First Bancorp Annual Report 2007

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FY2007 Annual Report · First Bancorp

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FIR ST B AN CO RP

341 North Main Street
Post Office Box 508
Troy, NC 27371-0508
www.FirstBancorp.com

First Bancorp 2007 Annual Report

FIRST B ANCORP 2007 ANNUAL REPORT

First Bancorp Financial Highlights

($ in thousands except share data)
Change
2006
2005 to 2007
2007
Years Ended December 31,

2006

S E L E C T E D I N C O M E S T A T E M E N T D A T A
Net interest income $ 79,284 74,536 68,591 6.4%
Provision for loan losses 5,217 4,923 3,040 6.0%
Noninterest income 18,473 14,310 15,004 29.1%
Noninterest expenses 57,580 53,198 47,636 8.2%
Income taxes 13,150 11,423 16,829 15.1%
Net income 21,810 19,302 16,090 13.0%

P E R S H A R E D A T A
Earnings – basic $ 1.52 1.35 1.14 12.6%
Earnings – diluted 1.51 1.34 1.12 12.7%
Cash dividends declared 0.76 0.74 0.70 2.7%
Market Price:
High 26.72 23.90 27.88 11.8%
Low 16.40 19.47 19.32 -15.8%
Close 18.89 21.84 20.16 -13.5%
Book value 12.11 11.34 10.94 6.8%

SELECTED BALANCE SHEET DATA
(at year end)
Assets $2,317,249 2,136,624 1,801,050 8.5%
Loans 1,894,295 1,740,396 1,482,611 8.8%
Deposits 1,838,277 1,695,679 1,494,577 8.4%
Shareholders’ equity 174,070 162,705 155,728 7.0%

R A T I O S
Return on average assets 1.02% 1.00% 0.94% 2 bps
Return on average equity 12.77% 11.83% 10.39% 94 bps
Net charge-offs to average loans 0.16% 0.11% 0.14% 5 bps

N O N F I N A N C I A L D A T A
Shares outstanding 14,377,981 14,352,884 14,229,148
Number of branches 70 68 61
Number of employees – full/part time 574/81 579/82 540/76

Change
2005
to 2006

8.7%
61.9%
-4.6%
11.7%
-32.1%
20.0%

18.4%
19.6%
5.7%

-14.3%
0.8%
8.3%
3.7%

18.6%
17.4%
13.5%
4.5%

6 bps
144 bps
-3 bps

First Bancorp Table of Contents

President’s Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Corporate Profile/Service Area Map . . . . . . . . . . . . . . . . . .8
Local Advisory Boards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

First Bancorp and Subsidiaries . . . . . . . . . . . . . . . . . . . . . 14
Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . 20
Shareholder Information . . . . . . . . . . . . . . . . . Inside Back Cover

Dear Friends and Shareholders: I write to you having just completed my first year as

First Bancorp’s Chief Executive Officer. If you follow banks, you know that 2007 was an

interesting year for our industry and that 2008 has, thus far, been even more interesting.

We began 2007 with the prime rate of interest at its highest level in six years as the Federal

Reserve guarded against inflation. However, as the year progressed, an economic slowdown

and the revelation of questionable mortgage underwriting standards at some banks and

mortgage companies combined to create an uncertain environment, particularly in the

financial institution industry. In response to this uncertainty, the Federal Reserve began to

aggressively reduce interest rates.

At First Bancorp, we have consistently followed what we believe are sound credit

underwriting practices, and we also maintain a conservative investment portfolio strategy.

Thus, we have not been directly impacted by what is referred to as “sub-prime” loan

losses. Although we are not immune to general economic conditions, we believe that our

conservative philosophy will help protect us from the types and sizes of losses experienced

by others in the industry.

Because we have been relatively unaffected by the types of issues generating so much

press recently, it has allowed us to continue to focus on providing the best in community

banking to our customers, and our financial performance in 2007 reflects those efforts.

In 2007 we earned $21.8 million, or $1.51 per diluted share. This was a 13% increase

from the $19.3 million, or $1.34 per diluted share we earned in 2006. In 2006, we had

an unusual loss of $1.1 million, or $0.08 per diluted share, which impacts the year to year

comparison somewhat. We were very successful in gaining additional business in 2007.

For the year, total loans increased by $154 million, or 9%, while deposits increased by

$143 million, or 8%.

Our net interest margin (tax-equivalent net interest income divided by average earning

assets) was under constant pressure in 2007, with a flat yield curve creating margin

pressure through most of the year, and the immediate impact of cuts in interest rates

creating margin pressure late in the year. In light of those challenges, I am pleased with the

4.00% net interest margin we achieved in 2007, which was just 18 basis points lower than

it was in 2006. Because most of our revenue is represented by net interest income, we

carefully monitor and manage our interest spreads.

As I discussed previously, probably the most important area of focus by analysts is

asset quality. Asset quality concerns are what have caused so many problems for the

banking industry over the past year. In addition to the “sub-prime” losses that we have

seen mostly at much larger banks, we have also recently observed asset quality problems

at several community banks in the region. We devote substantial time and resources to

Jerry L. Ocheltree, President and CEO, First Bancorp and First Bank

Jerry L. Ocheltree, President and CEO, First Bancorp and First Bank, at left,
and David L. Burns, Chairman, First Bancorp

ensure that we minimize the risks associated with making loans. We have

bilingual, and the branches reflect the Hispanic culture. We

conduct their business and that our employees have enough

an experienced team of senior lenders who review and approve each

want to make it as easy and comfortable as possible for

space to best serve their customers. We continually evaluate

other’s large loans, and we have an ongoing training program for all of our

everyone to experience First Bank’s Banking One-on-One

our facilities and make upgrades on a proactive basis. In

loan officers. We believe these efforts have helped insulate us from the

philosophy. We are fortunate to have Ricardo Romero leading

that regard, in 2007 we constructed new branches in both

types and extent of losses being experienced by other banks. For the12th

our effort. Ricardo has worked hard to make the vision of

Kannapolis, North Carolina and Radford, Virginia. I know that

consecutive year, First Bancorp’s charge-off ratio (net charge-offs divided

Primer Banco a reality and in raising the awareness of the

our employees and customers in those locations are proud

by average loans) was less than 0.20%. And we compare very favorably

Hispanic community of First Bank’s initiative. Ricardo has also

of their new branches. We also completed major additions to

to peer averages for almost all asset quality ratios. Sound asset quality is

established a local advisory board dedicated to this initiative.

our Lumberton and Troy-Montgomery Square branches and

something we are proud of and will continue to emphasize.

