First Bancorp Annual Report 2009

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FY2009 Annual Report · First Bancorp

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F I R S T B A N C O R P | A bank you can believe in.

FIRST BANCORP
341 N. Main Street
PO Box 508
Troy, NC 27371-0508
www.FirstBancorp.com

2 0 0 9 A N N U A L R E P O R T

milestones
PAgE 3

convenience ﬁrst
PAgE 10

customers ﬁrst
PAgE 8

shareholder information
INSIDE BACK COVER

growth timeline
PAgE 12

THIS YEAR’S REPORT
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
President’s Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Service Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

WHAT’S IN THIS REPORT
Executive Oﬃcers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
First Bancorp and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Shareholder Information . . . . . . . . . . . . . . . . . . . . . inside back cover

sharing

investing

growing

serving

caring

believing

in our communities

for 75 years.

2009 FIRST BANCORP ANNUAL REPORT | 1

FINANCIAL HIGHLIGHTS

($ in thousands except share data)

Years Ended December 31,

2009

2008

2007

SELECTED INCOME STATEMENT DATA
Net interest income
Provision for loan losses
Noninterest income
Noninterest expenses
Income taxes
Net income
Preferred stock dividends
Net income - common shareholders

PER SHARE DATA
Earnings per common share - basic
Earnings per common share - diluted
Cash dividends declared - common
Market Price:

High
Low
Close

Book value - common
Tangible book value - common

SELECTED BALANCE SHEET DATA
(at year end)
Assets
Loans
Deposits
Shareholders’ Equity

PERFORMANCE RATIOS
Return on average assets
Return on average common equity

107,096
20,186
89,518
78,551
37,618
60,259
(3,972)
56,287

3.38
3.37
0.32

19.00
6.87
13.97
16.59
12.35

86,559
9,880
20,657
62,211
13,120
22,005
-
22,005

1.38
1.37
0.76

20.86
11.25
18.35
13.27
9.18

79,284
5,217
17,217
56,324
13,150
21,810
-
21,810

1.52
1.51
0.76

26.72
16.40
18.89
12.11
8.56

3,545,356
2,652,865
2,933,108
342,383

2,750,567
2,211,315
2,074,791
219,868

2,317,249
1,894,295
1,838,277
174,070

NONFINANCIAL DATA
Common shares outstanding
Number of branches
Number of employees - full/part time

16,722,423
91
728/72

16,573,826
74
612/75

14,377,981
70
574/81

2 | A BANK YOU CAN BELIEVE IN

Change
2008
to 2009

23.7%
104.3%
333.4%
26.3%
186.7%
173.8%
n/a
155.8%

144.9%
146.0%
-57.9%

-9.0%
-35.4%
-23.9%
25.2%
34.7%

28.9%
20.0%
41.4%
55.7%

9.2%
89.4%
20.0%
10.5%
-0.2%
0.9%
n/a
0.9%

-9.2%
-9.3%
0.0%

-21.9%
-31.4%
-2.9%
9.6%
7.2%

18.7%
16.7%
12.9%
26.3%

1.82%
22.55%

0.89%
10.44%

1.02%
12.77%

+93 bps
+1,211 bps

-13 bps
-233 bps

MILESTONES

Change

to 2008

2007 75 2 YEARS

IN A ROW.

Recognized by investment banking firm
Sandler O'Neill & Partners, L.P., as one of the
top performing small-cap banks in the nation

YEARS

of only 30 institutions in the nation that was selected
to Sandler O'Neill's "Sm-All Star" list for 2009.

of the best in
community banking
started in 1935.

One of only

institutions to be selected for this

list in both 2008 and 2009.

The only North Carolina bank
that made the 2009 list.

First Bank purchased
approximately
$958 MILLION
in total assets in ‘09
through the Cooperative
Bank acquisition.

Cooperative Bank branches acquired and
transitioned to First Bank branches in 2009.

BUSINESS LEADER
OF THE YEAR

On February 17, 2009, President
and CEO Jerry Ocheltree was
named 2008 Financial Services
Business Leader of the Year as
part of the Triad Hall of Fame
awards sponsored by Business
Leader magazine.

200

NEW EMPLOYEES
welcomed to First Bank
after the acquisition.

2009 FIRST BANCORP ANNUAL REPORT | 3

diﬃcult time for banks, with many banks experiencing
heavy loan losses and some banks failing. With this
perspective, I am proud that First Bancorp has
remained consistently proﬁtable during this period
without even a single quarterly loss. Our conservative
culture may have constrained our asset and earnings
growth when times were good, but that same culture
has limited our downside during these diﬃcult times.
For 2009, First Bancorp’s net income available to
common shareholders amounted to $56 million, or
$3.37 per share, compared to $22 million, or $1.37
per share in 2008. The 2009 results included a
signiﬁcant one-time acquisition gain discussed
below, but even without the one-time gain, we were
one of the few North Carolina banks to be consistently
proﬁtable in 2009.

