UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 Commission File Number 0-15572 FIRST BANCORP (Exact Name of Registrant as Specified in its Charter) North Carolina 56-1421916 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 341 North Main Street, Troy, North Carolina 27371-0508 (Address of Principal Executive Offices) (Zip Code) (Registrant's telephone number, including area code) (910) 576-6171 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X ] YES [ ] NO As of March 31, 1998, 3,020,370 shares of the registrant's Common Stock, $5 par value, were outstanding. The registrant had no other classes of securities outstanding. Transitional Small Business Format [ ] YES [ X ] NO EXHIBIT INDEX BEGINS ON PAGE 23 FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 1 of 23
INDEX FIRST BANCORP AND SUBSIDIARIES Page Part I. Financial Information Item 1 - Financial Statements CONSOLIDATED BALANCE SHEETS - March 31, 1998 and 1997 (With Comparative Amounts at December 31, 1997) 3 CONSOLIDATED STATEMENTS OF INCOME - For the Periods Ended March 31, 1998 and 1997 4 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - For the Periods Ended March 31, 1998 and 1997 5 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - For the Periods Ended March 31, 1998 and 1997 6 CONSOLIDATED STATEMENTS OF CASH FLOWS - For the Periods Ended March 31, 1998 and 1997 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8 Item 2 - Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition 10 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 18 Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K 20 Signatures 22 Exhibit Cross Reference Index 23 FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 2 of 23
Part I. Financial Information Item 1 - Financial Statements <TABLE> <CAPTION> First Bancorp and Subsidiaries Consolidated Balance Sheets March 31, December 31, March 31, ($ in thousands-unaudited) 1998 1997 1997 - --------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> ASSETS Cash & due from banks, noninterest-bearing $ 15,592 17,664 12,243 Due from banks, interest-bearing 10,004 13,081 -- Federal funds sold 5,811 2,896 15,400 --------- --------- --------- Total cash and cash equivalents 31,407 33,641 27,643 --------- --------- --------- Securities available for sale (costs of $44,339, $49,995, and $54,559) 44,507 50,277 54,296 Securities held to maturity (fair values of $20,619, $21,512, and $23,537) 20,016 20,856 23,160 Presold mortgages in process of settlement 1,909 1,330 1,391 Loans 309,497 280,513 225,171 Less: Allowance for loan losses (5,008) (4,779) (4,777) --------- --------- --------- Net loans 304,489 275,734 220,394 --------- --------- --------- Premises and equipment 8,752 8,839 7,789 Accrued interest receivable 2,812 2,866 2,447 Intangible assets 6,323 6,487 5,459 Other 2,617 2,639 2,626 --------- --------- --------- Total assets $ 422,832 402,669 345,205 ========= ========= =========
<CAPTION> First Bancorp and Subsidiaries Consolidated Balance Sheets March 31, December 31, March 31, ($ in thousands-unaudited) 1998 1997 1997 - --------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> LIABILITIES Deposits: Demand - noninterest-bearing $ 53,288 50,921 43,192 Savings, NOW, and money market 137,418 135,805 117,084 Time deposits of $100,000 or more 47,064 40,200 33,011 Other time deposits 142,654 134,298 114,010 --------- --------- --------- Total deposits 380,424 361,224 307,297 Accrued interest payable 2,412 2,299 1,862 Other liabilities 2,453 2,381 2,398 --------- --------- --------- Total liabilities 385,289 365,904 311,557 --------- --------- --------- SHAREHOLDERS' EQUITY Common stock, $5 par value per share Authorized: 12,500,000 shares Issued and outstanding: 3,020,370, 3,020,370, and 3,016,370 shares 15,102 15,102 15,082 Capital surplus 3,861 3,861 3,831 Retained earnings 18,469 17,616 14,907 Accumulated other comprehensive income (loss) 111 186 (172) --------- --------- --------- Total shareholders' equity 37,543 36,765 33,648 --------- --------- --------- Total liabilities and shareholders' equity $ 422,832 402,669 345,205 ========= ========= ========= </TABLE> See notes to consolidated financial statements. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 3 of 23
<TABLE> <CAPTION> First Bancorp and Subsidiaries Consolidated Statements of Income Three Months Ended March 31, ------------------------------ ($ in thousands, except per share data-unaudited) 1998 1997 - ----------------------------------------------------------------------------------- <S> <C> <C> INTEREST INCOME Interest and fees on loans $ 6,919 5,287 Interest on investment securities: Taxable interest income 807 895 Tax-exempt interest income 279 316 Other, principally overnight investments 220 180 ---------- ---------- Total interest income 8,225 6,678 ---------- ---------- INTEREST EXPENSE Savings, NOW and money market 800 609 Time deposits of $100,000 or more 603 462 Other time deposits 1,832 1,462 ---------- ---------- Total interest expense 3,235 2,533 ---------- ---------- Net interest income 4,990 4,145 Provision for loan losses 280 75 ---------- ---------- Net interest income after provision for loan losses 4,710 4,070 ---------- ---------- NONINTEREST INCOME Service charges on deposit accounts 610 607 Commissions from insurance sales 59 74 Other service charges, commissions and fees 374 311 Data processing fees -- 73 ---------- ---------- Total noninterest income 1,043 1,065 ---------- ----------
