<PAGE>

--------------------------------------------------------------------------------
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------

                                    FORM 10-K


                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]


                     For the fiscal year ended   June 30, 1997
                                              -------------------
                        Commission file number     0-27098
                                              -------------------

                           FIRST SAVINGS BANCORP, INC.
           -----------------------------------------------------------
             (Exact name of registrant as specified in its charter)

               North Carolina                              56-1842701
      -------------------------------                  ------------------
      (State or other jurisdiction of                  (I.R.S. Employer 
       incorporation or organization)                  Identification No.)

    205 S.E. Broad Street, P.O. Box 1657
       Southern Pines, North Carolina                        28388
  ---------------------------------------                 ----------   
  (Address of principal executive office)                 (Zip Code)

Registrant's telephone number, including area code    (910) 692-6222
                                                   --------------------

      Securities Registered Pursuant to Section 12(b) of the Act:   None
                                                                 ----------

          Securities Registered Pursuant to Section 12(g) of the Act:

                          Common Stock, no par value
                  ------------------------------------------
                               (Title of class)

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.   Yes X   No
                                        ---    ---

Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K 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. [ ]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.
$57,606,945 common stock, no par value, based on the closing price of such
--------------------------------------------------------------------------
common stock on August 29, 1997.
--------------------------------

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. 3,679,185 shares of common
                                                 --------------------------
stock, no par value, outstanding at September 22, 1997.
-------------------------------------------------------
<PAGE>
 
                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report of First Savings Bancorp, Inc. for the year ended
June 30, 1997, are incorporated by reference into Part I, Part II and Part IV.

Portions of the Proxy Statement for the 1997 Annual Meeting of Shareholders of
First Savings Bancorp, Inc. to be held on October 30, 1997, are incorporated by
reference into Part III.
<PAGE>
 
                                    PART I


ITEM 1.    BUSINESS

General

       First Savings Bancorp, Inc. (the "Holding Company") is a savings bank
holding company registered with the Board of Governors of the Federal Reserve
System (the "Federal Reserve") under the Bank Holding Company Act of 1956, as
amended (the "BHCA"), and the savings bank holding company laws of North
Carolina. The Holding Company's office is located at 205 S.E. Broad Street,
Southern Pines, North Carolina. The Holding Company's activities consist of
investing the proceeds of its initial public offering which were retained at the
holding company level and owning First Savings Bank of Moore County, Inc., SSB
(the "Bank"). The Holding Company's principal sources of income are earnings on
its investments. In addition, the Holding Company receives any dividends which
are declared and paid by the Bank on its capital stock.

       The Bank was originally chartered in 1922. It is a member of the Federal
Home Loan Bank ("FHLB") system and its accounts are federally insured up to
allowable limits. The Bank is primarily engaged in soliciting deposit accounts
from the general public, making loans primarily secured by residential real
estate and making limited types of consumer loans.

       The operations of the Bank and depository institutions in general are
significantly influenced by general economic conditions and by related monetary
and fiscal policies of depository institution regulatory agencies, including the
Federal Reserve, the Federal Deposit Insurance Corporation (the "FDIC") and the
North Carolina Administrator, Savings Institutions Division, North Carolina
Department of Commerce (the "Administrator"). Deposit flows and cost of funds
are influenced by interest rates on competing investments and general market
rates of interest. Lending activities are affected by the demand for financing
of real estate and other types of loans, which in turn are affected by the
interest rates at which such financing may be offered and other factors
affecting local demand and availability of funds.

       The Bank conducts its business through five offices in Southern Pines,
Pinehurst, Carthage and West End, North Carolina.

       The Holding Company and the Bank are collectively referred to herein as
"First Savings."

Market Area

       First Savings' primary market area consists of Moore County, North
Carolina. Moore County is home to many retirement communities and, with its many
renowned golf courses in Pinehurst and Southern Pines, has an active tourist and
convention business. As a result, the economy of Moore County is primarily
service oriented. However, there is also employment in manufacturing,
agricultural and governmental activities. Major employers of First Savings'
market area include Resorts of Pinehurst, Firsthealth Moore Regional Hospital,
Ithaca Industries, Inc., Gulstan Carpets, Perdue, Inc. and Stanly Furniture
Company.

Lending Activities

       First Savings' primary source of revenue is interest and fee income from
its real estate lending activities, consisting primarily of mortgage loans for
the purchase, refinancing or construction of one-to-four family residential real
property located in its primary market area. First Savings also makes loans
secured by multi-family residential and non-residential real estate, home equity
and home improvement loans, savings account loans, installment loans and credit
card loans. As a result, over 98% of First Savings' loan portfolio is secured by
real estate. As of June 30, 1997, over 99% of the net amount of First Savings'
real estate loan portfolio was secured by properties in North Carolina. On June
30, 1997, the largest amount First Savings had outstanding to any one borrower
and its affiliates was approximately 

                                       3
<PAGE>
 
$1,510,283. This loan was performing in accordance with its original terms as of
that date. In addition to interest earned on loans, First Savings receives fees
in connection with loan originations, loan modifications, late payments, loan
assumptions and other miscellaneous services.

       First Savings does not originate its loans with the intention that they
will be sold in the secondary market. Loans generally are not originated in
conformity with purchase requirements of the Federal Home Loan Mortgage
Corporation ("FHLMC") or Federal National Mortgage Association ("FNMA"). First
Savings originates loans which satisfy its underwriting requirements which are
tailored for its local community. As a result, many of such loans do not satisfy
various requirements imposed by the FHLMC or the FNMA. Accordingly, such loans
are not readily saleable in the secondary market. Such loans could be sold only
after incurring certain costs, such as costs for surveys and title insurance
and/or discounting the purchase price.

       First Savings purchased loan participations totaling $145,000, $1,570,000
and $99,000 during the years ended June 30, 1997, 1996 and 1995, respectively.
All such loan participations are secured by real property located in North
Carolina.

       First Savings' ratio of loan loss allowances to nonperforming assets at
June 30, 1997, 1996 and 1995, was 241.60%, 454.48% and 223.90%, respectively.

Investments and Mortgage-Backed Securities

       Interest income from mortgage-backed securities and investment securities
generally provides the second largest source of income to First Savings after
interest on loans. In addition, First Savings receives interest income from
interest-bearing deposits in other financial institutions.

       On June 30, 1997, First Savings' investment securities portfolio
consisted of U.S. government and U.S. agency obligations, North Carolina and
municipal obligations and FHLB of Atlanta stock. There was a significant
increase in First Savings' investment securities portfolio during fiscal 1994 as
a result of First Savings' conversion to stock form on January 6, 1994. As a
result of this conversion, First Savings received net proceeds from the issuance
of its common stock of approximately $36.0 million.

       As of June 30, 1997, $7.1 million of investment securities were pledged
as collateral for individual and public deposits.

       As a member of the FHLB of Atlanta, First Savings is required to maintain
an investment in stock of the FHLB of Atlanta equal to the greater of 1% of
First Savings' outstanding home loans or 5% of its outstanding advances from the
FHLB of Atlanta. No ready market exists for such stock, which is carried at
cost. As of June 30, 1997, First Savings' investment in stock of the FHLB of
Atlanta was approximately $1.9 million.

       North Carolina regulations require First Savings to maintain a minimum
amount of liquid assets which may be invested in specified short-term
securities. See "SUPERVISION AND REGULATION - Liquidity." As is described above,
First Savings is also permitted to make certain other securities investments.
First Savings has adopted an investment policy which is implemented by First
Savings' investment committee, which meets at least monthly. First Savings'
investment strategy is intended, among other things, to (i) provide and maintain
liquidity, (ii) maintain a balance of high quality, diversified investments to
minimize risk, (iii) provide collateral for pledging requirements, (iv) serve as
a countercyclical balance to earnings from lending operations, (v) maximize
returns, and (vi) manage interest rate risk. In terms of priorities, safety is
considered more important than liquidity or return on investment. First Savings
does not engage in hedging activities.

       The following table sets forth certain information regarding First
Savings' cash investments and the carrying and market values of First Savings'
mortgage-backed securities and investment portfolio at the dates indicated.

                                       4
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                 At June 30,
                                           ------------------------------------------------------------------------------------
                                                     1997                          1996                           1995
                                           ------------------------       -----------------------      ------------------------
                                           Amortized       Market         Amortized       Market       Amortized        Market
                                              Cost          Value            Cost          Value          Cost           Value
                                           ---------     ----------       ---------     ----------     ---------     ----------
                                                                               (In Thousands)
<S>                                        <C>           <C>              <C>           <C>            <C>           <C>    
Interest-bearing deposits in other
    financial institutions ..........        $ 6,301        $ 6,301        $   713        $   713        $ 1,069        $ 1,069
                                             =======        =======        =======        =======        =======        =======

Securities available-for-sale/1/:
  U.S. government and agency
     securities .....................        $78,881        $79,282        $63,919        $63,889        $73,504        $74,156
  Obligations of states and political
     subdivisions ...................            950            975          2,150          2,180          2,151          2,218
  Federal Home Loan Bank stock ......          1,929          1,930          1,930          1,930          1,930          1,930
                                             -------        -------        -------        -------        -------        -------
Total securities available-for-sale .        $81,760        $87,187        $67,999        $67,999        $77,585        $78,304
                                             =======        =======        =======        =======        =======        =======

Securities held-to-maturity/1/:
  U.S. government and agency
     securities .....................        $              $              $              $              $ 1,999        $ 2,003
  Obligations of states and political
     subdivisions....................
  Federal Home Loan Bank stock.......
  Mortgage-backed securities ........          6,572          6,672          2,965          3,016          4,484          4,537
                                             -------        -------        -------        -------        -------        -------

Total securities held-to-maturity ...        $ 6,572        $ 6,672        $ 2,965        $ 3,016        $ 6,483        $ 6,540
                                             =======        =======        =======        =======        =======        =======
</TABLE>

-----------------------------
/1/  The Financial Accounting Standards Board has issued Statement of Financial
     Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain
     Investments in Debt and Equity Securities" which addresses the accounting
     and reporting for investments in equity securities that have readily
     determinable fair values and for all investments in debt securities. These
     investments are to be classified in three categories and accounted for as
     follows: (i) debt securities that the entity has the positive intent and
     ability to hold to maturity are classified as held-to-maturity and reported
     at amortized cost; (ii) debt and equity securities that are bought and held
     principally for the purpose of selling them in the near term are classified
     as trading securities and reported at fair value, with net unrealized gains
     and losses included in earnings; and (iii) debt and equity securities not
     classified as either held-to-maturity or trading securities are classified
     as securities available-for-sale and reported at fair value, with
     unrealized gains and losses excluded from earnings and reported as a
     separate component of equity. First Savings has no trading securities.
     First Savings adopted SFAS 115 on July 1, 1994.