Our sound ﬁnancial position allowed us to be opportunistic.
One of the geographic areas that experienced the
most dramatic downturn during this recession was
the coastal area of North Carolina. Cooperative
Bank, a bank headquartered in Wilmington, NC with
almost $1 billion in assets, had 24 branches primarily
along the southeastern North Carolina coast–at the
epicenter of the housing market collapse. While we
had only recently entered this market in 2005, and
thus our exposure to the downturn was limited,
Cooperative Bank was almost exclusively concentrated
in this region and the economic downturn hit them
especially hard. Without access to additional capital
to ride out the recession, bank regulators made the
decision to close Cooperative Bank. Due to First
Bancorp’s strong ﬁnancial position, we were permitted
by regulators to submit a bid for Cooperative, and we
were ultimately the successful bidder. On June 19,

PRESIDENT’S LETTER

“I am proud that First Bancorp has
remained consistently proﬁtable
during this period without even a
single quarterly loss.”

2009, Cooperative Bank was closed and First Bank
assumed the franchise.

Although we were saddened to see the situation
involving Cooperative Bank unfold, we believe that
First Bank was a good ﬁt to assume the closed
branches. As I noted earlier, we had entered the
coastal market in 2005 and had only a modest
presence. The addition of the Cooperative Bank
branches provided us with signiﬁcant market share
along the coast and opportunities to achieve
economies of scale with our existing operations.
Additionally, we are conﬁdent that this market area
will eventually recover and provide our company
with above-average growth potential.

It is also very important to note that our assumption
of Cooperative Bank came with limited downside risk
due to a loss sharing agreement that we entered into
with the FDIC. Under the terms of the agreement, the
FDIC will reimburse us for 80% of all losses associated
with the Cooperative Bank loan portfolio and their
foreclosed properties up to $303 million, and will
reimburse us for 95% of all losses that exceed $303
million. So although the coastal market continues to be
depressed, we believe we are well-positioned for its
ultimate recovery at minimal risk for our shareholders.

A bank you can
believe in.

Dear shareholders, customers
and friends:

The past two and a half years have been a challenging
economic time for our country, especially for the
banking industry. What began in 2007 with heavy
losses in the sub-prime housing market expanded to
become a decline in the overall housing market,
which had a pervasive eﬀect on most aspects of our
economy and led us into a deep recession with
unemployment levels hitting 30 year highs. While
there are signs of recovery in the housing market,
there are concerns that the commercial real estate
market may be the next sector to experience stress.
Our government continues to devise ways to boost
the economy, but it is likely to be a gradual process
with periodic setbacks.

The health of the banking industry is largely dependent
on the health of the economy. Thus, this has been a

J E R R Y O C H E LT R E E ,

P R E S I D E N T & C E O

F I R S T B A N C O R P A N D F I R S T B A N K

4 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 5

Another major aspect of the Cooperative transaction
was the accounting component. The accounting
rules required us to mark all of Cooperative’s assets
and liabilities to market value, including the value of
the loss share agreement. When the value of our bid
was combined with the market value estimates, the
result was that the assets exceeded the liabilities by
$67.9 million, which was required to be reported as a
gain, and amounted to $41.1 million, or $2.46 per
share, on an after-tax basis.

Although this sizeable accounting gain boosted
2009 net income, this transaction will only be a
long-term success for our shareholders if we are
able to retain our new customers by providing the
best in community banking. We are working hard to
do that.

While the Cooperative transaction was the defining

event for our company in 2009, there were many
other areas of achievement and items of interest for
our shareholders. First I will discuss ﬁnancial matters
and then I will discuss business initiatives.

Just into the new year, on January 9, 2009, we sold
$65 million in preferred stock to the US Treasury
under an initiative called the Capital Purchase
Program (also referred to as “TARP”). We participated
in this program for several reasons: 1) the capital
markets were effectively closed, 2) without access to
capital, our growth potential was limited, and 3) to
provide an extra capital cushion in light of the ever-
worsening economy. In addition, the capital was
offered by the government on attractive financial
terms, with the 5% dividend being the most signiﬁcant.
By contrast, the market dividend rate for similar
types of bank preferred stock was over 12%. In
hindsight, our participation turned out to be the

relationships ﬁrst.

"We started using First Bank when we opened our store and we

always felt as if we were part of the First Bank family."

F I R S T B A N K C U S T O M E R M A R Y H O L D E R

For 75 years, First Bank has remained dedicated to building
deep relationships with our customers. In January 2010,
First Bank held a reception for longtime customer and
one of downtown Troy’s most treasured merchants, Mary
Holder. The reception marked Holder’s retirement after 41
years in business and the closing of Holder’s gifts on
Main Street in Troy.

This reception celebrating Mary Holder is a testament to
the "family feel" First Bank strives for and the customer-
ﬁrst philosophy that separates our business model from
other area banks.

M A R Y H O L D E R at a First Bank reception in her honor.

investors ﬁrst.
First Bancorp ranked one of the best
ﬁnancial institutions in the nation.

Out of 509 publicly traded banks and thrifts with a market cap
of less than $2 billion, First Bancorp was one of only 30
institutions in the nation that was selected to Sandler
O'Neill's "Sm-All Star" list for 2009. First Bancorp was one of
only eight institutions to be selected for this list in both 2008
and 2009, and First Bancorp was the only North Carolina
bank on the 2009 list. The Sandler O'Neill analysis focused on
growth, proﬁtability, credit quality, and capital strength.

community ﬁrst.

The essence of our mission is investing in, supporting
and nurturing the communities we serve. When SHARE
of North Carolina needed a home for a local High Point
family, First Bank responded by donating a bank-owned
home to the organization. After renovating the property,
SHARE will donate the house to a low to moderate income
family in High Point.