<CAPTION> First Bancorp and Subsidiaries Consolidated Statements of Income Three Months Ended March 31, ------------------------------ ($ in thousands, except per share data-unaudited) 1998 1997 - ----------------------------------------------------------------------------------- <S> <C> <C> NONINTEREST EXPENSES Salaries 1,725 1,516 Employee benefits 373 320 ---------- ---------- Total personnel expense 2,098 1,836 Net occupancy expense 246 236 Equipment related expenses 219 211 Other operating expenses 1,208 1,202 ---------- ---------- Total noninterest expenses 3,771 3,485 ---------- ---------- Income before income taxes 1,982 1,650 Income taxes 676 524 ---------- ---------- NET INCOME $ 1,306 1,126 ========== ========== Weighted average common shares outstanding - basic 3,020,370 3,016,370 ========== ========== Weighted average common shares 3,108,468 3,082,097 ========== ========== Earnings per share - basic $ 0.43 0.37 Earnings per share - diluted 0.42 0.36 Cash dividends declared per share 0.15 0.13 </TABLE> See notes to consolidated financial statements. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 4 of 23
<TABLE> <CAPTION> First Bancorp and Subsidiaries Consolidated Statements of Comprehensive Income Three Months Ended March 31, ------------------------- ($ in thousands-unaudited) 1998 1997 - ------------------------------------------------------------------------------------ <S> <C> <C> Net income $ 1,306 1,126 ------- ------- Other comprehensive income (loss): Unrealized losses on securities available for sale: Unrealized holding losses arising during the period, pretax (115) (483) Tax benefit (expense) 40 165 ------- ------- Other comprehensive income (loss) (75) (318) ------- ------- Comprehensive income $ 1,231 808 ======= ======= </TABLE> See notes to consolidated financial statements. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 5 of 23
<TABLE> <CAPTION> First Bancorp and Subsidiaries Consolidated Statements of Shareholders' Equity Accumulated Common Stock Other Share- ($ in thousands, --------------------- Capital Retained Comprehensive holders' except per share - unaudited) Shares Amount Surplus Earnings Income Equity - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Balances, January 1, 1997 3,016 $ 15,082 3,831 14,173 146 33,232 Net income 1,126 1,126 Cash dividends declared ($0.13 per share) (392) (392) Other comprehensive income (loss) (318) (318) ----- --------- ----- ------ --- ------ Balances, March 31, 1997 3,016 $ 15,082 3,831 14,907 (172) 33,648 ===== ========= ===== ====== === ====== Balances, January 1, 1998 3,020 $ 15,102 3,861 17,616 186 36,765 Net income 1,306 1,306 Cash dividends declared ($0.15 per share) (453) (453) Other comprehensive income (loss) (75) (75) ----- --------- ----- ------ --- ------ Balances, March 31, 1998 3,020 $ 15,102 3,861 18,469 111 37,543 ===== ========= ===== ====== === ====== <CAPTION> As of As of March 31, March 31, 1998 1997 --------- --------- <S> <C> <C> Supplemental disclosure of components of Accumulated Other Comprehensive Income (Loss): Unrealized gain (loss) on securities available for sale, pretax $168 (261) Tax benefit (expense) (57) 89 --------- --------- Total Accumulated Other Comprehensive Income (Loss) $ 111 (172) ========= ========= </TABLE> See notes to consolidated financial statements. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 6 of 23
<TABLE> <CAPTION> First Bancorp and Subsidiaries Consolidated Statements of Cash Flows Three Months Ended March 31, --------------------------- ($ in thousands-unaudited) 1998 1997 - ---------------------------------------------------------------------------------------------------------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,306 1,126 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 280 75 Net security premium amortization (discount accretion) 14 (9) Loan fees and costs deferred, net of amortization 9 (1) Depreciation of premises and equipment 180 173 Amortization of intangible assets 164 139 Realized and unrealized other real estate losses -- 16 Provision for deferred income taxes 20 2 Changes in operating assets and liabilities: Decrease (increase) in accrued interest receivable 54 (35) Decrease in intangible pension asset -- 236 Decrease (increase) in other assets (537) 196 Increase (decrease) in accrued interest payable 113 (20) Increase (decrease) in other liabilities 12 (137) -------- -------- Net cash provided by operating activities 1,615 1,761 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities available for sale (5,314) (8,623) Purchases of securities held to maturity (3) (1,217) Proceeds from maturities/issuer calls of securities available for sale 10,960 7,802 Proceeds from maturities/issuer calls of securities held to maturity 838 373 Net increase in loans (29,044) (2,224) Purchases of premises and equipment (93) (240) -------- -------- Net cash used in investing activities (22,656) (4,129) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 19,200 9,436 Cash dividends paid (393) (332) -------- -------- Net cash provided by financing activities 18,807 9,104 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,234) 6,736 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 33,641 20,907 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,407 27,643 ======== ========
<CAPTION> First Bancorp and Subsidiaries Consolidated Statements of Cash Flows Three Months Ended March 31, --------------------------- ($ in thousands-unaudited) 1998 1997 - ---------------------------------------------------------------------------------------------------------------- <S> <C> <C> SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 3,122 2,553 Income taxes 204 28 Non-cash transactions: Foreclosed loans transferred to other real estate -- 62 Loans to facilitate the sale of other real estate -- 17 Decrease in fair value of securities available for sale (115) (483) </TABLE> See notes to consolidated financial statements. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 7 of 23