Although I view 2007 as a successful year from a financial perspective,

the performance of our company’s stock was mixed. Our stock price began

2007 at $21.84 per share and finished the year at $18.89, a 14% decrease

for the year. With the increase in our company’s earnings and otherwise

stable performance, it appears that our stock’s decline was more associated

with the banking sector falling out of favor with investors. While the stock

price decline is disappointing, First Bancorp stock performed far better than

that of the average bank stock in 2007. When you factor in the return our

shareholders received in the form of cash dividends, the total return for

First Bancorp stock in 2007 was a 10% decrease. This compares to a 27%

decrease experienced by a peer group of all banks in the nation.

Now I would like to discuss some of the accomplishments for 2007, as

well as some things we have planned for the upcoming year.

We entered 2007 having made significant investments in our expansion

along the southeastern North Carolina coast. In the fourth quarter of 2006,

we opened four full service branches in this area, with two branches

in Wilmington, one in Shallotte and one in Leland. We continued this

expansion in February 2007 with the opening of a full service branch in

Ocean Isle Beach. This coastal region continues to be one of the highest

Bienvenidos amigos!

Our expansion initiatives

in 2007 were not limited to

new branches. In July 2007,

I was pleased to inform you

that we had reached an

agreement to acquire Great

Pee Dee Bancorp, Inc. and

its banking subsidiary, Sentry

Bank & Trust, which has

approximately $220 million

in total assets. Sentry Bank &

Trust has faithfully served the

good folks of Cheraw, South

Carolina since 1935 and has

more recently expanded to

Florence, South Carolina. Both

have plans to construct a new

branch office in Mt. Pleasant in

the spring. We also expect to

begin expanding our Harmony

branch later in 2008. We know

that the need to replace or

expand our buildings means

we are growing our business,

and we are pleased to make

these investments.

Another investment we

started late in 2006 that we

continue to implement was

a major internal project to

identify processes that could

be improved, either from

an efficiency standpoint or

John Long, President, Great Pee Dee Bancorp and Sentry Bank & Trust,
at left, and James Crawford III, Chairman, Great Pee Dee Bancorp

Cheraw and Florence are in counties that are contiguous to

a better customer-experience standpoint. Indeed, we found

ones we already serve. Not only is this merger a natural fit for

several processes where we thought we could work smarter

us geographically, but it is also a great fit culturally. John Long,

and more efficiently, with either no change in customer

growth markets in the three-state area in which we operate. With many

the President of Sentry Bank, and the rest of his team treat

service or an improvement in customer service. As a result of

of the start-up expenses associated with new branches behind us, these

their customers with the same high degree of personalized

this project, we reassigned certain personnel to new functions

coastal branches are now a positive contributor to earnings.

care that we emphasize at First Bank. I have enjoyed getting

and slowed new hiring in certain areas of our bank. Due to

And speaking of high growth, the fastest growing segment of our

to know the staff at Great Pee Dee, including their Chairman,

these initiatives, despite adding two new full service branches

market’s population is the Hispanic population, many of whom are not

Jim Crawford, who is scheduled to join our board of directors

and growing our company by over $180 million in assets, our

currently using a bank. In 2007, we opened two uniquely Hispanic branches

when the transaction is complete. Welcome friends!

number of full time equivalent employees actually declined

under the trade name “Primer Banco,” which means First Bank in Spanish.

We now have 71 bank branches. We believe it is important

by six in 2007 (via natural attrition) with what we believe is

The staff in these two branches, located in Asheboro and Candor, are

that our customers have an attractive branch in which to

the same or improved level of customer service. We monitor

various overhead ratios, which confirm that we have become

our customers to extend their banking day by providing

make life easier for our business customers, while also

And we will also continue to provide the best in

a more efficient company.

same day credit for deposits until 5 pm.

generating fee income for the bank.

community banking in 2008. With the possibility that some

In 2007, we also introduced several new products

Also in 2007, we partnered with an outside merchant

And just recently, we announced that we had joined

of our competitors are currently distracted with other

to improve our customers’ banking experience. First,

credit card company who provides us with the ability

several new ATM networks with a total of almost 50,000

matters, we believe there is an opportunity right now in the

we began by offering remote capture to our business

to offer business customers state-of-the-art credit-card

ATMs, all of which can be used by First Bank customers for

marketplace to gain new market share by continuing to do

customers. Remote capture is a relatively new technology

products and services, including wireless credit card

free. We know our customers are happy that they can access

what we have always done best – Banking One-on-One.

that provides business customers with a method to

terminals, web-based reporting, and the ability to offer

their money almost anywhere in the country without having

Before I conclude, I would like to thank Jimmie Garner,

electronically transmit checks received from customers into

gift cards. The company we partnered with also has a

to pay a surcharge fee.

our retired CEO, for his continued service to our company.