The SHARE donation is part of a larger bank eﬀort to
support causes and events that strengthen the communities
First Bank calls home. Through numerous donations,
sponsorships and volunteer hours each year, First Bank
supports community service, educational and charitable
eﬀorts across the Carolinas and Virginia.

correct decision, as it provided the capital we needed
to bid on Cooperative and it also serves as insurance
against an economy that continues to struggle. In light
of the continued economic uncertainties, we have no
immediate plans to redeem this stock. As we gain
conﬁdence in the economic recovery, we may elect to
redeem this stock in installments. The favorable
dividend rate of 5% is in effect for another four
years before it increases to 9%.

In February 2009, after careful deliberation, your
board of directors reluctantly decided that it was
necessary to reduce the Company’s quarterly dividend
from $0.19 per share to $0.08 per share. This decision
was made in order to conserve capital and is consistent
with our historically conservative nature amid
ever-worsening economic conditions. Virtually every
bank in the nation has made a similar decision, with
many banks completely eliminating their dividend.
We will assess our dividend rate every quarter, and
my hope is that in the future, as conditions allow, we
can increase it from its current level.

In September 2009, I was pleased to report that the
Company had been recognized for the second year in
a row by investment banking ﬁrm Sandler O’Neill &
Partners, L.P., as one of the top performing small-
cap banks in the nation. New York-based Sandler
O’Neill is one of the best-known and most highly
regarded investment firms specializing in the
commercial banking industry. We are proud to have
been the only North Carolina bank recognized for
this honor two years in a row.

In February 2010, we reported the Company’s earnings
for 2009. As I noted earlier, for 2009 our net income
available to common shareholders was $56.3 million
compared to $22.0 million in 2008. Although the
Cooperative transaction resulted in a large gain that
positively impacted net income, there were also

6 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 7

factors that negatively impacted 2009 net income,
such as higher FDIC insurance premiums, acquisition-
related expenses, and preferred stock dividends.
From a balance sheet perspective, we ﬁnished the
year with $3.5 billion in assets, a 28.9% increase from
2008, with loans of $2.7 billion and deposits of
$2.9 billion.

In addition to earnings, asset quality and capital
adequacy are important in this environment. When
we evaluate our own asset quality, we generally
exclude loans related to the Cooperative transaction
because of the existence of the FDIC loss sharing
arrangement, which greatly reduces risk. We use the
term “non-covered loans” or “non-covered assets” to
refer to legacy First Bancorp loans/assets for which
we bear all the risk. In 2009, we experienced net loan
losses of $12.1 million, which amounted to 0.56% of
average non-covered loans. This charge-oﬀ rate was
less than one third than that of our peers. Our level
of non-covered nonaccrual loans at year end also
compared favorably to the most recently available
peer ratios.

With regards to capital, we ended the year with a
total risk-based capital ratio of 15.14%, which far
exceeded the regulatory threshold for well-capitalized
status of 10%. In addition, the 15.14% ratio is the
highest for the company since 2000. Largely because
this ratio reflects the benefit of the preferred stock
issuance, some bank analysts place importance on
the tangible common equity to tangible assets ratio
(TCE Ratio). At year end, First Bancorp’s TCE Ratio
was 5.94%, which is slightly lower than the 6.00%
target that some analysts say they like to see. Our
5.94% ratio was an increase from the 5.67% ratio from
one year earlier. In January 2010, our TCE Ratio rose
above 6.00%, and we expect it to rise steadily in
2010. In addition to earnings, a common stock
oﬀering is a way that many banks have boosted this
ratio. While we do not rule out the possibility of a
common stock oﬀering, we do not have any current
plans for an oﬀering. We are however, proposing to
shareholders to increase the number of shares
authorized for issuance, which is explained in
more detail in our proxy statement.

Please see the ﬁnancial summary beginning on page
18 for a more detailed discussion of the financial
results for the year.

customers in a very short time frame, we were also
able to make strides in several other business
initiatives that I want to discuss.

Like most bank stocks, our common stock performance
for 2009 was volatile. First Bancorp common stock
traded at $18.35 to start 2009 before quickly dropping
as investors’ concerns about banks heightened,
reaching a low of $6.87 in March. Then the price
rebounded and traded in a range of $12-$13 in the
weeks leading up to the June 19th Cooperative
transaction, which seemed to be well received by the
investing community. In the weeks after the transaction,
our stock price steadily increased reaching a high of
$19.00 in September. During the last few months
of the year, for reasons that are unclear, our stock
price gradually declined and closed at $13.97 on
December 31, 2009. While negative stock performance
is disappointing, First Bancorp’s common stock has
outperformed a peer index of banks in the 1, 3 and 5
year periods ended December 31, 2009.
While our team of employees worked very hard to
successfully convert and integrate Cooperative’s

In early 2009, we upgraded our online banking
platforms, with our current online banking software
being truly state-of-the-art. From our website,
customers can obtain transaction histories for any
account they have with us, view check images of
cashed checks, pay bills, and initiate stop payments.
Customers can also access an exciting feature that
we call Finance 360. Finance 360 is a powerful
budgeting and financial analysis tool that assists
customers in seeing their complete ﬁnancial picture,
including the ability to aggregate accounts held at
other ﬁrms.

With the new online banking software, we also began
oﬀering e-Statements. E-Statements are traditional
bank statements that are delivered securely over the
internet to a customer’s e-mail box, which is an
environmentally friendly way to deliver a bank
statement. In addition, the statements are received

customers ﬁrst.