First Bancorp And Subsidiaries Notes To Consolidated Financial Statements (unaudited) For the Periods Ended March 31, 1998 and 1997 - -------------------------------------------------------------------------------- NOTE 1 In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the consolidated financial position of the Company as of March 31, 1998 and 1997 and the consolidated results of operations and consolidated cash flows for the periods ended March 31, 1998 and 1997. Reference is made to the Annual Report on Form 10-K filed with the SEC for a discussion of accounting policies and other relevant information with respect to the consolidated financial statements. The results of operations for the periods ended March 31, 1998 and 1997 are not necessarily indicative of the results to be expected for the full year. NOTE 2 The Company adopted financial accounting standard 128, "Earnings Per Share," as of December 31, 1997. As required by the standard, all prior year earnings per share amounts have been restated and computed under the provisions of the new standard. Basic earnings per share were computed by dividing net income by the weighted average common shares outstanding. Diluted earnings per share includes the potentially dilutive effects of the Company's 1994 Stock Option Plan. The following is a reconciliation of the numerators and denominators used in computing basic and diluted earnings per share: <TABLE> <CAPTION> For the Three Months Ended March 31, -------------------------------------------------------------------------------- 1998 1997 -------------------------------------------------------------------------------- Income Shares Income Shares ($ in thousands except per (Numer- (Denom- Per Share (Numer- (Denom- Per Share share amounts) ator) inator) Amount ator) inator) Amount - ---------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Basic EPS Net income $ 1,306 3,020,370 $0.43 $ 1,126 3,016,370 $0.37 ======= ======= Effect of Dilutive Securities Effect of stock option plan -- 88,098 -- 65,727 ------ --------- ------- -------- Diluted EPS Net income plus assumed exercises of options $ 1,306 3,108,468 $0.42 $ 1,126 3,082,097 $0.36 ------- --------- ======= ------- --------- ======= </TABLE>
On January 1, 1998, the Company adopted financial accounting standard 130, "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components in a full set of financial statements. Comprehensive income is defined as the change in equity during a period for non-owner transactions and is divided into net income and other comprehensive income. Other comprehensive income includes revenues, expenses, gains, and losses that are excluded from earnings under current accounting standards. This statement does not change or modify the reporting or display in the income statement. Comparative financial statements have been presented as required by the statement. The Financial Accounting Standards Board has also issued financial accounting standard number 131, "Disclosures about Segments of an Enterprise and Related Information". This statement requires management to report selected financial data and descriptive information about reportable operating segments and is effective for periods beginning after December 15, 1997. This statement does not require application in interim financial statements in the initial year of adoption. The requirements of this standard will be applied in a manner relevant for the Company beginning with the financial statements for the year ended December 31, 1998. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 8 of 23
As of January 1, 1998, the Company also adopted financial accounting standard 132, "Employers Disclosures about Pensions and Other Postretirement Benefits." This statement standardizes the disclosure requirements of pensions and other postretirement benefits. This statement does not change any measurement or recognition provisions, and thus has not and is not expected to materially impact the Company. NOTE 3 Certain amounts reported in the period ended March 31, 1997 have been reclassified to conform with the presentation for March 31, 1998. These reclassifications had no effect on net income or shareholders' equity for the periods presented, nor did they materially impact trends in financial information. NOTE 4 Based on management's evaluation of the loan portfolio, current economic conditions and other risk factors, the Company's allowance for possible loan losses was $5,008,000 as of March 31, 1998 compared to $4,779,000 and $4,777,000 as of December 31, 1997 and March 31, 1997, respectively. These reserve levels represented 1.62%, 1.70% and 2.12% of total loans as of March 31, 1998, December 31, 1997 and March 31, 1997, respectively. Nonperforming assets are defined as nonaccrual loans, loans past due 90 or more days and still accruing interest, restructured loans and foreclosed, repossessed and idled properties. For each of the periods presented, the Company had no loans past due 90 or more days and still accruing interest. Nonperforming assets are summarized as follows: <TABLE> <CAPTION> March 31, December 31, March 31, ($ in thousands) 1998 1997 1997 - ----------------------------------------------- ----------------- --------------- ---------------- <S> <C> <C> <C> Nonperforming loans: Nonaccrual loans $ 633 957 1,376 Restructured loans 256 326 294 ------ ------ ------ Total nonperforming loans 889 1,283 1,670 Foreclosed, repossessed, and idled properties (included in other assets) 377 560 410 ------ ------ ------ Total nonperforming assets $1,266 1,843 2,080 ====== ====== ====== Nonperforming loans to total loans 0.29% 0.46% 0.74% Allowance for loan losses to nonperforming loans 563.33% 372.49% 286.05% Nonperforming assets as a percentage of loans and foreclosed, repossessed, and idled properties 0.41% 0.66% 0.92% Nonperforming assets to total assets 0.30% 0.46% 0.60% </TABLE> NOTE 5 Loans are shown on the Consolidated Balance Sheets net of approximately $10,000 of unearned income for each of the periods presented. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 9 of 23