their bank account without having to visit a branch. This is

dedicated sales team covering our market territory that

In 2008, we will continue with our strategic expansion

Jimmie served as a consultant to the bank in 2007 following

an especially valuable service to our customers who are not

actively assists us in increasing the number of customers

initiatives. We currently have a full service branch planned for

his retirement from full time employment in 2006 after

in close proximity to one of our branches, and it also allows

that we provide this service. These credit card services

Fort Chiswell, Virginia, which will likely be open by the time

37 years with First Bank. During the year, Jimmie served

First Bancorp Performance

2,317

2,137

1,801

0.70

0.66

0.63

0.76

0.74

1,639

1,476

1.40

1.35

1.34

1.12

03 04 05 06

T O T A L A S S E T S
Dollars in millions

D I V I D E N D S P E R S H A R E
Dollars

E A R N I N G S P E R S H A R E
Dollars

you read this letter. Fort Chiswell is located at the intersection

as a spokesman for our company to the public and to our

of Interstates 77 & 81 and our branch there will be just a

employees at various events and functions, and I leaned on

few miles away from our branch in Wytheville, where we

him for advice as I worked hard to keep us on the path he

have had great success. We are also evaluating several new

set. Jimmie has graciously agreed to continue to serve on our

markets for the possibility of opening branches.

Community Service Advisory Board. The leadership Jimmie

Also planned for 2008 is the implementation of branch

provided to this company will endure for many years to

capture. Branch capture uses similar technology as remote

come, and we can’t thank him enough for it.

capture and will allow our branches to electronically

Accompanying the mailing of this annual report is our proxy

transmit their daily teller work to the home office. This will

statement and the notice of our Annual Shareholders Meeting,

1.51

make us more efficient by reducing the expense we incur

which is being held at the James H. Garner Conference Center

in having to physically pick up each branch’s work. This is

at 3:00 PM on May 15, 2008. There is important information

especially important as we continue to expand the market

regarding your company contained within the proxy statement,

areas we serve.

and I encourage you to read it closely. On the back of the proxy

Already in 2008, we have added the ability to offer our

statement is a location map for your convenience. I invite you

customers government-sponsored FHA and VA loans. These

to attend this meeting, which will give you an opportunity

types of loans require a great deal of expertise, and we have

to meet the management and board of directors of your

recently made additions to our mortgage loan staff with the

company, as well as the opportunity to personally welcome

required skills. We felt the addition of these products was

our newest director, Jim Crawford, to First Bancorp.

especially important given the growth in military personnel

Your support is appreciated, and I welcome your comments

that we expect in our market areas surrounding Fort Bragg as

and suggestions.

a result of the Base Realignment and Closure (BRAC) actions

Sincerely,

approved by Congress in November 2005. While some

military bases in other states are closing, the number of

military personnel at Fort Bragg is expected to increase as a

Jerry L. Ocheltree

result of BRAC. We are eager to serve their banking needs.

February 26, 2008

L to R, Dennis A. Wicker, Virginia C. Thomasson, Frederick L. Taylor II, James G. Hudson Jr., Jack D. Briggs, Mary Clara Capel,
A. Jordan Washburn, John F. Burns, R. Walton Brown, John C. Willis, Jerry L. Ocheltree, Goldie H. Wallace, David L. Burns,
Thomas F. Phillips, and George R. Perkins Jr.

First Bancorp Board of Directors

Jack D. Briggs

James G. Hudson Jr.

Virginia C. Thomasson, CPA

President of J. Briggs, Inc., Davidson Funeral Home,

Executive Vice President

Chairman, Montgomery Data

Inc., Carter Funeral Home, Inc. and Mountain View of

First Bank

Services, Inc.

Denton, Inc., and Secretary, Piedmont Funeral Home

Funeral director and retail furniture merchant

Jerry L. Ocheltree

President and CEO

Partner, Holden, Thomasson &
Longfellow, P.C.

R. Walton Brown

Executive Vice President

of First Bank

David L. Burns

Chairman, First Bancorp

President, Z. V. Pate, Inc.

Holding company for agricultural, timber,
restaurant and retail sales operations

John F. Burns

Executive Vice President
First Bancorp and First Bank

Mary Clara Capel

Director of Administration, Capel, Inc.

Rug manufacturer, importer, exporter

First Bancorp and First Bank

Goldie H. Wallace

George R. Perkins Jr.

Chairman and CEO

Investor

A. Jordan Washburn

Frontier Spinning Mills, LLC

Chairman, First Bank Insurance

Thomas F. Phillips

Chairman, First Bank

Owner, Phillips Ford

Frederick L. Taylor II

President

Troy Lumber Company

Services, Inc.

Retired

Dennis A. Wicker

Attorney, Helms Mulliss & Wicker, PLLC

John C. Willis

Investor

First Bancorp

First Bank

Executive Officers

Regional Executive Officers

Area Executive Officers

H. Dean Martin

Senior Vice President

Robert T. Patterson

Senior Vice President

Frances H. Cagle
Senior Vice President

Joseph F. Youngblood

Senior Vice President

Susie C. Jones

Vice President

Glenn Batten

Senior Vice President

Michael W. Vinson

Senior Vice President

Janet D. Abernethy

Senior Vice President

Richard E. Clayton

Senior Vice President

David C. Foushee

Senior Vice President

Roger S. Gentry Jr.
Senior Vice President

Jimmy G. Grubbs

Senior Vice President

Michael L. Hardin

Senior Vice President

J. Bradford Mickle

Senior Vice President

Jimmy R. Preslar

Senior Vice President

Stamey R. Taylor

Senior Vice President

Charles R. Vance III

Senior Vice President

Jerry L. Ocheltree

President and CEO

First Bancorp and First Bank

Anna G. Hollers

Chief Operating Officer

Executive Vice President

Secretary

Teresa C. Nixon

Chief Lending Officer
Executive Vice President

David G. Grigg

President

Montgomery Data Services, Inc.

