Our STORY 2018 First Bancorp Annual Report In every compelling story, there’s a hero. There’s a challenge. And, there’s the hero overcoming that challenge. Our Those are the kind of stories we love, because they’re the kind we help our customers write. And really, the kind we’ve been living ourselves. You see, we knew we could build on our rich, 83-year heritage; take the kind of loyalty we’ve earned in small towns and build in the not-so-small ones right here in the Carolinas. But what we lacked back then was a rallying point, a way to really bring it all together. Then we found it. It was right in front ST of us all along. It’s you. It’s your dreams, your opportunities, your successes that get us going. It’s At First Bank, we’re flipping the script. You’re the Ohero. Just asR your goals are our goals, your challenges you. are our challenges. And we can’t wait to help you overcome them. Should make for a great story, shouldn’t it? Let’s start writing itY together. We’re ready. In This Issue 2018—A Year in Review First Bank Hurricane Response Dream It. Do It. Campaign Finale 2018 Community Bank of the Year Asheville Savings Bank Conversion Numbers Focusing on Financial Wellness Board of Directors 2018 Report margin remaining stable at 4.12% compared to 4.08% in 2017. We believe that striving for profitable growth is the most efficient use of our shareholders’ capital. Our earnings for 2018 were also favorably impacted by continued improvement in asset quality. During the year, we received several large recoveries on loans that we had written-off during the A Year in great recession. These recoveries, along with overall continued improvement in asset quality, were largely responsible for us recording a negative provision for loan losses (income) of $3.6 Review million compared to a provision for loan losses of $0.7 million recorded in 2017. Our ratio of nonperforming assets to total assets of 0.74% at December 31, 2018 marked the seventh consecutive year 20 of improvement in that ratio. Despite the favorable financial results for the year, our stock price Dear Shareholders, declined from $35.31 at December 31, 2017 to $32.66 on December Customers and Friends, 31, 2018. After generally rising for the first eight months of 2018 I am pleased to report on a remarkable year for our company. and reaching nearly $43 per share in August, our stock price was Driven by solid balance sheet growth, increased operational negatively impacted late in the year by macro economic concerns efficiencies, and the continued success of our community banking about the banking industry, which resulted in steep declines model, our earnings increased in 2018 by 94% to $89 million, while for most bank stocks. However, our 2018 stock price decline of earnings per share increased 65% to $3.01 per share compared to 7.5% compared favorably to most bank indices, which declined $1.82 for 2017. approximately 18%-20% for the year. We entered 2018 after closing on two large bank acquisitions in In March 2018, we were pleased to report our first dividend increase 2017 that increased our total assets by nearly 50% and provided us in many years, with the quarterly dividend rate increased from 1with increased market share 8in the North Carolina metro areas of $0.08 per share to $0.10 per share. And in February 2019, our Board the Triad and Asheville. We worked hard in 2018 to fully integrate of Directors declared another dividend rate increase, raising the those acquisitions and to maximize operational efficiencies. Our quarterly dividend rate to $0.12 per share. This 50% increase in success in doing so resulted in our efficiency ratio, a common bank dividends over the past two years has been popular with many performance measure, improving from 61% in 2017 to 55% in 2018, shareholders, and we are pleased that our increased profitability and while our return on average assets improved from 1.00% in 2017 to capital levels made it possible. 1.57% in 2018. As you will see throughout this Annual Report, First Bank is In 2018, our total loans increased by $207 million, or 5.1%, while our taking every opportunity to renew our all-in commitment to our total deposits grew by $252 million, or 5.7%. Importantly, we did communities and customers. One of these initiatives was our “Dream not sacrifice profitability to achieve this growth, with our net interest It. Do It.” contest, which concluded in mid-2018. In this contest, we 5 First Bancorp donated $100,000 over a one-year period to worthwhile causes in our communities based on more than 3,300 entries from folks across our market area who explained how we could help make their dreams First Bank come true. The stories were inspiring, and we were proud to play a Hurricane part in making a difference in many of our communities. The theme for this Annual Report is “Our Story” which refers to the stories of our customers and how we hope we can play a part in their success. By focusing on excellence in everything we do, we believe we can help make that success possible. Ongoing service excellence training and initiatives take place in our company to further that goal. And I’m pleased to report that our efforts are being recognized. In November 2018, First Bank was named the 2018 Community Bank RES of the Year at the North Carolina Rural Assembly. We were honored to be chosen for this award which recognizes a financial institution for providing loans and excellent customer services to small businesses in North Carolina. Due to acquisitions of many of our local competitors by large out- of-state banks, we find our company as the only community bank PO headquartered in North Carolina or South Carolina with total assets between $4 billion and $14 billion. This puts us in the unique position to be small enough to focus on individuals and small businesses in our local markets, but big enough to be able to invest in the latest technology and provide comprehensive financial solutions for our customers. We look forward to continuing to NFirst Bank hasS donated moreE capitalize on this opportunity. than $100,000 to local charities To our customers, thank you for the privilege to serve, and to our and in support of employees shareholders, thank you for the opportunity to grow your investment. impacted by the devastating Sincerely, 2018 hurricanes. First Bank also set up a special SBA loan to support business recovery. Richard H. Moore Chief Executive Officer 2018 Annual Report 6 Final Facts Dream It. and Winners Do It. 3,300+entries from CON all across the TEST Carolinas When dreams come true, communities grow stronger. The “Dream It. Do It.” contest was 500+cities and towns conceived to help deserving families in North and South and individuals, demonstrate community Carolina support, and to raise awareness of First Bank and its full-service offerings. Now that it is concluded, we can only declare it a resounding success. lives10 changed for the better! 7 First Bancorp Marianne Kernan A Fourth Quarter Winner Chase Clark A Third Quarter Winner Linden Lodge Foundation “Our mission at Linden Lodge is to Helping a Teen Help Others provide those with a serious mental illness the At eight, Chase Clark of Colfax, NC, started opportunity, both mentally and physically, for the a nonprofit and raised more than $6,000 for a fulfilling life that we all desire,” says Marianne local Make-A-Wish program. Now, at 13, Clark’s Kernan, chairwoman of the Linden Lodge nonprofit, Chase’s Chance, has many more Foundation. This all-volunteer organization runs beneficiaries for her fundraising. She’s helped a judgment-free home, staffed 24 hours a day, for financially disadvantaged classmates attend field six residents to live, work, learn and prepare for trips and summer camps; sent rain boots and a return to a normal life. Besides the seven- other shoes to Liberian schoolchildren who walk bedroom, three-bath house, the seven-acre to school year-round; regularly stocked supplies property has a nursery, art and music therapy for teachers at a Greensboro elementary school, building, walking paths and room for peer support delivered goodie-filled backpacks to kids in foster meetings. Linden Lodge has been awarded $10,000, care; funded microwaves for her school cafeteria to which will be used to initiate construction of a small, ensure everyone could prepare a hot meal within standalone house for residents to engage in and their lunch period; and sold more than 1,000 Girl maintain physical wellness, an important part of Scout cookies to help a local troop visit Disney their treatment plan. World this spring. Most of Clark’s $5,000 will fund Kernan has seen how lives can be transformed more nonprofit projects, with some saved for when individuals are nurtured and taught to thrive, college plus a small splurge–new shoes for her and what a difference such a supportive community coming track season. Says Chase’s mom Salina, can have on those with serious mental illness and “Her influence at this age reminds us that we all can their families. bring change without excuses.” 2018 Annual Report 8 Great news! First Bank was 2018 honored as the 2018 Community Community Bank of the Year at this year’s North Carolina Rural Assembly, Bank of the held in Raleigh on November 15 and 16.