Item 2 - Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition RESULTS OF OPERATIONS OVERVIEW Net income for the first quarter of 1998 totaled $1,306,000, an increase of 16.0% over the $1,126,000 reported for the first quarter of 1997. Basic earnings per share for the three months ended March 31, 1998 were $0.43 compared to $0.37 reported for the first quarter of 1997, an increase of 16.2%. Earnings per share on a diluted basis amounted to $0.42 per share for the first quarter of 1998 compared to $0.36 reported for the first quarter of 1997, a 16.7% increase. The increase in first quarter net income from the prior year is primarily a result of the 20.4% increase in net interest income. The increase in net interest income is largely attributable to the loan and deposit growth experienced in the past year. These additional earnings were partially offset by a higher provision for loan losses, which was $280,000 for the first three months of 1998 compared to the $75,000 recorded in the first three months of 1997. The increase in the provision for loan losses was primarily in response to the significantly higher loan growth experienced in the first quarter of 1998 ($29 million) compared to the first quarter of 1997 ($2 million), and not credit quality concerns. Noninterest income decreased 2.1% and noninterest expenses increased 8.2% when comparing the first quarter of 1998 to 1997. The decrease in noninterest income was primarily a result of the loss of a data processing client that occurred in November 1997. The increase in noninterest expenses is primarily attributable to growth in the branch network over the prior year. 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 increased by $845,000, or 20.4%, when comparing the first quarter of 1998 with the first quarter of 1997, primarily because of growth in loan and deposit volume. At March 31, 1998, loans had increased 37.4% to $309,497,000 from $225,171,000 at March 31, 1997, while deposits had increased by 23.8%, from $307,297,000 at March 31, 1997 to $380,424,000 at March 31, 1998. The Company's net interest margin was substantially the same during the two periods - 5.55% for the first quarter of 1998 and 5.56% for the first quarter of 1997. See additional discussion regarding interest rate risk below in Item 3 - Quantitative and Qualitative Disclosures About Market Risk. The provision for possible loan losses for the first quarter increased $205,000 to $280,000 from $75,000 for the first quarter of 1997. The increase in the provision for loan losses was primarily in response to the significantly higher loan growth experienced in the first quarter of 1998 ($29 million) compared to the first quarter of 1997 ($2 million), and not credit quality concerns. Provisions for possible loan losses are based on management's evaluation of the loan portfolio, as discussed under "Summary of Loan Loss Experience" below. Noninterest income decreased $22,000, or 2.1%, to $1,043,000 in the first quarter of 1998 from $1,065,000 for the first quarter of 1997. The decrease in noninterest income was primarily a result of the loss of a data processing client that occurred in November 1997. This customer provided approximately $73,000 in gross revenues in the first quarter of 1997. This decline in noninterest income was largely offset by a $63,000, or 20.3% increase in other service charges, commissions, and fees. The increase in this category of noninterest income was primarily a result of an increase in mortgage origination fees on presold mortgages that was experienced as a result of heavy residential mortgage loan volume. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 10 of 23
Noninterest expenses increased by $286,000, or 8.2%, from $3,485,000 to $3,771,000, for the first quarter of 1998 primarily because of expenses associated with opening branch offices in Sanford and Polkton since March 1997 and a full quarter of expenses associated with the opening of the Lillington branch that occurred in March 1997. The personnel expense associated with the employees of these new branches, along with normal wage increases for substantially all Company employees that occurred in January 1998, caused total personnel expense to increase by 14.2%, or $262,000 when comparing the first quarter of 1998 to the same quarter of 1997. Income taxes increased $152,000, or 29.0%, for the first quarter of 1998 over the first quarter of 1997. This reflects an effective tax rate of 34.1% for the first quarter of 1998 compared to 31.8% for the first quarter of 1997. The increase in the effective tax rate is due to the Company deriving a smaller percentage of its earnings from tax-exempt securities. FINANCIAL CONDITION The Company's total assets were $422.8 million at March 31, 1998, an increase of $77.6 million, or 22.5%, from the $345.2 million at March 31, 1997. Interest-earning assets increased by 22.6%, from $319.4 million to $391.7 million, compared to March 31, 1997. Loans, the primary interest-earning asset, increased by $84.3 million, or 37.4% during this same period. Deposits increased $73.1 million, or 23.8% to support the asset growth, of which approximately $14 million was acquired in the Company's November 1997 branch purchase in Lillington. The increases in deposits occurred in all significant categories with noninterest bearing demand deposits increasing by $10.1 million, or 23.4%, savings, NOW and money market accounts increasing by $20.3 million, or 17.4%, time deposits of $100,000 or more increasing by $14.1 million, or 42.6%, and other time deposits increasing by $28.6 million, or 25.1%. The Company's cost of funds has remained relatively low compared to that of its competitors. The Company does not rely heavily on large deposits of $100,000 or more to fund asset growth and has not traditionally engaged in obtaining deposits through brokers. Since December 31, 1997, the Company has experienced increases of 6.2%, 5.0%, and 5.3% in earning assets, total assets and deposits, respectively. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 11 of 23