"Acquiring Cooperative Bank this year was a big step for First Bank and a great success. We

are happy to have this opportunity to bring our commitment to relationship-based banking

to more communities than ever before.” J E R R Y O C H E L T R E E , P R E S I D E N T & C E O

F I R S T B A N C O R P A N D F I R S T B A N K

On Friday, June 19, 2009, Wilmington-based Cooperative Bank was closed by
regulators and First Bank was assigned to assume the bank. This was an
uncertain event for Cooperative’s customers that First Bank worked quickly to
address. First Bank immediately assured all customers that all of their deposits
would be fully honored with no loss to any customer. First Bank’s team also
worked throughout the weekend to ensure that there would be no
disruptions of service for any customer.

Over the next several months, First Bank employees worked
hand-in-hand with Cooperative employees to make the
transition for customers to First Bank as seamless as
possible. Throughout the process, customers were assured
that their assets were safe and secure.

In October 2009, First Bank completed the transition
throughout the former Cooperative Bank footprint.
Customers now have access to the full complement of
banking services provided by First Bank at 91 full-service
branches throughout the Carolinas and Virginia, and over
55,000 free ATMs nationwide.

8 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 9

quicker and many people feel that it provides for
better organization and safekeeping of their bank
statements. It also provides our company with the
ability to save on paper and postage expense. We ran
a promotional campaign that began in November
that encouraged customers to enroll to receive
E-Statements with daily drawings of prizes for new
enrollees. So far over 3,400 of our deposit customers
with 4,830 accounts have enrolled for E-Statements.
If you haven’t enrolled for E-Statements, I hope you
will consider doing so soon.

Mobile technology is now an integral part of our
internet banking. Last year we rolled out mobile
authorizations for our business customers. Business
owners no longer have to be tied to their desk to
approve payroll ﬁles or wire transfers. With the use
of secure access codes, important business transactions
can be approved quickly, securely and conveniently.
In 2010, we will begin oﬀering customers the ability
to use their phone to access their internet bank
account, with most all of the same real-time features
they are accustomed to using with their computer. We
are pleased to be at the forefront of this emerging
technology.

We are also embracing technology internally to
become more eﬃcient. In 2009, we began installing
computer hardware and software that allows our
branches to transmit their daily teller transactions
over secure data lines without the expense of a
courier physically picking up the documents and
driving them to the home oﬃce for processing. As a
result, we have greatly reduced our courier runs and
their related costs.

Although delivery of banking products through the
use of technology continues to increase, we believe
the presence of a physical location is the foundation
for a core, stable customer base and is valued in the
communities we serve. During 2009, in addition to

convenience ﬁrst.

Tech-savvy services like Mobile Banking allow First Bank
customers to do almost everything they can do inside
their local branch quickly, easily, securely – and remotely.

Next generation
services are a win-
win for First Bank,
as they reinforce our
commitment to oﬀer
our customers the
latest technology
to meet their
evolving needs.

responsibility ﬁrst.

The introduction of e-statements
in 2009 was an environmentally
friendly shift in the way First Bank
communicates with its customers.
going paperless saves money,
simpliﬁes money management
and helps the environment by
reducing paper consumption.

e-statements
are available at
no charge to all
First Bank customers.

the branches assumed from Cooperative, we opened
a new oﬃce in Florence, South Carolina, upgraded
our oﬃce in Leland, North Carolina to a new facility,
and broke ground on the construction of a branch in
Christiansburg, Virginia. While many banks are looking
to close branches during this tough economic period, we
will continue to make investments in our communities.

The year 2010 looks like it will be another challenging
year for the banking industry. Credit losses are expected
to remain elevated due to poor economic conditions.
Also, the regulatory environment is not favorable,
with legislators currently debating various measures
that would increase the regulatory burden and result
in higher costs. Already, there is enacted legislation
that takes eﬀect on July 1 that will likely reduce the
fees we earn on overdrawn deposit accounts by a
significant amount. In addition, FDIC insurance
expense is expected to remain high as the number of
bank failures climbs. At First Bank, we will remain
focused on the things we can control, with taking
care of our customers and our communities being
our top priority. In fact, since opening in 1935, the
year 2010 marks the 75th year that we have followed
that same philosophy. It is our privilege to be of service
to our customers and communities, and we will
continue to strive in all aspects to be the bank you
can believe in for the next 75 years.

Before I conclude, I want to say that I hope you saw
the February 12, 2010 press release in which we
announced the acquisition of a property and casualty
insurance agency located in Troy called The Insurance
Center, Inc. This acquisition provides additional
efficiencies of scale for our existing insurance
agency, First Bank Insurance Services, and will
enhance our level of noninterest income with minimal
incremental cost. We are pleased to welcome the
customers of The Insurance Center, Inc. to First Bank
Insurance Services.

Accompanying the mailing of this annual report is
our proxy statement and the notice of our Annual
Shareholders Meeting, which is being held at the
James H. garner Conference Center at 3:00 PM on
May 13, 2010. There is important information regarding
your company contained within the proxy statement,
and I encourage you to read it closely. On the back of
the proxy statement is a location map for your
convenience. I invite you to attend this meeting,
which will give you an opportunity to meet the
management and board of directors of your company.
You will note from your proxy statement that the
Board of Directors is recommending the election of
three new directors to our board – Daniel T. Blue,
R. Winston Dozier and Richard H. Moore. I hope you
will come by and meet them.

