First Bancorp Reports First Quarter Results; Record Loan and Deposit Growth Achieved

TROY, N.C., April 24 /PRNewswire-FirstCall/ -- First Bancorp , the parent company of First Bank, announced net income today of $4,991,000, or $0.35 per diluted share, for the three months ended March 31, 2006. These quarterly earnings represent a 5.8% increase in net income and a 6.1% increase in diluted earnings per share from the net income of $4,716,000, or $0.33 per diluted share, reported for the first quarter of 2005. During the first quarter of 2006, the Company experienced strong growth in loans and deposits. Loans outstanding grew by $71 million, or 19.4% on an annualized basis, while deposits grew by $70 million, or 19.1% on an annualized basis. The $71 million in loan growth and $70 million in deposit growth are the highest increases ever experienced by the Company in a single quarter, excluding quarters that were impacted by acquisition-related growth.

Key performance ratios for the three months ended March 31, 2006 include: * Return on average assets of 1.12% * Return on average equity of 12.78% * Net charge-offs to average loans of 0.03% * Net interest margin of 4.33% * Nonperforming assets to total assets at quarter end of 0.25% * Efficiency ratio of 58.04%

Total assets at March 31, 2006 amounted to $1.91 billion, 13.1% higher than a year earlier. Total loans at March 31, 2006 amounted to $1.55 billion, an 11.3% increase from a year earlier, and total deposits amounted to $1.57 billion at March 31, 2006, an 8.0% increase from a year earlier.

The increase in loans and deposits over the past twelve months resulted in an increase in the Company's net interest income when comparing the first quarter of 2006 to the first quarter of 2005. Net interest income for the first quarter of 2006 amounted to $17.9 million, a 9.6% increase over the $16.3 million recorded in the first quarter of 2005.

The Company's net interest margin (tax-equivalent net interest income divided by average earning assets) was 4.33% for the first quarter of 2006, which is the same as it was in the first quarter of 2005. The 4.33% net interest margin realized in the first quarter of 2006 was a four basis point decrease from the 4.37% realized in the fourth quarter of 2005. The slight decrease in margin from the previous quarter was primarily a result of the average rates paid on deposits rising by more than the corresponding increases in average yields realized from loans.

The Company's provision for loan losses amounted to $1,015,000 in the first quarter of 2006 compared to $580,000 in the first quarter of 2005. The increase was primarily the result of the strong loan growth realized in 2006, as asset quality ratios remained stable. Loan growth was $71 million in the first quarter of 2006 compared to $28 million in the first quarter of 2005. The Company's ratio of annualized net charge-offs to average loans amounted to 3 basis points for the first quarter of 2006 compared to 7 basis points for the first quarter of 2005. The Company's ratio of nonperforming assets to total assets was 0.25% at March 31, 2006 compared to 0.40% at March 31, 2005.

Noninterest income amounted to $4.0 million for the first quarter of 2006, a 6.6% increase from the first quarter of 2005. Noninterest expenses amounted to $12.7 million in the first quarter of 2006, an 8.7% increase over 2005. There were no unusual items of noninterest income or expense that were significant in either period. In accordance with the new accounting requirements regarding stock-based compensation (FASB Statement 123(r)) that were effective on January 1, 2006, the Company recorded $47,000 in expense related to stock options in the first quarter of 2006.

The Company's effective tax rate was 38.1% for the first quarter of 2006 compared to 38.8% in the first quarter of 2005. There were no significant changes in the Company's state tax audit situation. As previously reported, the Company has elected to enter the Settlement Initiative program that was announced by the North Carolina Department of Revenue in February 2006 in order to resolve matters related to the Company's operating structure involving a real estate investment trust. Based on the terms the initiative, the Company believes it has fully reserved for this liability and does not have any additional state income tax exposure other than the ongoing interest that will continue to accrue ($65,000 per quarter on an after-tax basis) until the Settlement Initiative is completed and the Company pays the amounts due in accordance with the settlement, which is expected to occur in the fourth quarter of this year.

James H. Garner, President and CEO of First Bancorp, commented on the quarter's results, "I am pleased with today's report, especially the strong balance sheet growth that we have achieved thus far in 2006. On an annualized basis, we grew both loans and deposits by 19%. In the short-term, the strong loan growth negatively impacted earnings, as we were required to set aside loss reserves for the new loans. But in the long term, this growth should improve our bottom line."

Mr. Garner added, "I would like to invite our friends and shareholders to our Annual Shareholders Meeting to be held at 3:00 P.M. on May 3, 2006 at the James H. Garner Conference Center located at 211 Burnette Street in Troy. I think you will find the meeting to be informative, and I always enjoy meeting and talking with my fellow shareholders. Also, at this meeting, we will be bidding a fond farewell to William E. Samuels, who is retiring from the Board of Directors. Bill was instrumental in making this company what it is today, and I know you'll want to thank him for all of his years of loyal service."