NONPERFORMING ASSETS Nonperforming assets are defined as nonaccrual loans, loans past due 90 or more days and still accruing interest, restructured loans and foreclosed, repossessed and idled properties. For each of the periods presented, the Company had no loans past due 90 or more days and still accruing interest. Nonperforming assets are summarized as follows: <TABLE> <CAPTION> March 31, December 31, March 31, ($ in thousands) 1998 1997 1997 - ----------------------------------------------- ---------------- ----------------- --------------- <S> <C> <C> <C> Nonperforming loans: Nonaccrual loans $ 633 957 1,376 Restructured loans 256 326 294 ------ ------ ------ Total nonperforming loans 889 1,283 1,670 Foreclosed, repossessed, and idled properties (included in other assets) 377 560 410 ------ ------ ------ Total nonperforming assets $1,266 1,843 2,080 ====== ====== ====== Nonperforming loans to total loans 0.29% 0.46% 0.74% Allowance for loan losses to nonperforming loans 563.33% 372.49% 286.05% Nonperforming assets as a percentage of loans and foreclosed, repossessed, and idled properties 0.41% 0.66% 0.92% Nonperforming assets to total assets 0.30% 0.46% 0.60% </TABLE> Management has reviewed the collateral for the nonperforming assets, including nonaccrual loans, and has included this review among the factors considered in the evaluation of the allowance for loan losses discussed below. A loan is placed on nonaccrual status when, in management's judgment, the collection of interest appears doubtful. While a loan is on nonaccrual status, the Company's policy is that all cash receipts are applied to principal. Once the recorded principal balance has been reduced to zero, future cash receipts are applied to recoveries of any amounts previously charged off. Further cash receipts are recorded as interest income to the extent that any interest has been foregone. The accrual of interest is discontinued on all loans that become 90 days past due with respect to principal or interest. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the originally contracted terms. Nonperforming loans are defined as nonaccrual loans and restructured loans. As of March 31, 1998, December 31, 1997 and March 31, 1997, nonperforming loans were approximately 0.29%, 0.46%, and 0.74%, respectively, of the total loans outstanding at such dates. Nonaccrual loans as of March 31, 1998 decreased $743,000, or 54.0%, from March 31, 1997 to approximately $633,000 and are lower by approximately $324,000, or 33.9%, since year-end. The decrease in nonaccrual loans at March 31, 1998 as compared to December 31, 1997 is primarily attributable to generally improved loan quality, as well as the full payout of a nonaccrual relationship totaling $230,000 during the period. The decrease in nonaccrual loans when comparing December 31, 1997 to March 31, 1997 is primarily attributable to generally improved loan quality, as well as the resolution of several larger relationships during the period that resulted in partial charge-offs. As of March 31, 1998, the borrower with the largest nonaccrual loan owed a balance of $175,000 while the average nonaccrual loan balance was approximately $17,000. If FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 12 of 23
the nonaccrual loans and restructured loans as of March 31, 1998 and 1997 had been current in accordance with their original terms and had been outstanding throughout the three month periods (or since origination or acquisition if held for part of the three month periods), gross interest income in the amounts of approximately $15,000 and $35,000 for nonaccrual loans and $7,000 and $8,000 for restructured loans would have been recorded for the three months ended March 31, 1998 and 1997, respectively. Interest income on such loans that was actually collected and included in net income in the three months ended March 31, 1998 and 1997 amounted to approximately $1,000 and $40,000, respectively, for nonaccrual loans and $10,000 and $5,000, respectively, for restructured loans. The FASB has issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which requires that all creditors value all specifically reviewed loans for which it is probable that the creditor will be unable to collect all amounts due according to the terms of the loan agreement at the present value of expected cash flows, market price of the loan, if available, or value of the underlying collateral. Expected cash flows are required to be discounted at the loan's effective interest rate. The FASB also has issued SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures," that amends Standard No. 114 to allow a creditor to use existing methods for recognizing interest income on an impaired loan and by requiring additional disclosures about how a creditor recognizes interest income related to impaired loans. SFAS No.'s 114 and 118 do not apply to large groups of smaller-balance homogenous loans that are collectively evaluated for impairment. For the Company, these loans include residential mortgage and consumer installment loans. Consistent with SFAS No. 114, management considers loans to be impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured using either the discounted expected cash flows or the value