R. Walton Brown
Executive Vice President

John F. Burns

Executive Vice President

Eric P. Credle

Chief Financial Officer

Executive Vice President

Timothy S. Maples

Senior Vice President

Assistant Secretary

Lee C. McLaurin

Senior Vice President

Controller

Corporate Profile Service Area

First Bancorp is a bank holding
company based in Troy, North Carolina.
Its principal activity is the ownership
and operation of First Bank, a state-
chartered community bank that operates
71 branch offices, with 63 branches
operating in a 21-county market area in
central and southeastern North Carolina;
three branches in South Carolina; and
five branches and a loan production
office in Virginia, where First Bank does
business as First Bank of Virginia.

First Bank Insurance Services, Inc.,

a provider of property and casualty
insurance coverage, is a subsidiary
of First Bank. Montgomery Data
Services, Inc. is a non-bank
subsidiary which provides
electronic data processing
services.

Map Legend

First Bank Main Office

First Bank Branches

First Bank Branches operating
as First Bank of Virginia

Loan Production Office

Sentry Bank & Trust Branches

VIRGINIA

NORTH CAROLINA

Cheraw

CHESTERFIELD

SOUTH CAROLINA

COLUMBUS

Florence

FLORENCE

Ocean Isle
Beach

First Bank Local Advisory Boards

Albemarle & Richfield

Broadway

Bradford Barringer
Richard Clayton Sr.
Tony Dennis
Ruby Fraley
William Harvey
Angela Krol
Tony Lowder
Dean Martin
David Mullis
G. T. Rabe Jr.

Angier

Bill Adams
James Burgin
Donald Gregory
Dan Honeycutt
Thomas Stancil

Apex

William Gordon
Jack Hunter
Karl Lack
Milton Rogers Jr.

Asheboro

Brooks Hedrick
Kennan Hill
Gilbert Ingold
Nancy Stover
Charles Swiers
Billie Wilson
Bobby Wright

Biscoe & Candor

Ralph Bostic
Kristy Garner
Larry Preslar
Tim Privett
Vance Richardson
Harold VanDerveer Jr.

Donald Andrews Jr.
Cecil Cameron
Stewart Forbes
Henry Green
Donny Hunter
Frank McDonald
Katherine Taylor
Gary Thomas

Brunswick County
Dave Kesterson
Brad Mickle
William Smith

Denton
Stan Bingham
Jack Briggs
Delbert Cranford
Leroy Hinesley
Peggy (Dixie) Kearns
Wanona Smith

Dillon County, SC

Carroll Allen
Gerald Arnette Jr.
Walton Brown
McKethan Gaddy
Lafon Legette Jr.
Douglas Lynn
Mendel Smith
Lewis Stepp
Charles Vance III

Duplin County

(serves Kenansville, Rose Hill
and Wallace)

Glenn Batten
Dennis Beasley
Alice Brown
Ronald Collier
Robert Frederick II
Jonathan Fussell
Jimmy Jackson
Ross Powell
Lawrence Rouse
Joseph Wallace
Kevin Wilson

Fairmont

James Capps
William Greene Jr.
Hal Herring Jr.
Frank McCree
Ronald Nye
Isiah Taylor
Vayda Taylor

Harmony

L. A. Anderson Jr.
Norman Dudley
Jo Ellen Fox
Robert Moore
Teresa Sherrow

High Point & Archdale

Dwight Bumgarner
Caroline Burnett
Michael Byrd
Steve Foley
Jack Hendrix
Ryan Hoskins
Warren Lackey
Clayton Miller Jr.
Jerry Ocheltree
Walter Stanley
Jordan Washburn
Joseph Youngblood

Kannapolis

Dallas Campbell
Michael Hurlbert
Rosena Johnson
Michael Lowder
Billie Overcash
Wayne Petrea
Melvin Rape

Lillington &
Anderson Creek
David Avrette
Edgar Bain
James Blaylock
Charles Griffin
Reginald Kelly
Harold Lassiter
Edgar Smith Jr.
Stamey Taylor
Donald Ray Turlington
Charles Wellons II
Ray Womble Jr.
Robert Womble
Thomas Womble
Thomas Wood

Locust & Polkton

Betty Eskridge
Gerald Friedman
Dakeita Vanderburg-Horton
Timothy Huie
Leon Huneycutt
Richard Jones
Jerry Jordan
Adrian Marbry
Robert McCoy
Peggy Morgan
Ronald Turner

North Moore

(serves Bennett, Carthage,
Robbins, Seagrove and
Seven Lakes)

Tammy Barnett
Stan Beck
Christopher Brady
Frances Cagle
Wyanne Caviness
John Frye Sr.
James Garner
John Garner
Robin Garner
Rebecca Gilmore
Kenneth Hill
Phyllis Lawrence
Bernard Routh
Arnold Swindell

Pembroke
Timothy Brooks
Ronald Brown
Michael Hardin
Diane Jones
Cynthia Locklear
Eddie Mac Locklear
William Oxendine

Pittsboro
William Arthurs
Debbie Brown
Joe Burke
Faye Dark
David Foushee
Linda Harris
James Nordan
Hazel Puckett
Ralph Riddle
Rouse Wilson

Lumberton

Herman Chavis
Michael Hardin
Edward Hickman
Staley Jackson
Nancy Jessup
Susie Jones
Lacy Koonce Jr.
Evelyn Price
Bhagirath Shah

Mayodan
LeGrand Bennett Jr.
Claude Hopper
Lonnie Sechrist
Dennis Sparks
Steve Wall

Mooresville
Janet Abernethy
Clyde Howard
Dean Stein
Paul Taylor
Kevin Vanhoy
Betsy Yarborough

Mt. Pleasant
Zeba Barringer
Richard Clayton Sr.
Max Cruse
Doris Furr
Lee Kluttz
Rick Lambert
David Lockhart
David Preddy
Kay Scott