                                       5
<PAGE>

     The following table sets forth certain information regarding First Savings'
cash investments and the carrying value, weighted average yields and contractual
maturities of First Savings' mortgage-backed and investment securities as of
June 30, 1997.

<TABLE>
<CAPTION>
                                                                           After One Through      After Five Through
                                                   One Year or Less           Five Years               Ten Years            
                                               ------------------------ ----------------------- ------------------------ 
                                                              Weighted               Weighted                Weighted    
                                                 Carrying     Average    Carrying     Average    Carrying     Average    
                                                   Value       Yield       Value       Yield       Value       Yield     
                                               ----------- ------------ ---------- ------------ ----------- ------------ 
                                                                             (In Thousands)
<S>                                            <C>         <C>          <C>        <C>          <C>         <C>
Interest-bearing
    deposits in other       
    financial institutions ....                $     6,301        5.83% $                     % $                      % 
                                               ----------- ------------ ---------- ------------ ----------- ------------ 
Securities available-for-sale:  
  U.S. government and agency 
    securities.................                $    13,601        6.91% $   45,696        6.55% $    13,963        7.66% 
  N.C. State and municipal                 
    obligations(1).............                                                                         975        5.35  
  Federal Home Loan                        
    Bank stock.................                      1,929        7.25                                                   
                                               ----------- ------------ ---------- ------------ ----------- ------------ 
Total securities  
    available-for-sale.........                $    15,530        6.95% $   45,696        6.55% $    14,938        7.50% 
                                               ----------- ------------ ---------- ------------ ----------- ------------ 
                                           
Securities held-to-maturity:                   
    Mortgage-backed securities.                $       142        7.71% $      397        9.17% $       322        9.52% 
                                               ----------- ------------ ---------- ------------ ----------- ------------ 

Total investments, at                      
    carrying value.............                $    15,592              $   46,173              $    15,271              
                                               -----------              ----------              -----------              
                                           
Total interest-bearing                      
    deposits and investments...                $    21,893              $   46,173                 $ 15,271              
                                               ===========              ==========              ===========              
 
<CAPTION>
                                                    
                                                    After Ten Years            Total
                                                ----------------------- -----------------------
                                                            Weighted                 Weighted
                                                Carrying     Average     Carrying    Average
                                                  Value       Yield        Value       Yield
                                                ---------- ------------ ----------- ----------- 
                                                                (In Thousands)
<S>                                             <C>        <C>          <C>         <C>
Interest-bearing
    deposits in other       
    financial institutions.....                 $                     % $     6,301       5.83%  
                                                ---------- ------------ ----------- ----------- 
Securities available-for-sale:                        
    U.S. government and                      
    agency securities..........                 $    6,023        8.25% $    79,283       6.94%
  N.C. State and municipal                 
    obligations(1).............                                                 975       5.35
  Federal Home Loan                        
    Bank stock.................                                               1,929       7.25
                                                ---------- ------------ ----------- ----------- 
Total securities                           
    available-for-sale.........                 $    6,023        8.25% $    82,187       6.93%
                                                ---------- ------------ ----------- ----------- 
                                           
Securities held-to-maturity:                   
    Mortgage-backed securities.                 $    5,711        7.99% $     6,572       8.13%  
                                                ---------- ------------ ----------- ----------- 
                                           
Total investments, at                      
    carrying value.............                 $   11,723              $    88,759
                                                ----------              ----------- 
                                           
                                           
Total interest-bearing                      
    deposits and investments...                 $   11,723              $    95,060  
                                                ==========              =========== 
 
</TABLE> 
                                           
(1) Yields on obligations of states and political subdivisions are not
calculated on a tax-equivalent basis.


                                       6
<PAGE>
 
Deposits and Borrowings

       Deposits. Deposits are the primary source of First Savings' funds for
lending and other investment purposes. On June 30, 1997, 1996 and 1995, First
Savings' savings deposits totalled $204.3 million, $187.4 million and $183.1
million, respectively. In addition to deposits, First Savings derives funds from
loan principal repayments, interest payments, interest income from
mortgage-backed securities, investment income, interest from its own
interest-bearing deposits, and otherwise from its operations. Loan repayments
are a relatively stable source of funds while deposit inflows and outflows may
be significantly influenced by general interest rates and money market
conditions. Borrowings may be used on a short-term basis to compensate for
reductions in the availability of funds from other sources. They may also be
used on a longer term basis for general business purposes.

       First Savings attracts both short-term and long-term deposits from the
general public by offering a variety of accounts and rates. First Savings offers
passbook savings accounts, checking accounts, money market accounts and fixed
interest rate certificates with varying maturities. All deposit flows are
greatly influenced by economic conditions, the general level of interest rates,
competition and other factors, including the restructuring of the thrift
industry. First Savings' deposits traditionally have been obtained primarily
from its market area. First Savings utilizes traditional marketing methods to
attract new customers and savings deposits, including print media advertising
and direct mailings. First Savings does not advertise for deposits outside of
its local market area and it has no brokered deposits.

       As of June 30, 1997, the aggregate amount outstanding of certificates of
deposit in amounts of $100,000 or more was approximately $25.5 million. Some of
these deposits were deposits of state and local governments which are subject to
rebidding from time to time and to securitization requirements. The following
table presents the maturity of these time certificates of deposit at the dates
indicated.

<TABLE>
<CAPTION>

                                                             June 30,
                                                               1997
                                                           ------------- 
                                                           (In Thousands)
<S>                                                         <C>            
3 months or less.........................................   $       8,722 
Over 3 months through 6 months...........................           1,835 
Over 6 months through 12 months..........................           8,014 
Over 12 months...........................................           6,894 
                                                            ------------- 
       Total.............................................   $      25,465 
                                                            ============= 

</TABLE> 

       Borrowings. First Savings is a member of the FHLB of Atlanta, and the
FHLB system functions in a reserve credit capacity for savings institutions. As
a member, First Savings is required to own capital stock in the FHLB of Atlanta
and is authorized to apply for advances from the FHLB of Atlanta on the security
of that stock and a floating lien on certain of its real estate secured loans
and other assets. Each credit program has its own interest rate and range of
maturities. Depending on the program, limitations on the amount of advances are
based either on a fixed percentage of an institution's net worth or on the FHLB
of Atlanta's assessment of the institution's creditworthiness. As of June 30,
1997, First Savings had $20.0 million in borrowings outstanding to the FHLB of
Atlanta.

       Upon First Savings' conversion to the stock form of ownership, the First
Savings Bank of Moore County, Inc., SSB Employee Stock Ownership Plan ("ESOP")
became effective. As part of the conversion, the ESOP borrowed $648,000 from an
independent third party lender and First Savings contributed $72,000 to the
ESOP. This $720,000 was used to purchase 72,000 shares of common stock issued in
the conversion. The note was assumed by the Holding Company in January 1997. The
note payable is collateralized by the common shares purchased by the ESOP with
the proceeds. The note will be repaid principally from First Savings'
discretionary contributions to the ESOP over a period not to exceed ten years.
Dividends paid on shares held by the ESOP may also be used to reduce the note.
The note is not guaranteed by First Savings. Unearned compensation related to
the ESOP note payable is amortized on a straight-line basis over ten years.

                                       7
<PAGE>
 
Subsidiaries

     The Bank has one wholly-owned subsidiary, Moore Service Corporation ("Moore
Service"). Moore Service, a North Carolina corporation, is not active in
producing income, even though it serves as the trustee in deeds of trust
securing loans made by First Savings. At one time Moore Service performed loan
origination and appraisal services for First Savings. The financial statements
of Moore Service are consolidated with those of First Savings. Moore Service has
the same Board of Directors as the Bank, and William E. Samuels, Jr. is its
Chief Executive Officer.

Competition

     First Savings faces strong competition both in attracting deposits and
making real estate and other loans. Its most direct competition for deposits has
historically come from other savings institutions, credit unions and commercial
banks located in its primary market area, including large financial institutions
which have greater financial and marketing resources available to them. First
Savings has also faced additional significant competition for investors' funds
from short-term money market securities and other corporate and government
securities. The ability of First Savings to attract and retain savings deposits
depends on its ability to generally provide a rate of return, liquidity and risk
comparable to that offered by competing investment opportunities. As of June 30,
1997, there were at least twelve other financial institutions with offices in
Moore County, North Carolina. Based upon comparative data as of June 30, 1997,
First Savings had the second largest share of deposits in Moore County, totaling
approximately 21% of all deposits in the county.