of collateral method. While a loan is considered to be impaired, the Company's policy is that all cash receipts are applied to principal. Once the recorded principal balance has been reduced to zero, future cash receipts are applied to recoveries of any amounts previously charged off. Further cash receipts are recorded as interest income to the extent that any interest has been foregone. At March 31, 1998, December 31, 1997, and March 31, 1997 the recorded investment in loans that are considered to be impaired under SFAS No. 114 was $96,000, $398,000, and $908,000, respectively, all of which were on a nonaccrual basis. The decreases in the level of impaired loans at the respective period ends is due to the same reasons as the decrease in nonaccrual loans over the same periods discussed above. The related allowance for loan losses for these impaired loans as determined in accordance with SFAS No. 114 was $14,000, $60,000, and $166,000, respectively. There were no impaired loans for which there was no related allowance determined in accordance with the statement. The average recorded investments in impaired loans during the three month period ended March 31, 1998, the year ended December 31, 1997, and the three months ended March 31, 1997 were approximately $247,000, $654,000, and $1,068,000, respectively. For the same periods, the Company recognized no interest income on those impaired loans during the period that they were considered to be impaired. In addition to the nonperforming loan amounts discussed above, management believes that an estimated $1,000,000-$1,500,000 of loans that are currently performing in accordance with their contractual terms may potentially develop problems depending upon the particular financial situations of FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 13 of 23
the borrowers and economic conditions in general. These loans were considered in determining the appropriate level of the allowance for possible loan losses. See "Summary of Loan Loss Experience" below. Loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed in the problem loan amounts above do not represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources, or represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms. As of March 31, 1998, December 31, 1997 and March 31, 1997, the Company owned foreclosed, repossessed, and idled assets totaling approximately $377,000, $560,000, and $410,000, respectively, which consisted principally of several parcels of foreclosed real estate. The Company's management reviewed recent appraisals of these properties and has concluded that their fair values, less estimated costs to sell, exceed their respective carrying values as of the periods presented. SUMMARY OF LOAN LOSS EXPERIENCE The allowance for loan losses is created by direct charges to operations. Losses on loans are charged against the allowance in the period in which such loans, in management's opinion, become uncollectible. Recoveries during the period are credited to this allowance. The factors that influence management's judgment in determining the amount charged to operating expense include past loan loss experience, composition of the loan portfolio, evaluation of possible future losses and current economic conditions. The Company's bank subsidiary uses a loan analysis and grading program to facilitate its evaluation of possible future loan losses and the adequacy of its allowance for loan losses, otherwise referred to as its loan loss reserve. In this program, a "watch list" is prepared and monitored monthly by management and is tested quarterly by the bank's Internal Audit Department. The list includes loans that management identifies as having potential credit weaknesses in addition to loans past due 90 days or more, nonaccrual loans and remaining unpaid loans identified during previous examinations. Based on management's evaluation of the loan portfolio and economic conditions, a provision for possible loan losses of $280,000 was added to the allowance for possible loan losses during the first quarter of 1998. This provision for loan losses made during the first quarter of 1998 was greater than the $75,000 provision made during the corresponding period of 1997. This increase was due primarily to the significant loan growth experienced by the Company and not credit quality concerns. The net increase in loans outstanding was $29 million in the first quarter of 1998 as compared to a $2 million increase experienced in the first quarter of 1997. At March 31, 1998, the allowance stood at $5,008,000, compared to $4,779,000 at December 31, 1997 and $4,777,000 at March 31, 1997. At March 31, 1998, the allowance for loan losses was approximately 563% of total nonperforming loans, compared to corresponding percentages of 372% at December 31, 1997 and 286% at March 31, 1997. The allowance for loan losses was 1.62%, 1.70% and 2.12% of total loans as of March 31, 1998, December 31, 1997 and March 31, 1997, respectively. Management believes the reserve levels are adequate to cover possible loan losses on the loans outstanding as of each reporting date. It must be emphasized, however, that the determination of the reserve using the Company's procedures and methods rests upon various judgments and assumptions about future economic conditions and other factors affecting loans. No assurance can be given that the Company will not in any particular period sustain FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 14 of 23
