to read the joint proxy
statement/prospectus and other documents filed with the SEC carefully. You can
obtain the documents free from the SEC's website, www.sec.gov. Our officers' and
directors' interests in First Savings (stock, contracts, etc.) are described in
First Savings' September 24, 1999 proxy statement which is also available on the
SEC website. In addition, you may obtain free copies of these documents from
the Corporate Secretary of First Savings Bancorp, P.O. Box 1657, Southern Pines,
North Carolina 28388-1657, telephone (910) 692-6222.
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