Employees

     As of June 30, 1997, First Savings had 40 full-time employees and two part-
time employees. First Savings provides its employees with a comprehensive
benefits program, including basic and major medical insurance, life and
disability insurance, sick leave, education cost sharing, and payment of certain
civic club dues. In addition, First Savings maintains an employee profit sharing
plan covering all eligible employees. Under this plan, First Savings annually
contributes an amount equal to at least 5% of participants' salaries and in
recent years has contributed 15% of employees' salaries. During the fiscal years
ended June 30, 1997, 1996 and 1995, contributions to this plan were $97,539,
$93,402 and $80,944, respectively. In addition, First Savings pays discretionary
bonuses to all of its employees based upon its after-tax earnings. In recent
years, these bonuses have equalled 4% of after-tax earnings. In addition, in
connection with the conversion of First Savings from mutual to stock ownership,
First Savings adopted the ESOP, a stock based management recognition plan, stock
option plans and a bonus compensation plan which provide benefits to employees
and directors of First Savings. The bonus compensation plan was terminated
effective October 1, 1996. Employees are not represented by any union or
collective bargaining group, and First Savings considers its employee relations
to be good.

Federal Income Taxation

     Savings institutions such as First Savings are subject to the taxing
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), for
corporations, as modified by certain provisions specifically applicable for
financial or thrift institutions. Income is reported using the accrual method of
accounting. The maximum corporate federal income tax rate is 35%.

     For fiscal years beginning prior to December 31, 1995, thrift institutions
which qualified under certain definitional tests and other conditions of the
Code were permitted certain favorable provisions regarding their deductions from
taxable income for annual additions to their bad debt reserve. A reserve could
be established for bad debts on qualifying real property loans (generally loans
secured by interests in real property improved or to be improved) under (i) a
method based on a percentage of the institution's taxable income, as adjusted
(the "percentage of taxable income method") or (ii) a method based on actual
loss experience (the "experience method"). The reserve for nonqualifying loans
was computed using the experience method.

                                       8
<PAGE>
 
     The percentage of taxable income method was limited to 8% of taxable
income. This method could not raise the reserve to exceed 6% of qualifying real
property loans at the end of the year. Moreover, the additions for qualifying
real property loans, when added to nonqualifying loans, could not exceed 12% of
the amount by which total deposits or withdrawable accounts exceed the sum of
surplus, undivided profits and reserves at the beginning of the year. The
experience method was the amount necessary to increase the balance of the
reserve at the close of the year to the greater of (i) the amount which bore the
same ratio to loans outstanding at the close of the year as the total net bad
debts sustained during the current and five preceding years bore to the sum of
the loans outstanding at the close of such six years or (ii) the balance in the
reserve account at the close of the last taxable year beginning before 1988
(assuming that the loans outstanding have not declined since such date).

     In order to qualify for the percentage of income method, an institution had
to have at least 60% of its assets as "qualifying assets" which generally
included, cash, obligations of the United States government or an agency or
instrumentality thereof or of a state or political subdivision, residential real
estate-related loans, or loans secured by savings accounts and property used in
the conduct of its business. In addition, it had to meet certain other
supervisory tests and operate principally for the purpose of acquiring savings
and investing in loans.

     Institutions which became ineligible to use the percentage of income method
had to change to either the reserve method or the specific charge-off method
that applied to banks. Large thrift institutions, those generally exceeding $500
million in assets, had to convert to the specific charge-off method. In
computing its bad debt reserve for federal income taxes, First Savings elected
to use the experience method in fiscal years 1995, 1996, and 1997.

     Bad debt reserve balances in excess of the balance computed under the
experience method or amounts maintained in a supplemental reserve built up prior
to 1962 ("excess bad debt reserve") require inclusion in taxable income upon
certain distributions to shareholders. Distributions in redemption or
liquidation of stock or distributions with respect to its stock in excess of
earnings and profits accumulated in years beginning after December 31, 1951, are
treated as a distribution from the excess bad debt reserve. When such a
distribution takes place and it is treated as from the excess bad debt reserve,
the thrift is required to reduce its reserve by such amount and simultaneously
recognize the amount as an item of taxable income increased by the amount of
income tax imposed on the inclusion. Dividends not in excess of earnings and
profits accumulated since December 31, 1951 will not require inclusion of part
or all of the bad debt reserve in taxable income. First Savings has accumulated
earnings and profits since December 31, 1951 and has an excess in its bad debt
reserve. Distributions in excess of current and accumulated earnings and profits
will increase taxable income. Net retained earnings at June 30, 1997 includes
approximately $5.3 million for which no provision for federal income tax has
been made.

     Legislation passed by the U.S. Congress and signed by the President in
August 1996 contains a provision that repeals the percentage of taxable income
method of accounting for thrift bad debt reserves for tax years beginning after
December 31, 1995. The legislation will trigger bad debt reserve recapture for
post-1987 excess reserves over a six-year period. At June 30, 1997, First
Savings' post-1987 excess reserves amounted to approximately $1.3 million. A
special provision suspends recapture of post-1987 excess reserves for up to two
years if, during those years, the institution satisfies a "residential loan
requirement." This requirement will be met if the principal amount of the
institution's residential loans exceeds a base year amount, which is determined
by reference to the average of the institution's residential loans during the
six taxable years ending before January 1, 1996. However, notwithstanding this
special provision, recapture must begin no later than the first taxable year
beginning after December 31, 1997.

     First Savings may also be subject to the corporate alternative minimum tax
("AMT"). This tax is applicable only to the extent it exceeds the regular
corporate income tax. The AMT is imposed at the rate of 20% of the corporation's
alternative minimum taxable income ("AMTI") subject to applicable statutory
exemptions. AMTI is calculated by adding certain tax preference items and making
certain adjustments to the corporation's regular taxable income. Preference
items and adjustments generally applicable to financial institutions include,
but are not limited to, the following: (i) the excess of the bad debt deduction
over the amount that would have been allowable on the basis of actual
experience; (ii) interest on certain tax-exempt bonds issued after August 7,
1986; and (iii) 75% of the excess, if any, of a corporation's adjusted earnings
and profits over its AMTI (as otherwise determined with certain adjustments).
Net operating loss carryovers, subject to certain adjustments, may be utilized
to offset up to 90% of the 

                                       9
<PAGE>
 
AMTI. Credit for AMT paid may be available in future years to reduce future
regular federal income tax liability. First Savings has not been subject to the
AMT in recent years.

     First Savings' federal income tax returns have not been audited in the last
ten tax years.

State Taxation

     Under North Carolina law, the corporate income tax is 7.75% of federal
taxable income as computed under the Code, subject to certain prescribed
adjustments. In addition, for tax years beginning in 1994, 1993, 1992 and 1991,
corporate taxpayers were required to pay a surtax equal to 1%, 2%, 3% and 4%,
respectively, of the state income tax otherwise payable by it. An annual state
franchise tax is imposed at a rate of 0.15% applied to the greatest of the
institution's (i) capital stock, surplus and undivided profits, (ii) investment
in tangible property in North Carolina or (iii) appraised valuation of property
in North Carolina.

     The North Carolina corporate tax rate dropped to 7.50% in 1997, and will
drop to 7.25% in 1998, 7.00% in 1999 and 6.90% thereafter.


                           SUPERVISION AND REGULATION

Regulation of the Holding Company

     Bank holding companies and state savings banks are extensively regulated
under both federal and state law. The following is a brief summary of certain
statutes and rules and regulations that affect or will affect the Company and
the Bank. This summary is qualified in its entirety by reference to the
particular statute and regulatory provisions referred to below and is not
intended to be an exhaustive description of the statutes or regulations
applicable to the business of the Company and the Bank. Supervision, regulation
and examination of the Company and the Bank by the regulatory agencies are
intended primarily for the protection of depositors rather than shareholders of
the Company.

     General. The Holding Company was organized for the purpose of acquiring and
holding all of the capital stock of the Bank. As a savings bank holding company
subject to the Bank Holding Company Act of 1956, as amended ("BHCA"), the
Holding Company is subject to certain regulations of the Federal Reserve. Under
the BHCA, the Holding Company's activities and those of its subsidiaries are
limited to banking, managing or controlling banks, furnishing services to or
performing services for its subsidiaries or engaging in any other activity which
the Federal Reserve determines to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. The BHCA prohibits the
Holding Company from acquiring direct or indirect control of more than 5% of the
outstanding voting stock or substantially all of the assets of any bank or
savings bank or merging or consolidating with another bank holding company or
savings bank holding company without prior approval of the Federal Reserve.

     Additionally, the BHCA prohibits the Holding Company from engaging in, or
acquiring ownership or control of, more than 5% of the outstanding voting stock
of any company engaged in a nonbanking business unless such business is
determined by the Federal Reserve to be so closely related to banking as to be
properly incident thereto. The BHCA generally does not place territorial
restrictions on the activities of such nonbanking related activities.

     Similarly, Federal Reserve approval (or, in certain cases, non-disapproval)
must be obtained prior to any person acquiring control of the Holding Company.
Control is conclusively presumed to exist if, among other things, a person
acquires more than 25% of any class of voting stock of the Holding Company or
controls in any manner the election of a majority of the directors of the
Holding Company. Control is presumed to exist if a person acquires more than 10%
of any class of voting stock and the stock is registered under Section 12 of the
Exchange Act or the acquiror will be the largest shareholder after the
acquisition.

                                       10
<PAGE>
 
     There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss to the depositors of such
depository institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default or in default. For example, under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("1991 Banking
Law"), to avoid receivership of an insured depository institution subsidiary, a
bank holding company is required to guarantee the compliance of any insured
depository institution subsidiary that may become "undercapitalized" with the
terms of any capital restoration plan filed by such subsidiary with its
appropriate federal banking agency up to the lesser of (i) an amount equal to 5%
of the institution's total assets at the time the institution became
undercapitalized or (ii) the amount which is necessary (or would have been
necessary) to bring the institution into compliance with all acceptable capital
standards as of the time the institution fails to comply with such capital
restoration plan. Under a policy of the Federal Reserve with respect to bank
holding company operations, a bank holding company is required to serve as a
source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so absent such policy. The Federal Reserve under the BHCA also has the
authority to require a bank holding company to terminate any activity or to
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a
bank) upon the Federal Reserve's determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any bank
subsidiary of the bank holding company.

