FORWARD-LOOKING STATEMENTS

Part I of this report contains 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, 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 our opinions or judgment 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 our customers, our level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions. For additional information that could affect the matters discussed in this paragraph, see the "Risk Factors" section of our 2008 Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES

We follow and apply accounting principles that conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry. Certain of these principles involve a significant amount of judgment and/or use of estimates based on our best assumptions at the time of the estimation. We have identified two policies as being more sensitive in terms of judgments and estimates, taking into account their overall potential impact to our consolidated financial statements - 1) the allowance for loan losses and 2) intangible assets.

Allowance for Loan Losses

Due to the estimation process and the potential materiality of the amounts involved, we have identified the accounting for the allowance for loan losses and the related provision for loan losses as an accounting policy critical to our consolidated financial statements. The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance considered adequate to absorb losses inherent in the portfolio.

Our determination of the adequacy of the allowance is based primarily on a mathematical model that estimates the appropriate allowance for loan losses. This model has two components. The first component involves the estimation of losses on loans defined as "impaired loans." A loan is considered to be impaired when, based on current information and events, it is probable we will be unable to collect all amounts due according to the contractual terms of the loan agreement. The estimated valuation allowance is the difference, if any, between the loan balance outstanding and the value of the impaired loan as determined by either 1) an estimate of the cash flows that we expect to receive from the borrower discounted at the loan's effective rate, or 2) in the case of a collateral-dependent loan, the fair value of the collateral.

The second component of the allowance model is an estimate of losses for all loans not considered to be impaired loans. First, loans that we have risk graded as having more than "standard" risk but not considered to be impaired are segregated between those relationships with outstanding balances exceeding $500,000 and those that are less than that amount. For those loan relationships with outstanding balances exceeding $500,000, we review the attributes of each individual loan and assign any necessary loss reserve based on various factors including payment history, borrower strength, collateral value, and guarantor strength. For loan relationships less than $500,000, we assign estimated loss percentages generally accepted in the banking industry. Loans that we have classified as having normal credit risk are segregated by loan type, and estimated loss percentages are assigned to each loan type, based on the historical losses, current economic conditions, and operational conditions specific to each loan type.

The reserve estimated for impaired loans is then added to the reserve estimated for all other loans. This becomes our "allocated allowance." In addition to the allocated allowance derived from the model, we also evaluate other data such as the ratio of the allowance for loan losses to total loans, net loan growth information, nonperforming asset levels and trends in such data. Based on this additional analysis, we may determine that an additional amount of allowance for loan losses is necessary to reserve for probable losses. This additional amount, if any, is our "unallocated allowance." The sum of the allocated allowance and the unallocated allowance is compared to the actual allowance for loan losses recorded on our books and any adjustment necessary for the recorded allowance to equal the computed allowance is recorded as a provision for loan losses. The provision for loan losses is a direct charge to earnings in the period recorded.

Although we use the best information available to make evaluations, future material adjustments may be necessary if economic, operational, or other conditions change. In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on the examiners' judgment about information available to them at the time of their examinations.

For further discussion, see "Nonperforming Assets" and "Summary of Loan Loss Experience" below.

Intangible Assets

Due to the estimation process and the potential materiality of the amounts involved, we have also identified the accounting for intangible assets as an accounting policy critical to our consolidated financial statements.

When we complete an acquisition transaction, the excess of the purchase price over the amount by which the fair market value of assets acquired exceeds the fair market value of liabilities assumed represents an intangible asset. We must then determine the identifiable portions of the intangible asset, with any remaining amount classified as goodwill. Identifiable intangible assets associated with these acquisitions are generally amortized over the estimated life of the related asset, whereas goodwill is tested annually for impairment, but not systematically amortized. Assuming no goodwill impairment, it is beneficial to our future earnings to have a lower amount assigned to identifiable intangible assets and higher amount of goodwill as opposed to having a higher amount considered to be identifiable intangible assets and a lower amount classified as goodwill.