loan losses that are sizable in relation to the amounts reserved or that subsequent evaluations of the loan portfolio, in light of conditions and factors then prevailing, will not require significant changes in the allowance for possible loan losses or future charges to earnings. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowances for possible loan losses and losses on other real estate. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available at the time of such examinations. For the periods indicated, the following table summarizes the Company's balances of loans outstanding, average loans outstanding, changes in the allowance for loan losses arising from charge-offs and recoveries by category, and additions to the allowance for loan losses that have been charged to expense. <TABLE> <CAPTION> Three Months Year Three Months Ended Ended Ended March 31, Dec 31, March 31, ($ in thousands) 1998 1997 1997 - ---------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Loans outstanding at period end $ 309,497 280,513 225,171 =================================================== Average loans outstanding during period $ 293,838 245,596 222,278 =================================================== Allowance for possible loan losses at beginning of period $ 4,779 4,726 4,726 Loans charged off: Commercial, financial and agricultural (15) (61) - Real estate - mortgage - (449) (110) Installment loans to individuals (58) (311) (104) ---------------------------------------------------- Total charge-offs (73) (821) (214) ---------------------------------------------------- Recoveries of loans previously charged-off: Commercial, financial and agricultural 3 89 73 Real estate - mortgage 2 38 6 Installment loans to individuals 17 141 78 Other - 31 33 --------------------------------------------------- Total recoveries 22 299 190 --------------------------------------------------- Net charge-offs (51) (522) (24) Additions to the allowance charged to expense 280 575 75 --------------------------------------------------- Allowance for possible loan losses at end of period $ 5,008 4,779 4,777 =================================================== Ratios: Annualized net charge-offs to average loans during period 0.07% 0.21% 0.04% Allowance for loan losses to loans at end of period 1.62% 1.70% 2.12% Allowance for loan losses as a multiple of annualized net charge-offs 24.55x 9.16x 49.76x Provision for loan losses as a percent of net charge-offs 549.02% 110.15% 312.5% Recoveries of loans previously charged- off as a percent of loans charged-off 30.14% 36.42% 88.79% </TABLE> FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 15 of 23
Based on the results of the aforementioned loan analysis and grading program and management's evaluation of the allowance for loan losses at March 31, 1998, there have been no material changes to the allocation of the allowance for loan losses among the various categories of loans since December 31, 1997. LIQUIDITY The Company's liquidity is determined by its ability to convert assets to cash or acquire alternative sources of funds to meet the needs of its customers who are withdrawing or borrowing funds, and to maintain required reserve levels, pay expenses and operate the Company on an ongoing basis. The Company's primary liquidity sources are net income from operations, cash and due from banks, federal funds sold and other short-term investments. In addition, the Company (through its bank subsidiary) has the ability, on a short-term basis, to purchase federal funds from other financial institutions and has an available line of credit with the Federal Home Loan Bank in place that can provide short or long term financing. The Company has not traditionally had to rely on these sources of credit as a source of liquidity. The Company has experienced an increase in its loan to deposit ratio (81.3% at March 31, 1998 compared to 73.3% a year ago) as a result of the significant loan growth experience by the Company. However, the Company's management believes its liquidity sources are at an acceptable level and remain adequate to meet its operating needs. CAPITAL RESOURCES The Company is required by its own policies and by applicable federal regulations to maintain certain capital levels. The Company's ratio of stated capital to total assets exceeded 8% as of March 31, 1998 and 1997, and December 31, 1997. In an effort to achieve a measurement of capital adequacy that is sensitive to the individual risk profiles of financial institutions, the various financial institution regulators have minimum capital guidelines that categorize various components of capital and types of assets and measure capital adequacy in relation to the financial institution's relative level of those capital components and the level of risk associated with various types of assets of that financial institution. The guidelines call for minimum adjusted capital of 8% of risk-adjusted assets. As of March 31, 1998, the Company's total risk-based capital ratio was 11.41%. In addition to the risk-based capital requirements described above, the Company is subject to a leverage capital requirement, which calls for a minimum ratio of leverage capital, as defined in the regulations, to quarterly average total assets of 3-5%. As of March 31, 1998, the Company's leverage capital ratio was 7.76%. The Company is not aware of any recommendations of regulatory authorities or otherwise which, if they were to be implemented, would have a material effect on its liquidity, capital resources, or operations. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 16 of 23