     In addition, the "cross-guarantee" provisions of the Federal Deposit
Insurance Act, as amended ("FDIA") require insured depository institutions under
common control to reimburse the FDIC for any loss suffered by either the Savings
Association Insurance Fund (the "SAIF") or the Bank Insurance Fund (the "BIF")
as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly controlled
insured depository institution in danger of default. The FDIC may decline to
enforce the cross-guarantee provisions if it determines that a waiver is in the
best interest of the SAIF or the BIF or both. The FDIC's claim for damages is
superior to claims of stockholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institutions.

     The Holding Company must notify the Federal Reserve prior to repurchasing
Common Stock in excess of 10% of its net worth during any twelve-month period.

     The Holding Company is also registered under the savings bank holding
company laws of North Carolina. Accordingly, the Holding Company is also subject
to regulation and supervision by the Administrator.

     Capital Adequacy Guidelines for Holding Companies. The Federal Reserve has
adopted capital adequacy guidelines for bank holding companies and banks that
are members of the Federal Reserve system and have consolidated assets of $150
million or more. For bank holding companies with less than $150 million in
consolidated assets, the guidelines are applied on a bank-only basis unless the
parent bank holding company (i) is engaged in nonbank activity involving
significant leverage or (ii) has a significant amount of outstanding debt that
is held by the general public.

     Bank holding companies subject to the Federal Reserve's capital adequacy
guidelines are required to comply with the Federal Reserve's risk-based capital
regulations. Under these regulations, the minimum ratio of total capital to 
risk-weighted assets (including certain off-balance sheet activities, such as
standby letters of credit) is 8%. At least half of the total capital is required
to be "Tier I capital," principally consisting of common stockholders' equity,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less certain goodwill items. The remainder ("Tier II
capital") may consist of a limited amount of subordinated debt, certain hybrid
capital instruments and other debt securities, perpetual preferred stock, and a
limited amount of the general loan loss allowance. In addition to the risk-based
capital guidelines, the Federal Reserve has adopted a minimum Tier I (leverage)
capital ratio, under which a bank holding company must maintain a minimum level
of Tier I capital to average total consolidated assets of at least 3% in the
case of a bank holding company which has the highest regulatory examination
rating and is not contemplating significant growth or expansion. All other bank
holding companies are expected to maintain a Tier I (leverage) capital ratio of
at least 1% to 2% above the stated minimum.
 

                                       11
<PAGE>
 
     Dividend Limitations. In connection with the Conversion, the FDIC has
required the Holding Company and the Bank to agree that, during the first year
after consummation of the Conversion, the Holding Company will not pay any
dividend or make any other distribution to its stockholders which represents, is
characterized as or is treated for federal tax purposes as, a return of capital.
In addition, the Company must obtain Federal Reserve approval prior to
repurchasing Common Stock for in excess of 10% of its net worth during any
twelve-month period unless the Company (i) both before and after the redemption
satisfies capital requirements for "well capitalized" state member banks; (ii)
received a one or two rating in its last examination; and (iii) is not the
subject of any unresolved supervisory issues. Although the payment of dividends
and repurchase of stock by the Company are subject to the requirements and
limitations of North Carolina corporate law, except as set forth in this
paragraph, neither the Administrator nor the FDIC have promulgated any
regulations specifically limiting the right of the Company to pay dividends and
repurchase shares. However, the ability of the Company to pay dividends or
repurchase shares may be dependent upon the Company's receipt of dividends from
the Bank. The Bank's ability to pay dividends is limited. See " -- Regulation of
the Bank -- Restrictions on Dividends and Other Capital Distributions."

     Capital Maintenance Agreement. In connection with the Administrator's
approval of the Holding Company's application to acquire control of the Bank,
the Holding Company was required to execute a Capital Maintenance Agreement
whereby it has agreed to maintain the Bank's capital in an amount sufficient to
enable the Bank to satisfy all regulatory capital requirements.

     Federal Securities Law. The Company has registered its Common Stock with
the SEC pursuant to Section 12(g) of the Exchange Act and will not deregister
the Common Stock for a period of three years following the completion of the
Conversion. As a result of such registration, the proxy and tender offer rules,
insider trading reporting requirements, annual and periodic reporting and other
requirements of the Exchange Act are applicable to the Company.

     The registration under the Securities Act of the Offerings of the Common
Stock does not cover the resale of such shares. Shares of the Common Stock
purchased by persons who are not affiliates of the Company may be resold without
registration. Shares purchased by an affiliate of the Company are subject to the
resale provisions of Rule 144 under the Securities Act. So long as the Company
meets the current public information requirements of Rule 144 under the
Securities Act, each affiliate of the Company who complies with the other
conditions of Rule 144 (including those that require the affiliate's sale to be
aggregated with those of certain other persons) will be able to sell in the
public market, without registration, a number of shares not to exceed, in any
three-month period, the greater of (i) 1% of the outstanding shares of the
Company or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks. Provision may be made in the future by the
Company to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances. There are currently no demand
registration rights outstanding. However, in the event the Company at some
future time determines to issue additional shares from its authorized but
unissued shares, the Company might offer registration rights to certain of its
affiliates who want to sell their shares.

Regulation of the Bank

     General. Federal and state legislation and regulation have significantly
affected the operations of federally insured savings institutions and other
federally regulated financial institutions in the past several years and have
increased competition among savings institutions, commercial banks and other
providers of financial services. In addition, federal legislation has imposed
new limitations on investment authority, and higher insurance and examination
assessments on savings institutions and has made other changes that may
adversely affect the future operations and competitiveness of savings
institutions with other financial institutions, including commercial banks and
their holding companies. The operations of regulated depository institutions,
including the Bank, will continue to be subject to changes in applicable
statutes and regulations from time to time.

     The Bank is a North Carolina-chartered savings bank, is a member of the
Federal Home Loan Bank ("FHLB") system, and its deposits are insured by the FDIC
through the Savings Association Insurance Fund ("SAIF"). It is subject to
examination and regulation by the FDIC and the Administrator and to regulations
governing such matters as capital 

                                       12
<PAGE>
 
standards, mergers, establishment of branch offices, subsidiary investments and
activities, and general investment authority. Generally, North Carolina-
chartered savings banks whose deposits are insured by the SAIF are subject to
restrictions with respect to activities and investments, transactions with
affiliates and loans-to-one borrower similar to those applicable to SAIF-insured
savings associations. Such examination and regulation is intended primarily for
the protection of depositors and the federal deposit insurance funds.

     The Bank is subject to various regulations promulgated by the Federal
Reserve including, without limitation, Regulation B (Equal Credit Opportunity),
Regulation D (Reserves), Regulation E (Electronic Fund Transfers), Regulation O
(Loans to Executive Officers, Directors and Principal Shareholders), Regulation
Z (Truth in Lending), Regulation CC (Availability of Funds) and Regulation DD
(Truth in Savings). As holders of loans secured by real property and as owners
of real property, financial institutions, including the Bank, may be subject to
potential liability under various statutes and regulations applicable to
property owners generally, including statutes and regulations relating to the
environmental condition of real property.

     The FDIC has extensive enforcement authority over North Carolina-chartered
savings banks, including the Bank. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue cease and
desist or removal orders and to initiate injunctive actions. In general, these
enforcement actions may be initiated in response to violations of laws and
regulations and unsafe or unsound practices.

     The grounds for appointment of a conservator or receiver for a North
Carolina savings bank on the basis of an institution's financial condition
include: (i) insolvency, in that the assets of the savings bank are less than
its liabilities to depositors and others; (ii) substantial dissipation of assets
or earnings through violations of law or unsafe or unsound practices; (iii)
existence of an unsafe or unsound condition to transact business; (iv)
likelihood that the savings bank will be unable to meet the demands of its
depositors or to pay its obligations in the normal course of business; and (v)
insufficient capital or the incurring or likely incurring of losses that will
deplete substantially all of the institution's capital with no reasonable
prospect of replenishment of capital without federal assistance.

     Transactions with Affiliates. Under current federal law, transactions
between savings institutions and any affiliate are governed by Sections 23A and
23B of the Federal Reserve Act. An affiliate of a savings institution is any
company or entity that controls, is controlled by or is under common control
with the savings institution. In a holding company context, the parent holding
company of a savings institution and any companies which are controlled by such
parent holding company are affiliates of the savings institution. Generally,
Sections 23A and 23 B (i) establish certain collateral requirements for loans to
affiliates; (ii) limit the extent to which the savings institution or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such savings institution's capital stock and surplus, and
contain an aggregate limit on all such transactions with all affiliates to an
amount equal to 20% of such capital stock and surplus and (iii) require that all
such transactions be on terms substantially the same, or at least as favorable
to the savings institution or the subsidiary, as those provided to a
nonaffiliate. The term "covered transaction" includes the making of loans or
other extensions of credit to an affiliate, the purchase of assets from an
affiliate, the purchase of, or an investment in, the securities of an affiliate,
the acceptance of securities of an affiliate as collateral for a loan or
extension of credit to any person, or issuance of a guarantee, acceptance or
letter of credit on behalf of an affiliate.

     Further, current federal law has extended to savings institutions the
restrictions contained in Section 22(h) of the Federal Reserve Act with respect
to loans to directors, executive officers and principal stockholders. Under
Section 22(h), loans to directors, executive officers and stockholders who own
more than 10% of a savings institution and certain affiliated entities of any of
the foregoing, may not exceed, together with all other outstanding loans to such
person and affiliated entities, the savings institution's loans-to-one borrower
limit as established by federal law (generally equal to 15% of the institution's
unimpaired capital and surplus). Section 22(h) also prohibits loans above
amounts prescribed by the appropriate federal banking agency to directors,
executive officers and stockholders who own more than 10% of a savings
institution, and their respective affiliates, unless such loan is approved in
advance by a majority of the board of directors of the savings institution. Any
"interested" director may not participate in the voting. The Federal Reserve has
prescribed the loan amount (which includes all other outstanding loans to such
person), as to which such prior board of director approval is required, as being
the greater of $25,000 or 5% of 

                                       13
<PAGE>
 
unimpaired capital and unimpaired surplus (up to $500,000). Further, pursuant to
Section 22(h) the Federal Reserve requires that loans to directors, executive
officers, and principal stockholders be made on terms substantially the same as
offered in comparable transactions to other persons and not involve more than
the normal risk of repayment or present other unfavorable features.