New Hanover County
Marcie Bibb
Dawn Carter
Donna Gurganus
Gerald Kinlaw
Brad Mickle
Donnie Norris
Matt Scharf
William Stanfield III
Shelly Wagner

First Bank Local Advisory Boards

First Bank of Virginia

Rockingham
Georgia Cagle
Jim Cox
Juanita Cox
Bryan Leggett
Jimmy Maske
Jesse Spencer

Salisbury

Janet Abernethy
Bradley Bost
Donald Bost Sr.
Millie Cress
William Furr
Darrell Hancock
William Mason
John Porter
Rachel Ross
Harry Welch Jr.
Jane Welch

Sanford
Rex Brown
David Foushee
Teresa Nixon
Donald Oldham
Robert Patterson
George Perkins Jr.
Ronald Perkinson
Hal Perry
Angela Poole
Lloyd Tice Jr.
James Wicker
Clement Williams
Jeffrey Yow

St. Pauls
Tim Ferguson
Claude Fulghum Jr.
Fred Gibson Jr.
Teresa Kashner
John Odum
Lloyd Williams

Thomasville

Thomas Ballard
Josephine Citrin
Henry Darr
James Hudson Jr.
John Hunnicutt
Stuart Kennedy
Esmail Nikouyeh
Milton Riley Jr.
Michael Sanders
William Slate
John Todd

Troy

David Britt
Hilton Cochran Sr.
Winston Dozier Jr.
Rick Harris
Jerry Holder
Rosemary Huntley
William Maness
Bobby Morris
Jimmy Preslar

Scotland County
(serves Laurel Hill,
Laurinburg and Maxton)

Clifton Buie
David Burns
Paul Davis
Ronald Gibson
T. G. Gibson III
Betty Hasty
R. M. Henderson
Hyder Massey Jr.
Charles Nichols
Jimmy Preslar
Frank Roofe III
Michael Vinson
Mark Ward
Andrew Williamson Jr.

South Moore

(serves Aberdeen,
Pinebluff, Pinehurst,
Southern Pines and Vass)

Allan Beck
Hugh Bingham
Charles Boyer
E. E. Brafford
John Burns
Felton Capel
Henry Clayton
Lori Foster
Bob Friesen
Philip Fulghum
James Garner
Roger Gentry
Stewart McFadyen
Michael McMillan
Charles McWilliams
Tim Myrick
Malcolm Owings
Robert Page III
George Parker
William Samuels
Robert Springer
Edward Taws Jr.
Lynette Williams

Community Service
Advisory Board

Primer Banco
Advisory Board

David Bruton
Heriberto Corral-Lopez
Victor Dau
Andres Hernandez
Jorge Antonio Mendez-Contreras
Jimmy Preslar
Daniel Reza
Irma Robledo
Isai Robledo
Luis Rodriguez
Ricardo Romero
Matthew Rothbeind
Judith Singleton
Joe Youngblood

Felton Capel, Chairman
Janet Abernethy
Joe Arundell
Ralph Bostic
David Bruton
Jesse Capel
Richard Clayton Sr.
David Foushee
James Garner
Roger Gentry
Jim Grubbs
Michael Hardin
Andres Hernandez
Wynne’e Roxanne Horton
Travis Jackson
Diane Jones
Louise Mack
Brad Mickle
Ann Moffitt
Teresa Nixon
Jerry Ocheltree
Jimmy Preslar
William Roberts
Kate Rumley
Stamey Taylor
Charles Vance III
Chanaka Yatawara

Local Advisory
Boards

Abingdon

Janet Berry
John Carrico
Susan Forkner
Jim Grubbs
Andrew Hargroves
J. W. Kiser

Radford

Darryl Gillespie
Jeffrey Irby
Jeffrey Price

Wytheville

David Carpenter
Robert Fowlkes Jr.
Jim Grubbs
George Johnstone Sr.
Stanly King Jr.
Lanny Lindamood
Thomas Lovelace
Jerry Ocheltree
Barbara Shannon
Amanda Brewer-Smith
Phyl Snapp
Charles Stanley III

First Bancorp & Subsidiaries

Financial Report

Subsidiaries of First Bancorp

Subsidiary of First Bank

First Bancorp
341 N. Main Street
Troy, NC 27371-0508

First Bank
341 North Main Street
Troy, NC 27371-0508

David L. Burns
Chairman

Thomas F. Phillips

Chairman

Jerry L. Ocheltree

President and Chief
Executive Officer

Jerry L. Ocheltree

President and Chief
Executive Officer

Montgomery Data Services, Inc.
355 Bilhen Street
Troy, NC 27371-0627

Virginia C. Thomasson

Chairman
David G. Grigg
President

Fred M. Thompson
Senior Vice President
Phyllis A. Stevenson

Assistant Vice President

Bradley Ferree

IT Network Officer

First Bank Insurance Services, Inc.
A. Jordan Washburn

Chairman

Jerry L. Ocheltree

President

580 South West Broad Street
Southern Pines, NC 28388

Stuart F. Fields
Vice President

1030 Albemarle Road
Troy, NC 27371

Jeffrey A. Morris
Vice President
Bobby R. Morris

Assistant Vice President

The following is a brief summary of First Bancorp’s

The impact of the growth in loans and deposits

financial results for 2007. The final paragraph on

on the Company’s net interest income was partially

page 16 contains information on where to find a

offset by a decline in the Company’s net interest

more detailed analysis.

margin (tax-equivalent net interest income divided

First Bancorp’s net income for 2007 was $21.8

by average earning assets). The Company’s net

million, or $1.51 per diluted share, a 13% increase

interest margin in 2007 was 4.00% compared to

over the $19.3 million, or $1.34 per diluted share,

4.18% in 2006. For most of 2007, the Company’s

earned in 2006. Results for 2006 include the

net interest margin experienced pressure as a

write-off loss of a merchant credit card receivable

result of the flat interest rate yield curve that

amounting to $1.9 million which had an after-tax

was prevailing in the marketplace. The Company

impact of $1.1 million, or $0.08 per diluted share,

was also negatively impacted during that period

on the Company’s earnings for 2006. The increase

by customers shifting their funds from low cost

in earnings in 2007 was also a result of higher net

deposits to higher cost deposits as rates rose.

interest income and noninterest income, caused by

In late 2007, the Company’s net interest margin

growth in the Company’s customer base, which was

was negatively impacted by the Federal Reserve

partially offset by higher operating expenses that

lowering interest rates by a total of 100 basis

are also associated with the Company’s growth.

points during the last four months of the year.