The primary identifiable intangible asset we typically record in connection with a whole bank or bank branch acquisition is the value of the core deposit intangible, whereas when we acquire an insurance agency, the primary identifiable intangible asset is the value of the acquired customer list. Determining the amount of identifiable intangible assets and their average lives involves multiple assumptions and estimates and is typically determined by performing a discounted cash flow analysis, which involves a combination of any or all of the following assumptions: customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates. We typically engage a third party consultant to assist in each analysis. For the whole bank and bank branch transactions recorded to date, the core deposit intangibles have generally been estimated to have a life ranging from seven to ten years, with an accelerated rate of amortization. For insurance agency acquisitions, the identifiable intangible assets related to the customer lists were determined to have a life of ten to fifteen years, with amortization occurring on a straight-line basis.

Subsequent to the initial recording of the identifiable intangible assets and goodwill, we amortize the identifiable intangible assets over their estimated average lives, as discussed above. In addition, on at least an annual basis, goodwill is evaluated for impairment by comparing the fair value of our reporting units to their related carrying value, including goodwill (our community banking operation is our only material reporting unit). At our last evaluation, the fair value of our community banking operation exceeded its carrying value, including goodwill. If the carrying value of a reporting unit were ever to exceed its fair value, we would determine whether the implied fair value of the goodwill, using a discounted cash flow analysis, exceeded the carrying value of the goodwill. If the carrying value of the goodwill exceeded the implied fair value of the goodwill, an impairment loss would be recorded in an amount equal to that excess. Performing such a discounted cash flow analysis would involve the significant use of estimates and assumptions.

We review identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our policy is that an impairment loss is recognized, equal to the difference between the asset's carrying amount and its fair value, if the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Estimating future cash flows involves the use of multiple estimates and assumptions, such as those listed above.

Current Accounting Matters

See Note 2 to the Consolidated Financial Statements above for information about accounting standards that we have recently adopted.

RESULTS OF OPERATIONS

Overview

Net income available to common shareholders for the first quarter of 2009 amounted to $3,140,000 compared to $5,529,000 reported in the first quarter of 2008. Earnings per diluted common share were $0.19 in the first quarter of 2009 compared to $0.38 in the first quarter of 2008. The lower quarterly earnings were caused primarily by higher loan losses that are largely attributable to the recessionary economy. We also recorded preferred stock dividends and accretion related to our issuance of preferred stock to the U.S. Treasury, which reduced net income available to common shareholders and earnings per diluted common share.

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2009 amounted to $22.1 million, an 11.9% increase over the first quarter of 2008. The higher net interest income resulted from growth in loans and deposits and was partially offset by a lower net interest margin.

Our net interest margin (tax-equivalent net interest income divided by average earnings assets) in the first quarter of 2009 was 3.68%, an 11 basis point decline from the 3.79% margin realized in the first quarter of 2008 and a two basis point decline from the 3.70% margin realized in the fourth quarter of 2008. Assuming a flat interest rate environment for the remainder of 2009, we expect our net interest margin to gradually increase as we renew maturing time deposits at lower interest rates.

Provision for Loan Losses

Although we have no subprime loan exposure, the current economic environment has resulted in an increase in our loan losses and classified assets, which has led to a higher provision for loan losses. Our provision for loan losses amounted to $4,485,000 in the first quarter of 2009 compared to $1,533,000 in the first quarter of 2008.

Noninterest Income

Noninterest income amounted to $4.7 million for the first quarter of 2009, an 8.6% decrease from the first quarter of 2008. The decrease was caused by a nonrecurring gain of $306,000 recorded in the first quarter of 2008 related to the VISA initial public offering that occurred in March 2008, which is included in "Other gains." We were a member/owner of VISA and received a portion of VISA's offering proceeds.