       Insurance of Deposit Accounts. The Bank's deposit accounts are insured by
the FDIC under the SAIF to the maximum extent permitted by law. The Bank pays
deposit insurance premiums to the FDIC based on a risk-based assessment system
established by the FDIC for all SAIF-member institutions. Under applicable
regulations, institutions are assigned to one of three capital groups that are
based solely on the level of an institution's capital ("well capitalized,"
"adequately capitalized" or "undercapitalized"), which are defined in the same
manner as the regulations establishing the prompt corrective action system
discussed below. The matrix so created results in nine assessment risk
classifications, with rates that, until September 30, 1996, ranged from 0.23%
for well capitalized, financially sound institutions with only a few minor
weaknesses to 0.31% for undercapitalized institutions that pose a substantial
risk to the SAIF unless effective corrective action is taken.

       Pursuant to the Deposit Insurance Fund Act (the "DIF Act"), which was
enacted on September 30, 1996, the FDIC imposed a special assessment on each
depository institution with SAIF-assessable deposits which resulted in the SAIF
achieving its designated reserve ratio. In connection therewith, the FDIC
reduced the assessment schedule for SAIF members, effective January 1, 1997, to
a range of 0% to 0.27%, with most institutions, including the Bank, paying 0%.
This assessment schedule is the same as that for the BIF, which reached its
designated reserve ratio in 1995. In addition, since January 1, 1997, SAIF
members are charged an assessment of 0.065% of SAIF-assessable deposits for the
purpose of paying interest on the obligations issued by the Financing
Corporation ("FICO") in the 1980s to help fund the thrift industry cleanup.
BIF-assessable deposits will be charged an assessment to help pay interest on
the FICO bonds at a rate of approximately .013% until the earlier of December
31, 1999 or the date upon which the last savings association ceases to exist,
after which time the assessment will be the same for all insured deposits.

       The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date. The DIF Act contemplates the
development of a common charter for all federally chartered depository
institutions and the abolition of separate charters for national banks and
federal savings associations. It is not known what form the common charter may
take and what effect, if any, the adoption of a new charter would have on the
operation of the Bank.

       The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of the Bank.

       Community Reinvestment Act. The Bank, like other financial institutions,
is subject to the Community Reinvestment Act, as amended ("CRA"). A purpose of
this Act is to encourage financial institutions to help meet the credit needs of
its entire community, including the needs of low- and moderate-income
neighborhoods. A savings bank is evaluated and rated under three categories: a
lending test, an investment test and a service test. For each of these three
tests, the savings bank is given a rating of either "outstanding," "high
satisfactory," "low satisfactory," "needs to improve" or "substantial
non-compliance." A set of criteria for each rating is included in the
regulation. If an institution disagrees with a particular rating, the
institution has the burden of rebutting the presumption by clearly establishing
that the quantative measures do not accurately present its actual performance,
or that demographics, competitive conditions or economic or legal limitations
peculiar to the service area should be considered. The ratings received under
the three tests are used to determine the overall composite CRA rating or
"outstanding," "satisfactory," "needs to improve" or "substantial
non-compliance."
 

                                       14
<PAGE>
 
       During the Bank's last compliance examination, which was performed by the
FDIC on February 13, 1996, the Bank received a "satisfactory" rating with
respect to CRA compliance. The Bank's rating with respect to CRA compliance
would be a factor to be considered by the Federal Reserve and FDIC in
considering applications submitted by the Bank to acquire branches or to acquire
or combine with other financial institutions and take other actions and could
result in the denial of such applications.

       The federal banking regulatory agencies have issued a revision of the CRA
regulations, which became effective on January 1, 1996, to implement a new
evaluation system that rates institutions based on their actual performance in
meeting community credit needs. Under the regulations, a savings bank will first
be evaluated and rated under three categories: a lending test, an investment
test and a service test. For each of these three tests, the savings bank will be
given a rating of either "outstanding," "high satisfactory," "low satisfactory,"
"needs to improve" or "substantial non-compliance." A set of criteria for each
rating has been developed and is included in the regulation. If an institution
disagrees with a particular rating, the institution has the burden of rebutting
the presumption by clearly establishing that the quantitative measures do not
accurately present its actual performance, or that demographics, competitive
conditions or economic or legal limitations peculiar to its service area should
be considered. The ratings received under the three tests will be used to
determine the overall composite CRA rating. The composite ratings will be the
same as those that are currently given: "outstanding," "satisfactory," "needs to
improve" or "substantial non-compliance."

       Capital Requirements. The FDIC requires the Bank to have a minimum
leverage ratio of Tier I capital (principally consisting of common stockholders'
equity, noncumulative perpetual preferred stock and minority interests in
consolidated subsidiaries, less certain intangible and goodwill items), to total
assets of at least 3%; provided, however that all institutions, other than those
(i) receiving the highest rating during the examination process and (ii) not
anticipating or experiencing any significant growth, are required to maintain a
ratio of 1% or 2% above the stated minimum, with an absolute minimum leverage
ratio of not less than 4%. The FDIC also requires the Bank to have a ratio of
total capital to risk-weighted assets, including certain off-balance sheet
activities, such as standby letters of credit, of at least 8%. At least half of
the total capital is required to be Tier I capital. The remainder (Tier II
capital) may consist of a limited amount of subordinated debt, certain hybrid
capital instruments, other debt securities, certain types of preferred stock and
a limited amount of general loan loss allowance.

       An institution which fails to meet minimum capital requirements may be
subject to a capital directive which is enforceable in the same manner and to
the same extent as a final cease and desist order, and must submit a capital
plan within 60 days to the FDIC. If the leverage ratio falls to 2% or less, the
institution may be deemed to be operating in an unsafe or unsound condition,
allowing the FDIC to take various enforcement actions, including possible
termination of insurance or placement of the institution in receivership.

       The Administrator requires that net worth equal at least 5% of total
assets. Intangible assets must be deducted from net worth and assets when
computing compliance with this requirement.

       At June 30, 1997, the Bank complied with each of the capital requirements
of the FDIC and the Administrator. For a description of the Bank's required and
actual capital levels on June 30, 1997, see Note 10 captioned "Shareholders'
Equity" on pages 31 and 32 of the 1997 Annual Report.

       Each federal banking agency was required by law to revise its risk-based
capital standards to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk, and the risk of nontraditional
activities, as well as reflect the actual performance and expected risk of loss
on multi-family mortgages. On August 2, 1995, the federal banking agencies
issued a joint notice of adoption of final risk-based capital rules to take
account of interest rate risk. The final regulation required an assessment of
the need for additional capital on a case-by-case basis, considering both the
level of measured exposure and qualitative risk factors. The final rule also
stated an intent to, in the future, establish an explicit minimum capital charge
for interest rate risk based on the level of a bank's measured interest rate
risk exposure. The final regulation has not had a material impact on the Bank's
capital requirements.

                                       15
<PAGE>
 
       Effective June 26, 1996, the federal banking agencies issued a joint
policy statement announcing the agencies' election not to adopt a standardized
measure and explicit capital charge for interest rate risk at that time. Rather,
the policy statement (i) identifies the main elements of sound interest rate
risk management, (ii) describes prudent principles and practices for each of
those elements, and (iii) describes the critical factors affecting the agencies'
evaluation of a bank's interest rate risk when making a determination of capital
adequacy. The joint policy statement is not expected to have a material impact
on the Bank's management of interest rate risk.

       In December 1994, the FDIC adopted a final rule changing its risk-based
capital rules to recognize the effect of bilateral netting agreements in
reducing the credit risk of two types of financial derivatives - interest and
exchange rate contracts. Under the rule, savings banks are permitted to net
positive and negative mark-to-market values of rate contracts with the same
counterparty, subject to legally enforceable bilateral netting contracts that
meet certain criteria. This represents a change from the prior rules which
recognized only a very limited form of netting. The Bank does not anticipate
that this rule will have a material effect upon its financial condition or
results of operations.

       Loans to One Borrower. The Bank is subject to the Administrator's
loans-to-one-borrower limits. Under these limits, no loans and extensions of
credit to any borrower outstanding at one time and not fully secured by readily
marketable collateral shall exceed 15% of the net worth of the savings bank.
Loans and extensions of credit fully secured by readily marketable collateral
may comprise an additional 10% of net worth. These limits also authorize savings
banks to make loans to one borrower, for any purpose, in an amount not to exceed
$500,000. A savings institution also is authorized to make loans to one borrower
to develop domestic residential housing units, not to exceed the lesser of $30
million, or 30% of the savings institution's net worth, provided that (i) the
purchase price of each single-family dwelling in the development does not exceed
$500,000; (ii) the savings institution is in compliance with its fully phased-in
capital requirements; (iii) the loans comply with applicable loan-to-value
requirements; (iv) the aggregate amount of loans made under this authority does
not exceed 150% of net worth; and (v) the institution's regulator issues an
order permitting the savings institution to use this higher limit. These limits
also authorize a savings bank to make loans-to-one borrower to finance the sale
of real property acquired in satisfaction of debts in an amount up to 50% of net
worth.

       As of June 30, 1997, the largest aggregate amount of loans which the Bank
had to any one borrower was $1.5 million. The Bank had no loans outstanding
which management believes violate the applicable loans-to-one borrower limits.