The Company experienced strong balance sheet

When interest rates are lowered, the Company’s

growth in 2007. Total assets at December 31,

net interest margin declines, at least temporarily,

2007 amounted to $2.32 billion, 8.5% higher than

as most of the Company’s adjustable rate loans

a year earlier. Total loans at December 31, 2007

reprice downward immediately, while rates on the

amounted to $1.89 billion, an increase of $154

Company’s customer time deposits are fixed, and

million, or 8.8%, from a year earlier. Total deposits

thus do not adjust downward until they mature. For

amounted to $1.84 billion at December 31, 2007,

these same reasons, the Company expects its net

an increase of $143 million, or 8.4%. All of the

interest margin to experience further compression

loan and deposit growth in 2007 was internally-

as a result of the Federal Reserve continuing to

generated, as there were no acquisitions that were

lower interest rates in the early part of 2008.

completed during the year. Total shareholders’

The Company’s provision for loan losses did

equity amounted to $174.1 million at December 31,

not vary significantly in 2007 when compared

2007, a 7.0% increase from a year earlier.

to 2006, amounting to $5,217,000 in 2007 and

The growth in loans and deposits was the primary

$4,923,000 in 2006. Asset quality changes and

reason for increases in the Company’s net interest

loan growth are the most significant factors that

income when comparing 2007 to 2006. Net interest

impact the Company’s provision for loan losses.

income amounted to $79.3 million in 2007, a 6.4%

Generally in 2007, the impact of unfavorable asset

increase over the $74.5 million recorded in 2006.

quality trends on the Company’s provision for loan

L to R, A. Jordan Washburn, Chairman, First Bank Insurance Services, Inc.; Jerry L. Ocheltree, President and CEO, First Bancorp and
First Bank; Virginia C. Thomasson, CPA, Chairman, Montgomery Data Services, Inc.; David L. Burns, Chairman, First Bancorp; and
Thomas F. Phillips, Chairman, First Bank

Financial Report (cont.)

Selected Consolidated Financial Data

losses was largely offset by lower loan growth

Noninterest expenses for the year ended

experienced during the year compared to 2006.

December 31, 2007 amounted to $57.6 million,

The Company’s net charge-offs to average loans

an 8.2% increase from the $53.2 million recorded

ratio was 0.16% for the year ended December 31,

in 2006. These increases in noninterest expenses

2007 compared to 0.11% in 2006, while the ratio

are primarily attributable to costs associated with

of nonperforming assets to total assets was 0.47%

the Company’s overall growth in loans, deposits

at December 31, 2007 compared to 0.39% a year

and branch network. Since October 1, 2006, the

earlier. Net internal loan growth for 2007 was

Company has opened six full service bank branches.

$154 million compared to $252 million for 2006.

Additionally, for the first time in many years, the

Although the Company’s level of nonperforming

Company began to again record FDIC insurance

assets increased in 2007, based on public

expense in the fourth quarter of 2007. This was as

information available, it remains more favorable

a result of the FDIC recently beginning to charge

than the average for the Company’s peers.

for FDIC insurance again in order to replenish its

Noninterest income for the year ended December

reserves. The Company recorded $100,000 in FDIC

31, 2007 amounted to $18.5 million, an increase of

insurance expense in the fourth quarter of 2007

29.1% from the $14.3 million recorded in 2006. The

and expects that its FDIC insurance expense will be

Company achieved increases in all major categories

approximately $1 million in 2008.

of noninterest income in 2007, largely as a result

During both 2006 and 2007, the Company’s

of overall growth in the Company’s customer

effective tax rate was approximately 37%.

base. The categories of noninterest income with

The foregoing discussion and financial

the largest increases, “service charges on deposit

information in this report is only intended to

accounts” and “other gains (losses)”, also had

provide a general overview of the Company’s

other factors that played a role in their increase.

financial position and results of operations.

Service charges on deposit accounts increased 11%,

In order to fully analyze and understand our

which was primarily associated with the Company

financial position and results of operations, you’ll

expanding the availability of its customer overdraft

want to review the Form 10-K, which includes

protection program in the fourth quarter of 2007 to

Management’s Discussion and Analysis. For

include debit card purchases and ATM withdrawals.

shareholders, the Form 10-K is being mailed with

Previously the overdraft protection program, in

this report. For other interested parties, you can

which the Company charges a fee for honoring

access our Form 10-K through the SEC EDGAR

payments on overdrawn accounts, only applied

database at www.sec.gov or if you’d prefer,

to written checks. The increase in “other gains

contact investor relations at First Bancorp —

(losses)” was due primarily to an unusual loss that

you’ll find contact information on the inside

occurred in 2006 that did not recur in 2007 — a

of the back cover.

$1.9 million merchant credit card loss.