Noninterest Expenses

Noninterest expenses amounted to $15.9 million in the first quarter of 2009, a 9.2% increase over 2008. A majority of this increase is attributable to our growth, including the April 1, 2008 acquisition of Great Pee Dee. Additionally, we recorded FDIC insurance expense of $756,000 in the first quarter of 2009 compared to $245,000 in the first quarter of 2008 as a result of the FDIC increasing its premium rates in order to replenish its reserves. We also recorded pension expense amounting to $897,000 in the first quarter of 2009 compared to $606,000 in the first quarter of 2008. Our pension expense increased in 2009 primarily as a result of investment losses experienced by the pension plan's assets in 2008.

Our effective tax rate was approximately 37% for each of the three month periods ended March 31, 2009 and 2008.

Our annualized return on average assets for the first quarter of 2009 was 0.49% compared to 0.99% for the first quarter of 2008. This ratio was calculated by dividing annualized net income available to common shareholders by average assets.

Our annualized return on average common equity for the first quarter of 2009 was 5.60% compared to 12.45% for the first quarter of 2008. This ratio was calculated by dividing annualized net income available to common shareholders by average common equity.

Preferred Stock Dividends and Accretion

On January 9, 2009, we completed the sale of $65 million of preferred stock to the U.S. Treasury Department under the Capital Purchase Program. The preferred stock issued to the Treasury pays a dividend rate of 5% for the first five years and 9% thereafter. As part of the program, we also issued warrants that give the Treasury the option for the next ten years to purchase a total of 616,038 shares of First Bancorp common stock at an exercise price of $15.82. (For further information regarding the Capital Purchase Program, see our 2008 Annual Report on Form 10-K and Note 12 above.)

In the first quarter of 2009, we accrued preferred stock dividends of $740,000 and recorded $201,000 in accretion of the discount that was recorded upon the issuance of the preferred stock (See Note 12).

Balance Sheet Growth

Total assets at March 31, 2009 amounted to $2.7 billion, 13.1% higher than a year earlier. Total loans at March 31, 2009 amounted to $2.2 billion, a 13.1% increase from a year earlier, and total deposits amounted to $2.1 billion at March 31, 2009, an 11.3% increase from a year earlier. Approximately two-thirds of the balance sheet growth relates to the April 1, 2008 acquisition of Great Pee Dee.

During the first quarter of 2009, we experienced a $24 million decrease in loans outstanding and a $64 million increase in deposits. The decline in loans was due primarily to lower loan demand in this recessionary economy. We are actively seeking to make new loans in order to offset normal principal reductions, as well as to grow our customer base. During the first quarter of 2009, we originated approximately $95 million in new loans (excluding renewals) but received principal paydowns from existing loans that more than offset this new growth. Deposit growth was strong in the first quarter due to an internal emphasis to grow deposits.

Components of Earnings

Net interest income is the largest component of earnings, representing the difference between interest and fees generated from earning assets and the interest costs of deposits and other funds needed to support those assets. Net interest income for the three month period ended March 31, 2009 amounted to $22,110,000, an increase of $2,346,000, or 11.9% from the $19,764,000 recorded in the first quarter of 2008. Net interest income on a tax-equivalent basis for the three month period ended March 31, 2009 amounted to $22,273,000, an increase of $2,345,000, or 11.8% from the $19,928,000 recorded in the first quarter of 2008. We believe that analysis of net interest income on a tax-equivalent basis is useful and appropriate because it allows a comparison of net interest income amounts in different periods without taking into account the different mix of taxable versus non-taxable investments that may have existed during those periods.

                                               Three Months Ended March 31,
      ($ in thousands)                           2009                 2008
      Net interest income, as reported      $       22,110               19,764
      Tax-equivalent adjustment                        163                  164
      Net interest income, tax-equivalent   $       22,273               19,928

There are two primary factors that cause changes in the amount of net interest income we record - 1) growth in loans and deposits, and 2) our net interest margin (tax-equivalent net interest income divided by average interest-earning assets). For the three months ended March 31, 2009, growth in loans and deposits increased net interest income, the positive effects of which were partially offset by lower net interest margins realized during the same

period. Our net interest margin of 3.68% in the first quarter of 2009 was 11 basis points less than the 3.79% recorded in the first quarter of 2008.