       Federal Home Loan Bank System. The FHLB system provides a central credit
facility for member institutions. As a member of the FHLB of Atlanta, the Bank
is required to own capital stock in the FHLB of Atlanta in an amount at least
equal to the greater of 1% of the aggregate principal amount of its unpaid
residential mortgage loans, home purchase contracts and similar obligations at
the end of each calendar year, or 5% of its outstanding advances (borrowings)
from the FHLB of Atlanta. On June 30, 1997, the Bank was in compliance with this
requirement with an investment in FHLB of Atlanta stock of $1.9 million.

       Federal Reserve System. Federal Reserve regulations require savings
banks, not otherwise exempt from the regulations, to maintain reserves against
their transaction accounts (primarily negotiable order of withdrawal accounts)
and certain nonpersonal time deposits. The reserve requirements are subject to
adjustment by the Federal Reserve. As of June 30, 1997, the Bank was in
compliance with the applicable reserve requirements of the Federal Reserve.

       Restrictions on Acquisitions. Federal law generally provides that no
"person," acting directly or indirectly or through or in concert with one or
more other persons, may acquire "control," as that term is defined in FDIC
regulations, of a state savings bank without giving at least 60 days' written
notice to the FDIC and providing the FDIC an opportunity to disapprove the
proposed acquisition. Pursuant to regulations governing acquisitions of control,
control of an insured institution is conclusively deemed to have been acquired,
among other things, upon the acquisition of more than 25% of any class of voting
stock. In addition, control is presumed to have been acquired, subject to
rebuttal, upon the acquisition of more than 10% of any class of voting stock,
and the issuer's securities are registered under Section 12 of the Exchange Act
or the person would be the single largest shareholder. Such acquisitions of
control may be disapproved if it is determined, among other things, that (i) the
acquisition would 

                                       16
<PAGE>
 
substantially lessen competition; (ii) the financial condition of the acquiring
person might jeopardize the financial stability of the savings bank or prejudice
the interests of its depositors; or (iii) the competency, experience or
integrity of the acquiring person or the proposed management personnel indicates
that it would not be in the interest of the depositors or the public to permit
the acquisition of control by such person.

       For three years following the Bank's conversion from mutual to stock
form, North Carolina conversion regulations require the prior written approval
of the Administrator before any person may directly or indirectly offer to
acquire or acquire the beneficial ownership of more than 10% of any class of an
equity security of the Bank. If any person were to so acquire the beneficial
ownership of more than 10% of any class of any equity security without prior
written approval, the securities beneficially owned in excess of 10% would not
be counted as shares entitled to vote and would not be voted or counted as
voting shares in connection with any matter submitted to stockholders for a
vote. Approval is not required for (i) any offer with a view toward public
resale made exclusively to the Bank or its underwriters or the selling group
acting on its behalf or (ii) any offer to acquire or acquisition of beneficial
ownership of more than 10% of the common stock of the Bank by a corporation
whose ownership is or will be substantially the same as the ownership of the
Bank, provided that the offer or acquisition is made more than one year
following the consummation of the conversion. During the second and third years
after the conversion, the Administrator may approve such an acquisition of more
than 10% of beneficial ownership upon a finding that (i) the acquisition is
necessary to protect the safety and soundness of the Holding Company and the
Bank or the Boards of Directors of the Holding Company and the Bank support the
acquisition and (iii) the acquiror is of good character and integrity and
possesses satisfactory managerial skills, the acquiror will be a source of
financial strength to the Holding Company and the Bank and the public interests
will not be adversely affected.

       Liquidity. The Bank is subject to the Administrator's requirement that
the ratio of liquid assets to total assets equal at least 10%. The computation
of liquidity under North Carolina regulation allows the inclusion of
mortgage-backed securities and investments which, in the judgment of the
Administrator, have a readily marketable value, including investments with
maturities in excess of five years. At June 30, 1997, the Bank's liquidity
ratio, calculated in accordance with North Carolina regulations, was
approximately 27.7%.

       Additional Limitations on Activities. Recent FDIC law and regulations
generally provide that the Bank may not engage as principal in any type of
activity, or in any activity in an amount, not permitted for national banks, or
directly acquire or retain any equity investment of a type or in an amount not
permitted for national banks. The FDIC has authority to grant exceptions from
these prohibitions (other than with respect to non-service corporation equity
investments) if it determines no significant risk to the insurance fund is posed
by the amount of the investment or the activity to be engaged in and if the Bank
is and continues to be in compliance with fully phased-in capital standards.
National banks are generally not permitted to hold equity investments other than
shares of service corporations and certain federal agency securities. Moreover,
the activities in which service corporations for savings banks are permitted to
engage are limited to those of service corporations for national banks.

       Savings banks are also required to notify the FDIC at least 30 days prior
to the establishment or acquisition of any subsidiary, or at least 30 days prior
to conducting any such new activity. Any such activities must be conducted in
accordance with the regulations and orders of the FDIC and the Administrator.
Savings banks are also generally prohibited from directly or indirectly
acquiring or retaining any corporate debt security that is not of investment
grade (generally referred to as "junk bonds").

       Prompt Corrective Regulatory Action. Federal law provides the federal
banking agencies with broad powers to take corrective action to resolve problems
of insured depository institutions. The extent of these powers depends upon
whether the institutions in question are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," or
"critically undercapitalized." Under the FDIC regulations applicable to the
Bank, an institution is considered "well capitalized" if it has (i) a total
risk-based capital ratio of 10% or greater, (ii) a Tier I risk-based capital
ratio of 6% or greater, (iii) a leverage ratio of 5% or greater and (iv) is not
subject to any order or written directive to meet and maintain a specific
capital level for any capital measure. An "adequately capitalized" institution
is defined as one that has (i) a total risk-based capital ratio of 8% or
greater, (ii) a Tier I risk-based capital ratio of 4% or greater and (iii) a
leverage ratio of 4% or greater (or 3% or greater in the case of an institution
with the

                                       17
<PAGE>
 
highest examination rating and which is not experiencing or anticipating
significant growth). An institution is considered (A) "undercapitalized" if it
has (i) a total risk-based capital ratio of less than 8%, (ii) a Tier I risk-
based capital ratio of less than 4% or (iii) a leverage ratio of less than 4%
(or 3% in the case of an institution with the highest examination rating and
which is not experiencing or anticipating significant growth); (B)
"significantly undercapitalized" if the institution has (i) a total risk-based
capital ratio of less than 6%, or (ii) a Tier I risk-based capital ratio of less
than 3% or (iii) a leverage ratio of less than 3% and (C) "critically
undercapitalized" if the institution has a ratio of tangible equity to total
assets equal to or less than 2%.

       Interstate Banking. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act"), effective September 29,
1995, permits adequately capitalized bank and savings bank holding companies to
acquire control of banks and savings banks in any state. The states may
specifically permit interstate acquisitions prior to September 29, 1995, by
enacting legislation that provides for such transactions. North Carolina adopted
nationwide reciprocal interstate acquisition legislation in 1994.

       Such interstate acquisitions are subject to certain restrictions. States
may require the bank or savings bank being acquired to have been in existence
for a certain length of time but not in excess of five years. In addition, no
bank or saving bank may acquire more than 10% of the insured deposits in the
United States or more than 30% of the insured deposits in any one state, unless
the state has specifically legislated a higher deposit cap. States are free to
legislate stricter deposit caps.

       The Interstate Banking Act also provides for interstate branching,
effective June 1, 1997, allowing interstate branching in all states, provided
that a particular state has not specifically denied interstate branching by
legislation prior to such time. Unlike interstate acquisitions, a state may deny
interstate branching if it specifically elects to do so by June 1, 1997. States
may choose to allow interstate branching prior to June 1, 1997 by opting-in to a
group of states that permits these transactions. These states generally allow
interstate branching via a merger of an out-of-state bank with an in-state bank,
or on a de novo basis. North Carolina has enacted legislation permitting
branching transactions.

       It is anticipated that the Interstate Banking Act will increase
competition within the markets in which the Bank now operates, although the
extent to which such competition will increase in such markets or the timing of
such increase cannot be predicted.

       Restrictions on Dividends and Other Capital Distributions. A North
Carolina-chartered stock savings bank may not declare or pay a cash dividend on,
or repurchase any of, its capital stock if the effect of such transaction would
be to reduce the net worth of the institution to an amount which is less than
the minimum amount required by applicable federal and state regulations. In
addition, a North Carolina-chartered stock savings bank, for a period of five
years after its conversion from mutual to stock form, must obtain the written
approval from the Administrator before declaring or paying a cash dividend on
its capital stock in an amount in excess of one-half of the greater of (i) the
institution's net income for the most recent fiscal year end, or (ii) the
average of the institution's net income after dividends for the most recent
fiscal year end and not more than two of the immediately preceding fiscal year
ends, if applicable. Under FDIC regulations, stock repurchases may be made by
the savings bank only upon receipt of FDIC approval.

       Also, without the prior written approval of the Administrator, a North
Carolina-chartered stock savings bank, for a period of five years after its
conversion from mutual to stock form, may not repurchase any of its capital
stock. The Administrator will give approval to repurchase only upon a showing
that the proposed repurchase will not adversely affect the safety and soundness
of the institution.

       In addition, the Bank is not permitted to declare or pay a cash dividend
or repurchase any of its capital stock if the effect thereof would be to cause
its net worth to be reduced below the amount required for the liquidation
account established in connection with the Bank's conversion from mutual to
stock ownership.

                                       18
<PAGE>
 
       Other North Carolina Regulation. As a North Carolina-chartered savings
bank, the Bank derives its authority from, and is regulated by, the
Administrator. The Administrator has the right to promulgate rules and
regulations necessary for the supervision and regulation of North Carolina
savings banks under his jurisdiction and for the protection of the public
investing in such institutions. The regulatory authority of the Administrator
includes, but is not limited to: the establishment of reserve requirements; the
regulation of the payment of dividends; the regulation of stock repurchases, the
regulation of incorporators, stockholders, directors, officers and employees;
the establishment of permitted types of withdrawable accounts and types of
contracts for savings programs, loans and investments; and the regulation of the
conduct and management of savings banks, chartering and branching of
institutions, mergers, conversions and conflicts of interest. North Carolina law
requires that the Bank maintain federal deposit insurance as a condition of
doing business.