Mr. Garner also noted the following corporate developments: - Earlier today, the Company opened for business in a newly constructed building in Mayodan, North Carolina. The Company opened its Mayodan branch in December 2003. The strong support of the community enabled First Bank to enhance its commitment to the area with the construction of a modern facility, which was built on the same lot as the existing branch. - On April 10, 2006, the Company upgraded its Mooresville loan production office located in the Mooresville Plaza Shopping Center to a full service bank branch. The loan production office opened on October 15, 2005 and quickly grew to a level that necessitated this upgrade in service in order to better serve its customers. - On January 23, 2006, the Company announced that it had entered into an agreement to purchase a bank branch from First Citizens Bank in Dublin, Virginia. The branch has approximately $20 million in deposits. The conversion is expected to occur in the third quarter of 2006. - The Company continues construction on new buildings in Angier and Sanford that will replace existing branches. The new Angier branch, which is expected to open on May 1, 2006, is being constructed at 415 North Raleigh Street and will replace the existing location at 20 North Broad Street. The new Sanford location, which is expected to open in June 2006, is being constructed on Spring Lane next to Applebee's and is replacing the nearby branch located in the Spring Lane Galleria. - On February 28, 2006, the Company announced a quarterly dividend of 18 cents per share payable on April 25, 2006 to shareholders of record on March 31, 2006. The current dividend rate is an increase of 5.9% over the dividend rate paid in the same period of 2005. - There was no stock repurchase activity during the first quarter of 2006.

First Bancorp is a bank holding company based in Troy, North Carolina with total assets of approximately $1.9 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 62 branch offices, with 56 branches operating in a nineteen county market area in the central piedmont region of North Carolina, 3 branches in Dillon County, South Carolina, and 3 branches in Virginia (Abingdon, Radford, and Wytheville), where First Bank does business as First Bank of Virginia. The Company also has loan production offices in Wilmington, North Carolina and Blacksburg, Virginia. First Bancorp's common stock is traded on the NASDAQ National Market under the symbol FBNC.

Please visit our website at http://www.firstbancorp.com/. For additional financial data, please see the attached Financial Summary.

This press release 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 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.