Jerry L. Ochletree
March 10, 2010

10 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 11

GROWTH TIMELINE

FIRST BANCORP PERFORMANCE

market opportunity

performance

First Bancorp is the 6th largest bank
headquartered in North Carolina.

$3.5

BILLION IN ASSETS

First Bancorp has paid dividends every
year since its 1987 public oﬀering.

$.32

DIVIDENDS PER SHARE

First Bancorp maintained solid
proﬁtability, despite a tumultuous year
in the ﬁnancial industry.

146%

INCREASE IN
EARNINGS PER SHARE

$3,545

TOTAL ASSETS
Dollars in Millions

$2,751

$2,317

$2,137

$1,801

2005

2006

2007

2008

2009

DIVIDENDS PER SHARE
Dollars

$.70

$.74

$.76

$.32

2005

2006

2007

2008

2009

EARNINGS PER SHARE
Dollars

$3.37

$1.34

$1.51

$1.37

$1.12

2005

2006

2007

2008

2009

For 75 years,

We have prospered by investing in, supporting and nurturing the communities we serve.

1935
$72,590
Asset Growth Timeline

1960
$2 million

1990
$200 million

2005
$1.8 billion

1945
$1 million

1970
$6 million

2000
$915 million

2009
$3.5 billion

12 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 13

OUR EXPANDING SERVICE AREA

First Bancorp’s principal activity is the
ownership and operation of First
Bank, a state-chartered community
bank that operates 91 branches, with
77 branches operating in the central
piedmont and coastal regions of North
Carolina, 9 branches in South Carolina
(Cheraw, Dillon, Florence, Latta,
Jeﬀerson, and Little River), and 5
branches in Virginia (Abingdon,
Dublin, Fort Chiswell, Radford, and
Wytheville), where First Bank does
business as First Bank of Virginia.
First Bank also has a loan production
oﬃce in Blacksburg, Virginia. First
Bank Insurance Services, Inc., a
provider of property and casualty
insurance coverage, is a subsidiary of
First Bank.

First Bancorp's common stock is traded
on the NASDAQ Global Select Market
under the symbol "FBNC."

— Troy Headquarters
— First Bank Branches
— First Bank of Virginia Branches
— Former Cooperative Bank Branches
— Loan Production Oﬃce
— First Bank Insurance Services
— First Bank Investment Services

— Existing Service Area
— 2009 Expanded Service Area

14 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 15

BOARD OF DIRECTORS

JACK D. BRIGGS
President and owner of J. Briggs, Inc.,
Davidson Funeral Home, Inc. & Carter Funeral
Home, Piedmont Funeral Home, Inc.,
Secretary, Funeral Director &
Retail Furniture Merchant

R. WALTON BROWN
Executive Vice President, First Bancorp &
First Bank

3 DAVID L. BURNS

President, Z. V. Pate, Inc.

JOHN F. BURNS
Executive Vice President, First Bancorp
and First Bank

5 MARY CLARA CAPEL
Chairman, First Bank
Director of Administrative Services, Capel, Inc.
Rug Manufacturer, Importer, Exporter

JAMES C. CRAWFORD III
Chairman, Montgomery Data Services, Inc.
Retired Chairman and CEO, B.C. Moore and
Sons, Inc.

JAMES G. HUDSON JR.
Retired Executive Vice President, First Bank
Former President, Home Savings Bank

JERRY L. OCHELTREE
President & CEO, First Bancorp & First Bank

9 GEORGE R. PERKINS JR.

Chairman & CEO,
Perkins Investments, LLC

10 THOMAS F. PHILLIPS
Chairman, First Bancorp
Owner, Phillips Ford

FREDERICK L. TAYLOR, II
Chairman, First Bank Insurance Services, Inc.
President, Troy Lumber Company

12 VIRGINIA C. THOMASSON

Chairman of First Bancorp Audit Committee
Partner, Holden, Thomasson, Longfellow, CPA

13 GOLDIE H. WALLACE

Investor

14 DENNIS A. WICKER

Attorney
Nelson Mullins Riley & Scarborough, LLP

JOHN C. WILLIS
Investor

16 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 17

The following is a brief summary of
our ﬁnancial results for 2009.

The ﬁnal paragraph on page 19 contains information
on where to ﬁnd a more detailed analysis.

Our net income available to common shareholders for
2009 was $56.3 million, or $3.37 per diluted common
share, compared to net income of $22.0 million, or $1.37
per diluted common share, reported for 2008. Our 2009
net income was signiﬁcantly impacted by a $67.9 million
acquisition gain related to the acquisition of a failed
bank, Cooperative Bank, in June 2009 (see additional
discussion below). The after-tax impact of this gain
was $41.1 million, or $2.46 per diluted common share.

Several other factors impacted the comparability of
the 2009 and 2008 results to a lesser extent, including
the following:

We recorded preferred stock dividends of $4.0

million, which reduced net income available to
common shareholders.

FDIC insurance expense amounted to $5.5 million
in 2009 compared to $1.2 million in 2008. The after-
tax impact of the increase in this expense was $2.6
million (or $0.16 per diluted common share).

We recorded acquisition related expenses related to

Cooperative Bank totaling $1.3 million, consisting
primarily of professional fees. The after-tax impact of
these expenses was $813,000 (or $0.05 per diluted
common share).