In the first quarter of 2009, we recorded non-cash net interest income purchase accounting adjustments totaling $267,000, which increased net interest income (related to the Great Pee Dee acquisition in April 2008). Similar adjustments are expected to amount to only $67,000 per quarter for the remainder of 2009.

Our net interest margin of 3.68% recorded for the first quarter of 2009 was only two basis points less than the net interest margin of 3.70% recorded for the fourth quarter of 2008. Assuming a flat interest rate environment for the remainder of 2009, we expect our net interest margin to gradually increase as we renew maturing time deposits at lower interest rates.

The following table presents net interest income analysis on a tax-equivalent basis.

                                                           For the Three Months Ended March 31,
                                                     2009                                        2008
                                                                  Interest                                    Interest
                                      Average        Average       Earned         Average        Average       Earned
($ in thousands)                      Volume          Rate         or Paid        Volume          Rate         or Paid
Assets
Loans (1)                           $ 2,202,782          5.99 %   $  32,552     $ 1,915,328          7.13 %   $  33,939
Taxable securities                      161,483          4.47 %       1,780         130,355          5.42 %       1,757
Non-taxable securities (2)               15,709          8.13 %         315          16,724          7.98 %         332
Short-term investments,
principally federal funds                72,505          0.22 %          39          50,987          3.49 %         443
Total interest-earning assets         2,452,479          5.74 %      34,686       2,113,394          6.94 %      36,471

Cash and due from banks                  38,603                                      38,486
Premises and equipment                   52,250                                      45,950
Other assets                             73,558                                      56,592
  Total assets                      $ 2,616,890                                 $ 2,254,422

Liabilities
NOW deposits                        $   199,162          0.18 %   $      90     $   190,018          0.22 %   $     103
Money market deposits                   360,790          1.85 %       1,647         270,669          2.73 %       1,838
Savings deposits                        123,238          1.31 %         398         104,577          1.48 %         385
Time deposits >$100,000                 607,429          3.20 %       4,796         493,345          4.71 %       5,775
Other time deposits                     586,462          3.11 %       4,494         570,351          4.44 %       6,299
   Total interest-bearing
deposits                              1,877,081          2.47 %      11,425       1,628,960          3.56 %      14,400
Securities sold under agreements
to repurchase                            51,032          1.56 %         196          38,446          3.00 %         287
Borrowings                              152,644          2.10 %         792         159,757          4.67 %       1,856
Total interest-bearing
liabilities                           2,080,757          2.42 %      12,413       1,827,163          3.64 %      16,543

Non-interest-bearing deposits           229,343                                     229,277
Other liabilities                        24,275                                      19,385
Shareholders' equity                    282,515                                     178,597
  Total liabilities
and shareholders' equity            $ 2,616,890                                 $ 2,254,422

Net yield on interest-earning
assets and net interest income                           3.68 %   $  22,273                          3.79 %   $  19,928
Interest rate spread                                     3.32 %                                      3.30 %

Average prime rate                                       3.25 %                                      6.22 %

(1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown.

(2) Includes tax-equivalent adjustments of $163,000 and $164,000 in 2009 and 2008, respectively, to reflect the tax benefit that we receive related to tax-exempt securities, which carry interest rates lower than similar taxable investments due to their tax exempt status. This amount has been computed assuming a 39% tax rate and is reduced by the related nondeductible portion of interest expense.