($ in thousands, except per share data)

Year Ended December 31,

2007

2006

2005

2004

2003

I N C O M E S T A T E M E N T D A T A
Interest income $ 148,942 129,207 101,429 81,593 74,667
Interest expense 69,658 54,671 32,838 20,303 18,907
Net interest income 79,284 74,536 68,591 61,290 55,760
Provision for loan losses 5,217 4,923 3,040 2,905 2,680
Net interest income after provision 74,067 69,613 65,551 58,385 53,080
Noninterest income 18,473 14,310 15,004 15,864 14,918
Noninterest expense 57,580 53,198 47,636 43,717 37,964
Income before income taxes 34,960 30,725 32,919 30,532 30,034
Income taxes 13,150 11,423 16,829 10,418 10,617
Net income $ 21,810 19,302 16,090 20,114 19,417

Earnings per share – basic $ 1.52 1.35 1.14 1.42 1.38
Earnings per share – diluted 1.51 1.34 1.12 1.40 1.35

Shares outstanding – basic 14,378,279 14,294,753 14,165,992 14,138,513 14,076,471
Shares outstanding – diluted 14,468,974 14,435,252 14,360,032 14,395,152 14,351,106

P E R S H A R E D A T A
Cash dividends declared $ 0.76 0.74 0.70 0.66 0.63
Dividend payout ratio 50.00% 54.81% 61.40% 46.48% 45.65%
Market price
High $ 26.72 23.90 27.88 29.73 21.49
Low 16.40 19.47 19.32 18.47 15.30
Close 18.89 21.84 20.16 27.17 20.80
Stated book value 12.11 11.34 10.94 10.54 10.02
Tangible book value 8.56 7.76 7.48 7.04 6.44

SELECTED BALANCE SHEET DATA (AT YEAR END)
Total assets $2,317,249 2,136,624 1,801,050 1,638,913 1,475,769
Loans 1,894,295 1,740,396 1,482,611 1,367,053 1,218,895
Allowance for loan losses 21,324 18,947 15,716 14,717 13,569
Intangible assets 51,020 51,394 49,227 49,330 50,701
Deposits 1,838,277 1,695,679 1,494,577 1,388,768 1,249,364
Shareholders’ equity 174,070 162,705 155,728 148,478 141,856

S E L E C T E D A V E R A G E B A L A N C E S
Assets $2,139,576 1,922,510 1,709,380 1,545,332 1,339,823
Loans 1,808,219 1,623,188 1,422,419 1,295,682 1,113,426
Earning assets 1,998,428 1,793,811 1,593,554 1,434,425 1,245,679
Deposits 1,780,265 1,599,575 1,460,620 1,306,404 1,153,385
Interest-bearing liabilities 1,726,002 1,537,385 1,359,744 1,232,130 1,065,949
Shareholders’ equity 170,857 163,193 154,871 146,683 137,293

A S S E T Q U A L I T Y R A T I O S
Net charge-offs to average loans 0.16% 0.11% 0.14% 0.14% 0.10%
Nonperforming loans to total loans at year end 0.41% 0.39% 0.11% 0.27% 0.35%
Nonperforming assets to total assets at year end 0.47% 0.39% 0.17% 0.32% 0.39%
Allowance for loan losses to total loans at year end 1.13% 1.09% 1.06% 1.08% 1.11%
Allowance for loan losses to nonperforming loans at year end 272.93% 276.11% 950.76% 395.19% 315.93%

P E R F O R M A N C E A N D O T H E R R A T I O S
Return on average assets 1.02% 1.00% 0.94% 1.30% 1.45%
Return on average equity 12.77% 11.83% 10.39% 13.71% 14.14%
Net interest margin (taxable equivalent basis) 4.00% 4.18% 4.33% 4.31% 4.52%
Efficiency ratio (taxable equivalent basis) 58.57% 59.54% 56.68% 56.32% 53.32%
Shareholders’ equity to total assets at year end 7.51% 7.62% 8.65% 9.06% 9.61%
Loans to deposits at year end 103.05% 102.64% 99.20% 98.44% 97.56%

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Income

($ in thousands)

A S S E T S

Cash and due from banks, noninterest bearing
Due from banks, interest bearing
Federal funds sold
Total cash and cash equivalents

Securities
Presold mortgages in process of settlement

Loans
Less: Allowance for loan losses
Net loans

Premises and equipment
Accrued interest receivable
Intangible assets
Other
Total assets

L I A B I L I T I E S

Deposits: Demand – noninterest bearing
Savings, NOW, and money market
Time deposits of $100,000 or more
Other time deposits

Total deposits

Repurchase agreements
Borrowings
Other liabilities
Total liabilities

S H A R E H O L D E R S ’ E Q U I T Y

Common stock, no par value per share
Authorized: 20,000,000 shares
Issued and outstanding: 14,377,981 shares in 2007
and 14,352,884 shares in 2006
Retained earnings
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Total liabilities and shareholders’ equity

December 31,

Year Ended December 31,

2007

2006

($ in thousands, except per share data)

2 0 0 7

2 0 0 6

2 0 0 5

$ 31,455
111,591
23,554
166,600

151,754
1,668

1,894,295
(21,324)
1,872,971

46,050
12,961
51,020
14,225
$2,317,249

$ 232,141
558,393
479,176
568,567
1,838,277
39,695
242,394
22,813
2,143,179

43,248
83,877
19,543

146,668

143,086

4,766

1,740,396
(18,947)
1,721,449

43,540
12,158
51,394
13,563
2,136,624

217,291
502,775
422,772
552,841

1,695,679
43,276

210,013
24,951
1,973,919

56,302
122,102
(4,334)
174,070
$2,317,249

56,035

111,220
(4,550)
162,705
2,136,624

I N T E R E S T I N C O M E
Interest and fees on loans
Interest on investment securities
Other, principally overnight investments
Total interest income

I N T E R E S T E X P E N S E
Savings, NOW and money market
Time deposits of $100,000 or more
Other time deposits
Borrowings and repurchase agreements
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses

N O N I N T E R E S T I N C O M E
Service charges on deposit accounts
Other service charges, commissions and fees
Fees from presold mortgage loans
Commissions from sales of insurance
and investment products
Data processing fees
Securities gains
Other gains (losses)
Total noninterest income