       The Administrator conducts regular examinations of North
Carolina-chartered savings banks. The purpose of such examinations is to assure
that institutions are being operated in compliance with applicable North
Carolina law and regulations and in a safe and sound manner. These examinations
are usually conducted on a joint basis with the FDIC. In addition, the
Administrator is required to conduct an examination of any institution when he
has good reason to believe that the standing and responsibility of the
institution is of doubtful character or when he otherwise deems it prudent. The
Administrator is empowered to order the revocation of the license of an
institution if he finds that it has violated or is in violation of any North
Carolina law or regulation and that revocation is necessary in order to preserve
the assets of the institution and protect the interests of its depositors. The
Administrator has the power to issue cease and desist orders if any person or
institution is engaging in, or has engaged in, any unsafe or unsound practice or
unfair and discriminatory practice in the conduct of its business or in
violation of any other law, rule or regulation.

       A North Carolina-chartered savings bank must maintain net worth, computed
in accordance with the Administrator's requirements, of 5% of total assets and
liquidity of 10% of total assets, as discussed above. Additionally, a North
Carolina-chartered savings bank is required to maintain general valuation
allowances and specific loss reserves in the same amounts as required by the
FDIC.

       Subject to limitation by the Administrator, North Carolina-chartered
savings banks may make any loan or investment or engage in any activity which is
permitted to federally chartered institutions. However, a North
Carolina-chartered savings bank cannot invest more than 15% of its total assets
in business, commercial, corporate and agricultural loans. In addition to such
lending authority, North Carolina-chartered savings banks are authorized to
invest funds, in excess of loan demand, in certain statutorily permitted
investments, including but not limited to (i) obligations of the United States,
or those guaranteed by it; (ii) obligations of the State of North Carolina;
(iii) bank demand or time deposits; (iv) stock or obligations of the federal
deposit insurance fund or a FHLB; (v) savings accounts of any savings
institution as approved by the board of directors; and (vi) stock or obligations
of any agency of the State of North Carolina or of the United States or of any
corporation doing business in North Carolina whose principal business is to make
education loans.

       North Carolina law provides a procedure by which savings institutions may
consolidate or merge, subject to approval of the Administrator. The approval is
conditioned upon findings by the Administrator that, among other things, such
merger or consolidation will promote the best interests of the members or
stockholders of the merging institutions. North Carolina law also provides for
simultaneous mergers and conversions and for supervisory mergers conducted by
the Administrator.

       Future Requirements. Statutes and regulations are regularly introduced
which contain wide-ranging proposals for altering the structures, regulations
and competitive relationships of financial institutions. It cannot be predicted
whether or what form any proposed statute or regulation will be adopted or the
extent to which the business of the Company and the Bank may be affected by such
statute or regulation.

                                       19
<PAGE>
 
ITEM 2.   PROPERTIES

       At June 30, 1997, First Savings conducted its business from the
headquarters office in Southern Pines, North Carolina, and its four branch
offices in Southern Pines, Pinehurst, Carthage and West End, North Carolina. The
following table sets forth certain information regarding First Savings'
properties as of June 30, 1997. All properties are owned by First Savings, with
the exception of the Pinehurst Office which has been leased for a term of 15
years with an expiration date of 2003. Rentals paid by First Savings under that
lease totalled $9,000 for the fiscal year ended June 30, 1997.

<TABLE> 
<CAPTION> 

                                                                   Net Book
                                                                   Value of
       Address                                                     Property
       -------                                                     --------
<S>                                                                <C> 
Headquarters Office                                                $589,101
  205 S.E. Broad Street
  Southern Pines, North Carolina 28387

Pinecrest Plaza Office                                              930,103
  46 Pinecrest Plaza
  Southern Pines, North Carolina 28387

Pinehurst Office                                                      9,614
  10 Chinquapin Road
  Pinehurst, North Carolina 28374

Carthage Office                                                     145,927
  109 Monroe Street
  Carthage, North Carolina  28327

Seven Lakes Office                                                  128,705
  200 Grant Street
  Seven Lakes Shopping Center
  West End, North Carolina 27376
</TABLE> 

The total net book value of First Savings' furniture, fixtures and equipment on
June 30, 1997 was $147,005. The properties are considered by First Savings'
management to be in good condition.

ITEM 3.   LEGAL PROCEEDINGS

       In the opinion of management, First Savings is not involved in any
pending legal proceedings other than routine, non-material proceedings occurring
in the ordinary course of business.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       No matter was submitted to a vote of the Holding Company's stockholders
during the quarter ended June 30, 1997.

                                       20

<PAGE>
 
                                    PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The high and low stock price for the Company's common stock was $21.75 and
$20.25, respectively, on August 30, 1997. The remaining information required by
this Item is set forth under the section captioned "Capital Stock" on page 40 of
First Savings' 1997 Annual Report which is incorporated herein by reference.

ITEM 6.   SELECTED FINANCIAL DATA

     The information required by this Item is set forth in the table captioned
"Five Year Summary" on the inside cover of First Savings' 1997 Annual Report
which is incorporated herein by reference.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATION

     See the information set forth under Item 1 above and the information set
forth under the sections captioned "Financial Highlights" on page 1 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" on pages 3 through 14 in First Savings' 1997 Annual Report, which
sections are incorporated herein by reference.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements of First Savings and supplementary
data set forth on pages 16 through 37 of First Savings' 1997 Annual Report are
incorporated herein by reference.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     Deloitte & Touche LLP was the Company's independent auditor for the year
ended June 30, 1996. As of August 29, 1996, Dixon, Odom & Co., L.L.P. has been
engaged as the Company's new independent auditor, for the year ending June 30,
1997. The Company's decision to change independent auditors was recommended by
the Audit Committee and approved by the Executive Committee. Deloitte & Touche
LLP's report on the Company's financial statements for the fiscal years ended
June 30, 1996 and 1995 did not contain an adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles. During such years and the subsequent interim period
through August 29, 1996, there were no disagreements between the Company and
Deloitte & Touche LLP on any matter of accounting principles or practice,
financial statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of such auditor, would have caused it to make
reference to the subject of such disagreement in connection with its reports.
During its two most recent fiscal years and the subsequent interim period ended
August 29, 1996, the Company has not consulted Dixon, Odom & Co., L.L.P. with
regard to either: (i) the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion that
might be rendered on the Company's financial statements, or (ii) any matter that
was either the subject of a disagreement or a reportable event.

                                       21
<PAGE>
 
                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Some of the information required by this Item is set forth in the tables on
pages 4 and 5 under the section captioned "Proposal 1 - Election of Directors"
of the Proxy Statement for the 1997 Annual Meeting of Shareholders of First
Savings Bancorp, Inc. to be held on October 30, 1997 (the "Proxy Statement").
Section 16(a) of the Exchange Act requires First Savings' executive officers and
directors, and persons who own more than ten percent of First Savings' common
stock, to file reports of ownership and changes in ownership with the SEC.
Executive officers, directors and greater than ten percent beneficial owners are
required by SEC regulations to furnish First Savings with copies of all Section
16(a) forms they file.

     Based solely on a review of the copies of such forms furnished to First
Savings and written representations from First Savings' executive officers and
directors, First Savings believes that during the fiscal year ended June 30,
1997, the following reports were filed late. On December 13, 1996, John F. Burns
sold 1,300 shares of Common Stock, which sale was not reported on a Form 5 until
August 12, 1997. On May 27, 1997, H. David Bruton sold 3,000 shares and gifted
1,000 shares, which was not reported on a Form 5 until August 12, 1997.

ITEM 11.  EXECUTIVE COMPENSATION AND TRANSACTIONS

     The information required by this Item is set forth under the sections
captioned "Proposal 1 - Election of Directors - Directors' Compensation" and " -
Management Compensation" on pages 6 through 7 and 8 through 11, respectively, of
the Proxy Statement, which sections are incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Following is certain information, as of the Record Date, regarding all
persons or groups, as defined in the Exchange Act, who held of record or who are
known to the Company to own beneficially more than 5% of the Common Stock.

<TABLE> 
<CAPTION> 
                                   Amount and Nature              Percentage
      Name and Address          of Beneficial Ownership         of Class/(1)/
      ----------------          -----------------------         -------------
<S>                             <C>                             <C> 
William E. Samuels, Jr.               190,225/(2)/                   5.07
205 S.E. Broad Street
Southern Pines, NC  28388
</TABLE> 
-----------------------------

(1)  Based upon a total of 3,679,185 shares of the Common Stock outstanding at
     the Record Date. Assumes the exercise of only those stock options included
     with respect to the designated recipient.

(2)  Includes 72,000 shares which could be purchased pursuant to the exercise of
     stock options granted to Mr. Samuels which are vested and nonforfeitable.
     The number stated includes 71,305 allocated and unallocated shares held by
     the First Savings Bank of Moore County, Inc., SSB Employee Stock Ownership
     Plan. Mr. Samuels is a trustee of such Plan and has certain voting and
     investment power over such shares. A total of 4,919 shares have been
     allocated to Mr. Samuels under the Employee Stock Ownership Plan.


     Set forth below is certain information as of the Record Date regarding
beneficial ownership of the Common Stock by each of the members of the Board of
Directors (including nominees for election at the Meeting), certain executive
officers of the Company, and the nominees, directors and all executive officers
of the Company as a group.