Average loans outstanding for the first quarter of 2009 were $2.203 billion, which was 15.0% higher than the average loans outstanding for the first quarter of 2008 ($1.915 billion). The mix of our loan portfolio remained substantially the same at March 31, 2009 compared to December 31, 2008, with approximately 88% of our loans being real estate loans, 8% being commercial, financial, and agricultural loans, and the remaining 4% being consumer installment loans. The majority of our real estate loans are personal and commercial loans where real estate provides additional security for the loan.

Average deposits outstanding for the first quarter of 2009 were $2.106 billion, which was 13.4% higher than

the average amount of deposits outstanding in the first quarter of 2008 ($1.858 billion). Generally, we can reinvest funds from deposits at higher yields than the interest rate being paid on those deposits, and therefore increases in deposits typically result in higher amounts of net interest income.

A majority of the increases in loans and deposits came as a result of the acquisition of Great Pee Dee. As of the April 1, 2008 acquisition date, Great Pee Dee had $184 million in loans and $148 million in deposits. See additional discussion regarding the nature of the growth in loans and deposits in the section entitled "Financial Condition" below. The effect of the higher amounts of average loans and deposits was to increase net interest income in the first quarter of 2009 compared to the first quarter of 2008.

The primary factor causing a decrease in our net interest margin in the first quarter of 2009 compared to 2008 was a lower proportion of our funding coming from non-interest bearing deposit accounts. Non-interest bearing deposits represented 9.9% of our average total funding during the first quarter of 2009 compared to 11.1% for the first quarter of 2008.

In the first quarter of 2009, we recorded non-cash net interest income purchase accounting adjustments totaling $267,000, which increased net interest income (related to the Great Pee Dee acquisition in April 2008). Similar adjustments are expected to amount to only $67,000 per quarter for the remainder of 2009.

See additional information regarding net interest income in the section entitled "Interest Rate Risk."

Our provision for loan losses increased significantly in 2009 compared to 2008, amounting to $4,485,000 in the first quarter of 2009 versus $1,533,000 in the first quarter of 2008. The higher provision in 2009 is primarily related to negative trends in asset quality, as discussed in the following paragraphs.

Although we have no subprime exposure, the current economic environment has resulted in an increase in our delinquencies and nonperforming assets. At March 31, 2009, our nonperforming assets were $44.7 million compared to $12.1 million at March 31, 2008. Our nonperforming assets to total assets ratio was 1.66% at March 31, 2009 compared to 0.51% at March 31, 2008. Our ratio of annualized net charge-offs to average loans was 0.34% for the first quarter of 2009 compared to 0.18% in the first quarter of 2008.

While the asset quality ratios discussed above reflect unfavorable trends, they compare favorably to those typical of our peers based on public information available. The table below shows how our ratios compare to data reported by the Federal Reserve for all bank holding companies with between $1 billion and $3 billion in assets at December 31, 2008 (the most recent information available):

                                           First Bancorp   Peer Average
Nonaccrual loans as percent of total loans     1.20%           2.20%
at December 31, 2008
Net charge-offs to average loans for 2008      0.24%           0.66%

Noninterest income amounted to $4.7 million for the first quarter of 2009, an 8.6% decrease from the first quarter of 2008. "Other gains (losses)" was positively impacted in the first quarter of 2008 when we recorded a gain of $306,000 related to the VISA initial public offering that occurred in March 2008. We were a member/owner of VISA and received a portion of VISA's offering proceeds.

The $4.7 million in noninterest income recorded in the first quarter of 2009 was a decrease from the $5.0 million recorded in the fourth quarter of 2008. This decline was caused primarily by a lower level of service charges on deposits accounts, with nonsufficient fund charges to overdrawn customers declining by $0.4 million as a result of a lower occurrence of overdrawn accounts.

Noninterest expenses amounted to $15.9 million in the first quarter of 2009, a 9.2% increase over 2008. A majority of this increase is attributable to our growth, including the April 1, 2008 acquisition of Great Pee Dee. Additionally, we recorded FDIC insurance expense of $756,000 in the first quarter of 2009 compared to $245,000

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