N O N I N T E R E S T E X P E N S E S
Personnel expense
Occupancy and equipment related expense
Intangibles amortization
Other operating expenses
Total noninterest expenses

Income before income taxes
Income taxes
Net income

E A R N I N G S P E R S H A R E :
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted

$139,323
7,014
2,605
148,942

120,694
6,231
2,282
129,207

94,097

5,660
1,672
101,429

7,094
17,662
21,276
8,639
54,671
74,536
4,923
69,613

8,968
4,578
1,062

1,434
162
205
(2,099)
14,310

30,678
6,866
322
15,332
53,198

30,725
11,423
19,302

1.35
1.34

4,048
11,425
13,043
4,322
32,838
68,591
3,040
65,551

8,537
3,963
1,176

1,307
279

5
(263)
15,004

27,975

6,002
290
13,369
47,636

32,919
16,829
16,090

1.14
1.12

14,294,753
14,435,252

14,165,992
14,360,032

10,368
22,687
26,498
10,105
69,658
79,284
5,217
74,067

9,988
5,158
1,135

1,511
204
487
(10)
18,473

33,670
7,604
374
15,932
57,580

34,960
13,150
$ 21,810

$ 1.52
1.51

14,378,279
14,468,974

Independent Auditors’ Report

Shareholder Information

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

First Bancorp and Subsidiaries:

We have audited in accordance with the standards of the Public Company Accounting Oversight Board

(United States), the consolidated balance sheets of First Bancorp and subsidiaries as of December 31, 2007

and 2006, and the related consolidated statements of income, comprehensive income, shareholders’ equity

and cash flows for each of the years in the three-year period ended December 31, 2007 (not presented

herein), and in our report dated March 5, 2008, we expressed an unqualified opinion on those consolidated

financial statements.

In our opinion, the information set forth in the accompanying condensed consolidated balance sheets and

condensed consolidated statements of income (included on pages 18 and 19 herein) is fairly stated, in all

material respects, in relation to the consolidated financial statements from which it has been derived.

Greenville, South Carolina

March 5, 2008

FORWARD LOOKING STATEMENTS

The discussions in this annual report contain statements that could be deemed forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995,
which statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include
projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of histori-
cal fact. Such statements are often characterized by the use of qualifying words (and their derivatives) such as “expect,”
“believe,” “estimate,” “plan,” “project,” or other statements concerning opinions or judgments of the Company and its
management about future events. Factors that could influence the accuracy of such forward-looking statements include,
but are not limited to, the financial success or changing strategies of the Company’s customers, the Company’s level of suc-
cess in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic
conditions. For additional information about the factors that could affect the matters discussed in this paragraph, see the
“Risk Factors” section of the Company’s most recent report on Form 10-K.

CORPOR ATE O FF IC E

341 North Main Street
P. O. Box 508
Troy, NC 27371
910-576-6171
800-548-9377
Fax 910-576-0662
www.FirstBancorp.com

IND E PE NDE NT AUD ITOR S

Elliott Davis, PLLC
Greenville, SC

CORPOR ATE COU NSE L

Robinson, Bradshaw & Hinson, PA
Charlotte, NC

TR ANS FE R AG E NT

Registrar & Transfer Co., Inc.
10 Commerce Drive
Cranford, NJ 07016-3572
800-368-5948
www.rtco.com

SH A RE H OLD ER S’ ME ET ING

The Annual Meeting of Shareholders will be held on May
15, 2008 at 3:00 PM at the James H. Garner Conference
Center, 211 Burnette Street, Troy, North Carolina.

COMMON STOC K I NFO RMATION

The Company’s common stock is traded on the NASDAQ
Global Select Market under the symbol FBNC. There were
14,377,981 shares outstanding as of December 31, 2007
with 2,605 shareholders of record and approximately
3,600 additional shareholders that held their shares in
“street name.”

DI REC T D E POSIT

With Direct Deposit, shareholders may enjoy the
convenience of having dividends directly deposited into
their checking or savings account. There is no cost for this
service. Shareholders may obtain further information about
Direct Deposit by calling us toll-free at 800-548-9377 and
asking for Shareholder Services.

SH A RE H OLD ER SE RV IC E S

First Bancorp now offers online access to your First
Bancorp Stock Account,
including your account
balance, certificate history, dividend reinvestment plan
information and more. Choose Investor Relations at
www.FirstBancorp.com and select Shareholder Login.

First Bancorp now offers online access to all financial
re p o r t s a n d
i n c l u d i n g a n n u a l
p u b l i c a t i o n s ,
quarterly reports filed with the Securities and Exchange
Commission, at www.FirstBancorp.com. Choose Investor
Relations and select SEC Filings.

For more information or shareholder assistance, call
us toll-free at 800-548-9377 and ask for Shareholder
Services.

COPIE S OF FORM 10 - K

Copies of the First Bancorp Annual Report on Form 10-K
filed with the Securities and Exchange Commission may be
obtained at no cost by contacting:

Investor Relations
Anna Hollers
P. O. Box 508
Troy, NC 27371-0508
800-548-9377
or
by visiting our corporate website at
www.FirstBancorp.com

DI V IDE ND RE I NV E STME NT

Registered holders of First Bancorp stock are eligible to
participate in the Company’s Dividend Reinvestment Plan,
a convenient and economical way to purchase additional
shares of First Bancorp common stock without payment
of brokerage commissions. For an information folder and
authorization form, or to receive additional information on
this plan, contact:

INV E STOR R E LATI ONS

Anna Hollers
Investor Relations
800-548-9377

Registrar & Transfer Co., Inc.
Dividend Reinvestment Section
10 Commerce Drive
Cranford, NJ 07016-3572
800-368-5948 or info@rtco.com