                                       22
<PAGE>
 
<TABLE>
<CAPTION>
                                       Amount and
                                        Nature of       Sole Voting/    Shared Voting/     Percentage
                                        Beneficial       Investment       Investment           of
Name of Beneficial Owner              Ownership/(1)/       Power            Power          Class/(2)/
------------------------              --------------       -----            -----          ----------
<S>                                   <C>               <C>             <C>                <C>  
Virginia C. Brandt                         500               500               0               .01%
H. David Bruton                         76,984/(2)/       73,184/(3)/        3,800            2.07%
John F. Burns                          124,335/(4)/       52,530            71,805            3.36%
Felton J. Capel                          1,500               0               1,500             .04%
J. E. Causey                            83,342/(3)/       68,342/(3)/       15,000            2.24%
Henry A. Clayton                        62,416/(3)/       62,416/(3)/          0              1.68%
Frank G. Hardister                      56,668/(3)/       56,668/(3)/          0              1.52%
W. Harrell Johnson                      61,839/(3)/       59,509/(3)/        2,330            1.66%
Joe Montesanti, Jr                      87,628/(3)/       77,528/(3)/       10,100            2.35%
Thomas F. Phillips                      59,212/(3)/       58,061/(3)/        1,151            1.59%
William E. Samuels, Jr                 190,225/(5)/      118,920            71,305            5.07%
Nominees, directors and all          
executive officers of the Company      886,121/(6)/          --                --            21.41%  
as a group (12 persons)
</TABLE>
---------------------------------

/(1)/  Unless otherwise noted, all shares are owned directly of record by the
       named individuals, by their spouses and minor children, or by other
       entities controlled by the named individuals.

/(2)/  Based upon a total of 3,679,185 shares of the Common Stock outstanding at
       the Record Date. Assumes the exercise of only those stock options
       included with respect to the designated recipients.

/(3)/  Includes 45,000 shares which could be purchased pursuant to the exercise
       of stock options granted to the named beneficial owner.

/(4)/  Includes 24,400 shares which could be purchased pursuant to the exercise
       of stock options granted to Mr. Burns which are vested and
       nonforfeitable. The number stated includes 71,305 allocated and
       unallocated shares held by the First Savings Bank of Moore County, Inc.,
       SSB Employee Stock Ownership Plan. Mr. Burns is a trustee of such Plan
       and has certain voting and investment power over such shares. A total of
       3,758 shares have been allocated to Mr. Burns under the Employee Stock
       Ownership Plan.

/(5)/  Includes 72,000 shares which could be purchased pursuant to the exercise
       of stock options granted to Mr. Samuels which are vested and
       nonforfeitable. The number stated includes 71,305 allocated and
       unallocated shares held by the First Savings Bank of Moore County, Inc.,
       SSB Employee Stock Ownership Plan. Mr. Samuels is a trustee of such Plan
       and has certain voting and investment power over such shares. A total of
       4,919 shares have been allocated to Mr. Samuels under the Employee Stock
       Ownership Plan.

/(6)/  Includes 420,400 shares which could be purchased pursuant to the exercise
       of stock options granted to directors and executive officers. This amount
       does not include options to purchase 20,600 shares issued in the
       aggregate to executive officers which are not yet vested and which will
       only become vested upon death, disability, satisfaction of requirements
       for retirement and subsequent retirement, or satisfaction of requirements
       with respect to length of employment. The number stated includes 71,305
       allocated and unallocated shares held by the First Savings Bank of Moore
       County, Inc., SSB Employee Stock Ownership Plan. William E. Samuels, Jr.,
       a director and an executive officer, and John F. Burns, an executive
       officer, are trustees of such Plan and have certain voting and investment
       power over such shares.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       There have been no reportable transactions during the two most recent
fiscal years nor are any reportable transactions proposed as of the date of this
Form 10-K. See also the section captioned "Proposal 1 - Election of Directors -
Certain Indebtedness and Transactions of Management" on page 13 of the Proxy
Statement, which section is incorporated herein by reference.

                                       23
<PAGE>
 
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

14(a)1.   Consolidated Financial Statements (contained in First Savings' 1997
          Annual Report attached hereto as Exhibit (13) and incorporated herein
          by reference)

          (a)  Independent Auditors' Report

          (b)  Consolidated Statements of Financial Condition as of June 30,
               1997 and 1996

          (c)  Consolidated Statements of Income for the Years Ended June 30,
               1997, 1996 and 1995

          (d)  Consolidated Statements of Shareholders' Equity for the Years
               Ended June 30, 1997, 1996 and 1995

          (e)  Consolidated Statements of Cash Flows for the Years Ended June
               30, 1997, 1996 and 1995

          (f)  Notes to Consolidated Financial Statements

14(a)2.   Financial Statement Schedules

          All schedules have been omitted as the required information is either
          inapplicable or included in the Notes to Consolidated Financial
          Statements.

14(a)3.   Exhibits

          Exhibit (3)(i)           Certificate of Incorporation, incorporated
                                   herein by reference to Exhibit (2), Appendix
                                   C, to the Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

          Exhibit (3)(ii)          Bylaws, incorporated herein by reference to
                                   Exhibit (2), Appendix D, to the Registration
                                   Statement on Form 8-A, Registration No. 0-27-
                                   098, dated October 26, 1995

          Exhibit (4)              Specimen Stock Certificate, incorporated
                                   herein by reference to Exhibit (5) to the
                                   Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

          Exhibit (10)(i)          First Savings Bank of Moore County, Inc., SSB
                                   Pinehurst Office Lease, incorporated herein
                                   by reference to Exhibit (10)(i) to the
                                   Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

          Exhibit (10)(ii)(a)      Employee Stock Option Plan of First Savings
                                   Bank of Moore County, Inc., SSB, incorporated
                                   herein by reference to Exhibit (10)(ii)(a) to
                                   the Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

          Exhibit (10)(ii)(b)      Director Stock Option Plan of First Savings
                                   Bank of Moore County, Inc., SSB, incorporated
                                   herein by reference to Exhibit (10)(ii)(b) to
                                   the Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

                                       24
<PAGE>
 
          Exhibit (10)(ii)(c)      Management Recognition Plan of First Savings
                                   Bank of Moore County, Inc., SSB, incorporated
                                   herein by reference to Exhibit (10)(ii)(c) to
                                   the Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

          Exhibit (10)(ii)(d)      Bonus Compensation Plan of First Savings Bank
                                   of Moore County, Inc., SSB, incorporated
                                   herein by reference to Exhibit (10)(ii)(d) to
                                   the Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

          Exhibit (10)(ii)(e)      Employment Agreement between First Savings
                                   Bank of Moore County, Inc., SSB and William
                                   E. Samuels, Jr., incorporated herein by
                                   reference to Exhibit (10)(ii)(e) to the
                                   Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

          Exhibit (10)(ii)(f)      Employment Agreement between First Savings
                                   Bank of Moore County, Inc., SSB and John F.
                                   Burns, incorporated herein by reference to
                                   Exhibit (10)(ii)(f) to the Registration
                                   Statement on Form 8-A, Registration No. 0-27-
                                   098, dated October 26, 1995

          Exhibit (11)             Statement Regarding Computation of Per Share
                                   Earnings

          Exhibit (12)             Statement Regarding Computation of Ratios

          Exhibit (13)             1997 Annual Report to Security Holders

          Exhibit (16)             Deloitte & Touche LLP Letter of Concurrence,
                                   incorporated herein by reference to Exhibit
                                   16 to the Registrant's Form 10-K for the year
                                   ended June 30, 1997

          Exhibit (21)             Subsidiaries of the Registrant, incorporated
                                   herein by reference to Exhibit (21) to the
                                   Registration Statement on Form 8-A,
                                   Registration No. 0-27-098, dated October 26,
                                   1995

          Exhibit (27)             Financial Data Schedule

14(b)     First Savings filed no reports on Form 8-K during the last quarter of
          the fiscal year ended June 30, 1997.

                                       25
<PAGE>
 
                                  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 SAVINGS BANCORP, INC.
                                  
                                  
Date:  September 26, 1997            By:   /s/ William E. Samuels, Jr.
                                           -------------------------------------
                                           William E. Samuels, Jr.
                                           President and Chief Executive Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

<TABLE> 
<CAPTION> 
Signature                                      Title                                  Date
---------                                      -----                                  ----
<S>                                    <C>                                      <C> 
/s/ William E. Samuels, Jr.            President, Chief Executive               September 26, 1997
--------------------------------       Officer and Director
William E. Samuels, Jr.                            

/s/ John F. Burns                      Executive Vice President,                September 26, 1997    
--------------------------------       Principal Financial Officer 
John F. Burns                          and Director     

/s/ Timothy S. Maples                  Vice President, Controller and           September 26, 1997
--------------------------------       Principal Accounting Officer
Timothy S. Maples                        

/s/ H. David Bruton                    Director                                 September 26, 1997
--------------------------------
H. David Bruton

/s/ J. E. Causey                       Director                                 September 26, 1997
--------------------------------
J. E. Causey

/s/ Henry A. Clayton                   Director                                 September 26, 1997
--------------------------------
Henry A. Clayton

/s/ Frank G. Hardister                 Director                                 September 26, 1997
--------------------------------
Frank G. Hardister

/s/ W. Harrell Johnson                 Director                                 September 26, 1997
--------------------------------
W. Harrell Johnson

/s/ Joe Montesanti, Jr.                Director                                 September 26, 1997
--------------------------------
Joe Montesanti, Jr.

/s/ Thomas F. Phillips                 Director                                 September 26, 1997
--------------------------------
Thomas F. Phillips
</TABLE> 

                                       26
<PAGE>
 
                               INDEX TO EXHIBITS



<TABLE> 
<CAPTION> 
Exhibit No.                         Description
-----------                         -----------
<S>                <C> 
(11)               Statement Regarding Computation of Per Share Earnings

(12)               Statement Regarding Computation of Ratios

(13)               1997 Annual Report to Security Holders

(27)               Financial Data Schedule
</TABLE> 

                                       27