On June 19, 2009, we acquired substantially all of the
assets and liabilities of Cooperative Bank, which had
been closed earlier that day by regulatory authorities.
Cooperative Bank operated through twenty-one
branches in North Carolina and three branches in

South Carolina. In connection with the acquisition, we
assumed assets with a book value of $958 million,
including $829 million in loans and $706 million in
deposits. The loans and foreclosed real estate purchased
are covered by a loss share agreement with the FDIC
which aﬀords us signiﬁcant loss protection. Under the
loss share agreement, the FDIC covers 80% of loan
and foreclosed real estate losses up to $303 million
and 95% of losses that exceed that amount.

The accounting rules required us to mark all of
Cooperative’s assets and liabilities to market value,
including the value of the loss share agreement. When
the value of our bid was combined with the market value
estimates, the result was that the assets exceeded the
liabilities by $67.9 million, which resulted in the
acquisition gain.

The Cooperative transaction also drove our balance
sheet growth for the year. Total assets at December 31,
2009 amounted to $3.5 billion, 28.9% higher than a
year earlier. Total loans at December 31, 2009
amounted to $2.7 billion, a 20.0% increase from a year
earlier, and total deposits amounted to $2.9 billion at
December 31, 2009, a 41.4% increase from a year earlier.
Excluding the assets and liabilities assumed from
Cooperative, we experienced a decline in loans of
approximately 4% and an increase in deposits of 7%.

The growth in loans and deposits was the primary
reason for the increase in our net interest income
when comparing 2009 to 2008. Net interest income
amounted to $107.1 million in 2009, a 23.7% increase
from 2008.

The impact of the growth in loans and deposits on net
interest income was enhanced by a slight increase in
our net interest margin (tax-equivalent net interest
income divided by average earning assets). Our net
interest margin for 2009 was 3.81% compared to 3.74%
for 2008. During 2009, there were no changes in the

FINANCIAL SUMMARY

2009. Additionally, FDIC insurance expense
amounted to $5.5 million in 2009, compared to $1.2
million for 2008. Included in the $5.5 million in FDIC
insurance expense for 2009 is $1.6 million related to a
special assessment that was levied by the FDIC on all
banks in the second quarter of 2009. We also
recorded $1.3 million in acquisition related expenses
in 2009 related to the Cooperative transaction.

Another signiﬁcant transaction for 2009 was our sale
of $65 million in preferred stock to the United States
Treasury under an initiative called the Capital Purchase
Program (also referred to as “TARP”) that is discussed
in more detail in the President’s Letter beginning on
page 4. In light of the continued economic concerns,
we have no immediate plans to redeem this stock. As
we gain conﬁdence in the economic recovery, we may
elect to redeem this stock in installments. The favorable
dividend rate of 5% is in eﬀect for another four years
before it increases to 9%.

Partially as a result of our participation in TARP, our
regulatory capital ratios are very strong, with our total
risk-based capital ratio amounting to 15.14% at December
31, 2009.

The foregoing discussion and ﬁnancial information in
this report is only intended to provide a general overview
of our ﬁnancial position and results of operations. In
order to fully analyze and understand our financial
position and results of operations, you’ll want to review
the Form 10-K, which includes Management’s Discussion
and Analysis. For shareholders, the Form 10-K is
being mailed with this report. For other interested
parties, you can access our Form 10-K through the
SEC EDgAR database at www.sec.gov or if you’d prefer,
contact Investor Relations at First Bancorp–you’ll ﬁnd
contact information on the inside of the back cover.

interest rates set by the Federal Reserve, and we were
able to reprice at lower rates maturing time deposits
that had been originated in periods of higher interest
rates.

The current economic environment has resulted in an
increase in our loan losses and nonperforming assets,
which has led to signiﬁcantly higher provisions for
loan losses. Our provision for loan losses for the year
ended December 31, 2009 was $20.2 million compared
to $9.9 million recorded in 2008.

The increases in the provisions for loan losses are
solely attributable to our “non-covered” loan portfolio,
which excludes loans assumed from Cooperative that
are subject to the loss share agreement with the FDIC.
We do not expect to record any signiﬁcant loan loss
provisions in the foreseeable future related to the loan
portfolio acquired from Cooperative because these
loans were written down to estimated fair market value
in connection with the recording of the acquisition.

Our non-covered nonperforming assets at December
31, 2009 amounted to $92 million at December 31,
2009 compared to $35 million at December 31, 2008.
At December 31, 2009, the ratio of non-covered non-
performing assets to total non-covered assets was
3.10% compared to 1.29% at December 31, 2008.

Noninterest income for the year ended December 31,
2009 amounted to $89.5 million compared to $20.7
million for 2008. The primary reason for the increase
was the $67.9 million gain realized from the Cooperative
acquisition that occurred in June 2009, as discussed
above.

Noninterest expenses for the year ended December 31,
2009 amounted to $78.6 million, a 26.3% increase
from the $62.2 million recorded in 2008. Incremental
operating expenses associated with the Cooperative
acquisition was the primary reason for the increase in

18 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 19

EXECUTIVE OFFICERS

Executives

Regional Executives

JERRY L. OCHELTREE
Chief Executive Oﬃcer and President
First Bancorp and First Bank

ANNA G. HOLLERS
Chief Operating Oﬃcer,
Executive Vice President
First Bancorp and First Bank

TERESA C. NIXON
Chief Lending Oﬃcer
Executive Vice President
First Bank

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

LEE C. MCLAURIN
Senior Vice President
Controller

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

JOHN S. LONG
Executive 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

FIRST BANCORP AND SUBSIDIARIES

Montgomery Data
Services, Inc.