First Bancorp and Subsidiaries Financial Summary Three Months Ended March 31, ----------------------- ($ in thousands except per 2006 2005 Percent share data - unaudited) Change ------------------------------------------------------------------------ INCOME STATEMENT Interest income --------------- Interest and fees on loans $26,762 21,359 Interest on investment securities 1,456 1,284 Other interest income 497 272 ------- ------- Total interest income 28,715 22,915 25.3% ------- ------- Interest expense ---------------- Interest on deposits 9,442 5,700 Other, primarily borrowings 1,420 930 ------- ------- Total interest expense 10,862 6,630 63.8% ------- ------- Net interest income 17,853 16,285 9.6% Provision for loan losses 1,015 580 75.0% ------- ------- Net interest income after provision for loan losses 16,838 15,705 7.2% ------- ------- Noninterest income ------------------ Service charges on deposit accounts 2,074 2,008 Other service charges, commissions, and fees 1,205 1,054 Fees from presold mortgages 267 238 Commissions from financial product sales 439 295 Data processing fees 36 147 Securities gains -- -- Other losses (67) (32) ------- ------- Total noninterest income 3,954 3,710 6.6% ------- ------- Noninterest expenses -------------------- Personnel expense 7,566 6,886 Occupancy and equipment expense 1,627 1,434 Intangibles amortization 61 73 Other operating expenses 3,475 3,322 ------- ------- Total noninterest expenses 12,729 11,715 8.7% ------- ------- Income before income taxes 8,063 7,700 4.7% Income taxes 3,072 2,984 2.9% ------- ------- Net income $4,991 4,716 5.8% ======= ======= Earnings per share - basic $ 0.35 0.33 6.1% Earnings per share - diluted 0.35 0.33 6.1% ADDITIONAL INCOME STATEMENT --------------------------- INFORMATION ----------- Net interest income, as reported $17,853 16,285 Tax-equivalent adjustment(1) 126 113 ------- ------- Net interest income, tax-equivalent $17,979 16,398 9.6% ======= ======= -------------------------------------------------------------------------- (1) This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and 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. Three Months Ended March 31, ----------------------- 2006 2005 Percent Change ------------------------------------------------------------------------ PERFORMANCE RATIOS (annualized) Return on average assets 1.12% 1.16% Return on average equity 12.78% 12.57% Net interest margin - tax equivalent (1) 4.33% 4.33% Efficiency ratio - tax equivalent (1) (2) 58.04% 58.26% Net charge-offs to average loans 0.03% 0.07% Nonperforming assets to total assets (period end) 0.25% 0.40% SHARE DATA Cash dividends declared $ 0.18 0.17 5.9% Stated book value 11.12 10.66 4.3% Tangible book value 7.69 7.17 7.3% Common shares outstanding at end of period 14,291,060 14,138,379 Weighted average shares outstanding - basic 14,254,785 14,105,577 Weighted average shares outstanding - diluted 14,421,639 14,363,606 Shareholders' equity to assets 8.33% 8.94% AVERAGE BALANCES ($ in thousands) Total assets $1,803,312 1,650,624 9.3% Loans 1,516,456 1,383,216 9.6% Earning assets 1,682,535 1,537,165 9.5% Deposits 1,525,167 1,414,721 7.8% Interest-bearing liabilities 1,431,936 1,318,731 8.6% Shareholders' equity 158,380 152,162 4.1% -------------------------------------------------------------------------- (1) See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments. (2) Calculated by dividing noninterest expense by the sum of tax-equivalent net interest income plus noninterest income. TREND INFORMATION ($ in thousands except per share data) For the Three Months Ended -------------------------- March 31, Dec. 31, Sept. 30, June 30, March 31, INCOME STATEMENT 2006 2005(3) 2005(2) 2005 2005 --------- -------- -------- ------- -------- Net interest income - tax equivalent (1) $17,979 18,060 17,463 17,118 16,398 Taxable equivalent adjustment (1) 126 113 111 111 113 Net interest income 17,853 17,947 17,352 17,007 16,285 Provision for loan losses 1,015 925 690 845 580 Noninterest income 3,954 3,803 3,779 3,712 3,710 Noninterest expense 12,729 12,175 11,486 12,260 11,715 Income before income taxes 8,063 8,650 8,955 7,614 7,700 Income taxes 3,072 1,237 9,646 2,962 2,984 Net income 4,991 7,413 (691) 4,652 4,716 Earnings per share - basic 0.35 0.52 (0.05) 0.33 0.33 Earnings per share - diluted 0.35 0.52 (0.05) 0.32 0.33 ------------------------------------------------------------------------- (1) See footnote 1 on page 1 of Financial Summary for discussion of tax- equivalent adjustments. (2) Net income for the three months ended September 30, 2005 was significantly impacted by a contingency tax loss accrual amounting to $6,320,000, or $0.44 per share (which increased income tax expense). (3) Net income for the three months ended December 31, 2005 was significantly impacted by the reversal of a portion of the accrual noted in (2) above, amounting to $1,982,000, or $0.14 per share (which decreased income tax expense). March 31, Dec. 31, March 31, One Year PERIOD END BALANCES 2006 2005 2005 Change ($ in thousands) ---------- -------- --------- -------- Assets $1,907,887 1,801,050 1,687,160 13.1% Securities 128,026 127,785 127,951 0.1% Loans 1,553,371 1,482,611 1,395,324 11.3% Allowance for loan losses 16,610 15,716 15,066 10.2% Intangible assets 49,131 49,227 49,445 -0.6% Deposits 1,565,040 1,494,577 1,448,692 8.0% Borrowings 131,739 100,239 76,239 72.8% Shareholders' equity 158,971 155,728 150,779 5.4% For the Three Months Ended March 31, Dec. 31, Sept. 30, June 30, March 31, YIELD INFORMATION 2006 2005 2005 2005 2005 --------- -------- --------- -------- --------- Yield on loans 7.16% 6.99% 6.71% 6.47% 6.26% Yield on securities - tax equivalent (1) 5.06% 4.82% 4.72% 5.06% 4.94% Yield on other earning assets 5.12% 4.39% 3.84% 3.33% 2.80% Yield on all interest earning assets 6.95% 6.74% 6.47% 6.25% 6.08% Rate on interest bearing deposits 2.88% 2.61% 2.35% 2.09% 1.86% Rate on other interest bearing liabilities 5.54% 5.30% 5.22% 5.27% 4.92% Rate on all interest bearing liabilities 3.08% 2.79% 2.53% 2.27% 2.04% Interest rate spread - tax equivalent (1) 3.87% 3.95% 3.94% 3.98% 4.04% Net interest margin - tax equivalent (2) 4.33% 4.37% 4.32% 4.31% 4.33% Average prime rate 7.42% 6.96% 6.42% 5.91% 5.44% (1) See footnote 1 on page 1 of Financial Summary for discussion of tax- equivalent adjustments. (2) Calculated by dividing annualized tax equivalent net interest income by average earning assets for the period. See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments. ASSET QUALITY DATA March 31, Dec. 31, Sept. 30, June 30, March 31, ($ in thousands) 2006 2005 2005 2005 2005 --------- -------- --------- -------- --------- Nonaccrual loans $3,283 1,640 3,330 3,806 4,249 Restructured loans 12 13 14 15 15 Accruing loans > 90 days past due -- -- -- -- -- --------- -------- --------- -------- --------- Total nonperforming loans 3,295 1,653 3,344 3,821 4,264 Other real estate 1,451 1,421 2,023 2,520 2,401 --------- -------- --------- -------- --------- Total nonperforming assets $4,746 3,074 5,367 6,341 6,665 ========= ======== ========= ======== ========= Net charge-offs to average loans - annualized 0.03% 0.29% 0.12% 0.08% 0.07% Nonperforming loans to total loans 0.21% 0.11% 0.23% 0.27% 0.31% Nonperforming assets to total assets 0.25% 0.17% 0.31% 0.36% 0.40% Allowance for loan losses to total loans 1.07% 1.06% 1.10% 1.10% 1.08%