355 Bilhen Street
Troy, NC 27371-0627

DAVID G. GRIGG
President

FRED M. THOMPSON
Senior Vice President

BRADLEY FERREE
Vice President

ROBIN T. HINSON
Vice President

PHYLLIS A. STEVENSON
Vice President

First Bancorp

341 N. Main Street
Troy, NC 27371-0508

THOMAS PHILLIPS
Chairman

JERRY L. OCHELTREE
Chief Executive Oﬃcer and President

Subsidiaries of First Bancorp

First Bank

341 N. Main Street
Troy, NC 27371-0508

MARY CLARA CAPEL
Chairman

JERRY L. OCHELTREE
Chief Executive Oﬃcer and President

20 | A BANK YOU CAN BELIEVE IN

Area Executives

R. GLENN BATTEN
Senior Vice President

FRANCES H. CAGLE
Senior Vice President

GEORGE B. DAVIS
Senior Vice President

H. STEWART FORBES JR.
Vice President

ERNEST W. HOOKS
Senior Vice President

SUSIE C. JONES
Senior Vice President

GERALD M. KINLAW
Senior Vice President

H. DEAN MARTIN
Senior Vice President

J. PHILLIP MCEACHERN
Senior Vice President

MICHAEL W. VINSON
Senior Vice President

JOSEPH F. YOUNGBLOOD
Senior Vice President

First Bank Insurance
Services, Inc.

580 South West Broad Street
Southern Pines, NC 28388

1030 Albemarle Road
Troy, NC 27371

FREDERICK TAYLOR II
Chairman

JERRY L. OCHELTREE
President

STUART F. FIELDS
Vice President

JEFFREY A. MORRIS
Vice President

BOBBY R. MORRIS
Assistant Vice President

MELANIE WHITAKER
Assistant Vice President

($ in thousands, except per share data)
INCOME STATEMENT DATA
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision
Noninterest income
Noninterest expense
Income before income taxes
Income taxes
Net income
Preferred stock dividends and accretion
Net income available to common shareholders

Earnings per common share - basic
Earnings per common share - diluted

Shares outstanding - basic
Shares outstanding - diluted

COMMON SHARE DATA
Cash dividends declared - common
Dividend payout ratio - common
Market Price

High
Low
Close

Stated book value - common
Tangible book value - common

SELECTED BALANCE SHEET DATA (AT YEAR END)
Total assets
Loans
Allowance for loan losses
Intangible assets
Deposits
Shareholders’ equity

ASSET QUALITY RATIOS*
Net charge-oﬀs to average loans
Non-covered nonperforming loans to total loans at year end
Non-covered nonperforming assets to total assets at year end
Allowance for loan losses to total loans at year end
Allowance for loan losses to nonperforming loans at year end
* Based on non-covered assets only. Excludes assets subject to FDIC loss-sharing agreement.

PERFORMANCE AND OTHER RATIOS
Return on average assets
Return on average common equity
Net interest margin (taxable equivalent basis)
Eﬃciency ratio (taxable equivalent basis)
Tangible common equity to tangible assets at year end
Loans to deposits at year end

SELECTED CONSOLIDATED FINANCIAL DATA

Year Ended December 31,

2009

2008

2007

2006

2005

155,991
48,895
107,096
20,186
86,910
89,518
78,551
97,877
37,618
60,259
(3,972)
56,287

147,862
61,303
86,559
9,880
76,679
20,657
62,211
35,125
13,120
22,005
-
22,005

148,942
69,658
79,284
5,217
74,067
17,217
56,324
34,960
13,150
21,810
-
21,810

129,207
54,671
74,536
4,923
69,613
14,310
53,198
30,725
11,423
19,302
-
19,302

101,429
32,838
68,591
3,040
65,551
15,004
47,636
32,919
16,829
16,090
-
16,090

3.38
3.37

1.38
1.37

1.52
1.51

1.35
1.34

1.14
1.12

16,648,822 15,980,533
16,027,144
16,686,880

14,378,279
14,468,974

14,294,753 14,165,992
14,435,252 14,360,032

0.32
9.47%

19.00
6.87
13.97
16.59
12.35

0.76
55.07%

0.76
50.00%

0.74
54.81%

0.70
61.40%

20.86
11.25
18.35
13.27
9.18

26.72
16.40
18.89
12.11
8.56

23.90
19.47
21.84
11.34
7.76

27.88
19.32
20.16
10.94
7.48

3,545,356
2,652,865
37,343
70,948
2,933,108
342,383

2,750,567
2,211,315
29,256
67,780
2,074,791
219,868

2,317,249
1,894,295
21,324
51,020
1,838,277
174,070

2,136,624
1,740,396
18,947
51,394
1,695,679
162,705

1,801,050
1,482,611
15,716
49,227
1,494,577
155,728

0.56%
3.91%
3.10%
1.75%
44.73%

1.82%
22.55%
3.81%
39.79%
5.94%
90.45%

0.24%
1.38%
1.29%
1.32%
95.62%

0.16%
0.41%
0.47%
1.13%
272.93%

0.11%
0.39%
0.39%
1.09%
276.11%

0.14%
0.11%
0.17%
1.06%
950.76%

0.89%
10.44%
3.74%
57.67%
5.67%
106.58%

1.02%
12.77%
4.00%
58.03%
5.43%
103.05%

1.00%
11.83%
4.18%
59.54%
5.34%
102.64%

0.94%
10.39%
4.33%
56.68%
6.08%
99.20%

2009 FIRST BANCORP ANNUAL REPORT | 21

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

($ in thousands, except per share data)

December 31,

ASSETS
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 - non-covered
Loans - covered by FDIC loss share agreement

Total loans

Less: Allowance for loan losses

Net loans

Premises and equipment
FDIC loss share receivable
Accrued interest receivable
Intangible assets
Other

Total assets

LIABILITIES
Deposits: Demand

Savings, NOW, and money market
Time deposits of $100,000 or more
Other time deposits
Total deposits

Repurchase agreements
Borrowings
Other liabilities

Total liabilities

SHAREHOLDERS’ EQUITY
Preferred stock
Discount on preferred stock
Common stock
Common stock warrants
Retained earnings
Accumulated other comprehensive income (loss)

Total shareholders equity

Total liabilities and shareholders equity

2009

60,071
283,175
7,626
350,872

214,168
3,967

2,132,843
520,022
2,652,865
(37,343)
2,615,522

54,159
143,221
14,783
70,948
77,716
3,545,356

272,422
1,008,644
816,540
835,502
2,933,108
64,058
176,811
28,996
3,202,973

65,000
(3,789)
98,099
4,592
182,908
(4,427)
342,383
3,545,356

2008

88,015
105,191
31,574
224,780

187,183
423

2,211,315
-
2,211,315
(29,256)
2,182,059

52,259
-
12,653
67,780
23,430
2,750,567

229,478
664,754
592,192
588,367
2,074,791
61,140
367,275
27,493
2,530,699

-
-
96,072
-
131,952
(8,156)
219,868
2,750,567

INTEREST INCOME
Interest and fees on loans
Interest on investment securities
Other, principally overnight investments

Total interest income

INTEREST EXPENSE
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

Provisons for loan losses

Net interest income after provision for loan losses

NONINTEREST INCOME
Service charges on deposit accounts
Other service charges, commissions and fees
Fees from presold mortgages
Commissions from sales of investment products
Data processing fees
gain from acquisition
Securities gains (losses)
Other gains (losses)

Total noninterest income

NONINTEREST EXPENSES
Personnel expense
Occupancy and equipment
Intangibles amortization
Acquisition expenses
Other operating expenses

Total noninterest expense

Income before income taxes
Income taxes
Net income
Preferred stock dividends and accretion
Net income available to common shareholders

EARNINGS PER COMMON SHARE

Basic
Diluted

Weighted average common shares outstanding

Basic
Diluted

2009

148,007
7,439
545
155,991

8,744
18,908
17,866
3,377
48,895
107,096
20,186
86,910

13,854
4,848
1,505
1,524
139
67,894
(104)
(142)
89,518

41,588
10,405
630
1,343
24,585
78,551

97,877
37,618
60,259
(3,972)
56,287

3.38
3.37

Year Ended December 31,
2008

138,878
7,973
1,011
147,862

9,736
21,308
22,197
8,062
61,303
86,559
9,880
76,679

13,535
4,392
869
1,552
167
-

(14)
156
20,657

35,446
8,280
416
-
18,069
62,211

35,125
13,120
22,005
-
22,005

1.38
1.37

2007

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

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

9,988
3,902
1,135
1,511
204
-
487
(10)
17,217

33,670
7,604
374
-
14,676
56,324

34,960
13,150
21,810
-
21,810

1.52
1.51

16,648,822
16,686,880

15,980,533
16,027,144

14,378,279
14,468,974

22 | A BANK YOU CAN BELIEVE IN

2009 FIRST BANCORP ANNUAL REPORT | 23

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, 2009 and 2008,
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, 2009 (not presented herein), and in our report
dated March 15, 2010, 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 22 and 23 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 15, 2010

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 historical 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 success 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.

24 | A BANK YOU CAN BELIEVE IN

CORPORATE OFFICE

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

INDEPENDENT AUDITORS

Elliott Davis, PLLC
Greenville, SC

CORPORATE COUNSEL

Robinson, Bradshaw & Hinson, PA
Charlotte, NC

TRANSFER AGENT

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

SHAREHOLDERS’ MEETING
The Annual Meeting will be held on May 13, 2010 at
3:00 pm at the James H. Garner Conference Center, 211
Burnette Street, Troy, North Carolina.

COMMON STOCK INFORMATION

The Company’s common stock is traded on the NAS-
DAQ Global Select Market under the symbol FBNC.
There were 16,722,423 shares outstanding as of December
31, 2009 with 2,695 shareholders of record and
approximately 4,200 additional shareholders that held
their shares in “street name.”

DIRECT DEPOSIT

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.

SHAREHOLDER SERVICES

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
publications, including annual reports and 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.

COPIES 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

DIVIDEND REINVESTMENT

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:

INVESTOR RELATIONS

Anna Hollers
Investor Relations
800-548-9377
or
Registrar & Transfer Co., Inc.
Dividend Reinvestment Section
10 Commerce Drive
Cranford, NJ 07016-3572
800-368-5948 or info@rtco.com