As of March 31, 1998, December 31, 1997 and March 31, 1997, the Company was in compliance with all existing regulatory capital requirements, as summarized in the following table: <TABLE> <CAPTION> March 31, Dec 31, March 31, ($ in thousands) 1998 1997 1997 - -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Tier I capital: Total stated shareholders' equity $ 37,543 36,765 33,648 Less: Intangible assets 6,323 6,487 5,459 Unrealized gain (loss) on securities available for sale, net of income taxes 111 186 (172) --------------------------------------------- Total Tier I leverage capital 31,109 30,092 28,361 Tier II capital: Allowable allowance for loan losses 3,773 3,466 2,840 --------------------------------------------- Total capital $ 34,882 33,558 31,201 ============================================= Risk-adjusted assets $ 308,257 283,924 232,497 Tier I risk-adjusted assets (includes Tier I capital adjustments) 301,823 277,251 227,210 Tier II risk adjusted assets (includes Tiers I and II capital adjustments) 305,596 280,717 230,050 Quarterly average total assets 407,233 386,291 339,878 Adjusted quarterly average total assets (includes Tier I capital adjustments) 400,799 379,618 334,591 Risk-based capital ratios: Tier I capital 10.31% 10.85% 12.48% Minimum required Tier I capital 4.00% 4.00% 4.00% Total risk-based capital 11.41% 11.95% 13.56% Minimum required total risk-based capital 8.00% 8.00% 8.00% Leverage capital ratios: Tier I leverage capital ratio 7.76% 7.93% 8.48% Minimum required Tier I leverage capital 3-5.00% 3-5.00% 3-5.00% </TABLE> UPDATE ON YEAR 2000 As has been widely reported in the media, many of the world's existing computer programs use only two digits to identify the year in the date field of a program. These programs were designed and developed without considering the impact of the upcoming change in the century and could experience serious malfunctions when the last two digits of the year change to "00" (Year 2000 Issue). Due to the highly automated and computerized nature of the Company's transaction processing and operations as a whole, the Company is taking the Year 2000 Issue very seriously. The Company's Technology Committee, which is comprised of a cross-section of the Company's employees, is leading the Company's Year 2000 efforts and involving all employees of the Company in ensuring that the Company is properly prepared for the Year 2000. The Company uses third-party software vendors for most of its computer programs and micro-chip related processes. The first phase of the Company's efforts to address the Year 2000 Issue was to inventory all known Company processes that could reasonably be expected to be impacted by the Year 2000 Issue and their related vendors, if applicable. This inventory of processes and vendors included not only typical computer processes such as the Company's transaction applications systems, but all known processes that could be impacted by micro-chip FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 17 of 23
malfunctions. These include but are not limited to the Company's alarm system, phone system, check ordering process, and ATM network. The Company's second phase in addressing the Year 2000 Issue was to contact all such vendors and request documentation regarding their Year 2000 compliance efforts. This phase is now virtually complete and the Company is currently analyzing the responses. The next phase for the Company is to implement a comprehensive testing of all known processes. Initially, processes will be tested on a stand-alone basis and then the testing will involve multiple interfacing processes. Testing of the Company's processes has begun and is scheduled to be substantially complete by the end of 1998. Management plans for any corrective actions to be implemented to ensure that the Company is fully prepared for the Year 2000 by the end of the first quarter of 1999. The most significant phase of testing, the testing of the Company's software applications, is scheduled for the third quarter of 1998 upon the arrival of software applications upgrades from the Company's primary software application vendor. To date the Company has not identified any processes that will require significant expenditures to address the Year 2000 Issue. The Company's estimate of the range of total costs to address the Year 2000 Issue continues to be from $100,000 to $150,000. The majority of these costs are expected to be incurred and expensed by the Company in 1998. Item 3. Quantitative and Qualitative Disclosures About Market Risk INTEREST RATE RISK (INCLUDING QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK) Net interest income is the Company's most significant component of earnings. Notwithstanding changes in volumes of loans and deposits, the Company's level of net interest income is continually at risk due to the effect that changes in general market interest rate trends have on interest yields earned and paid with respect to the various categories of earnings assets and interest-bearing liabilities. It is the Company's policy to maintain portfolios of earning assets and interest-bearing liabilities with maturities and repricing opportunities that will afford protection, to the extent practical, against wide interest rate fluctuations. The Company's exposure to interest rate risk is analyzed on a regular basis by management using standard GAP reports, maturity reports, and an asset/liability software model that simulates future levels of interest income and expense based on current interest rates, expected future interest rates, and various intervals of "shock" interest rates. Over the years, the Company has been able to maintain a fairly consistent yield on average earning assets (net interest margin). Over the past ten years the net interest margin has not varied by more than 25 basis points in any single year and the lowest net interest margin realized over that same period is within 60 basis points of the highest. While the Company can not guarantee similar stability in the net interest margin in the future, at this time, management does not expect significant fluctuations. See additional discussion of the Company's net interest margin in the "Components of Earnings" section above. As of March 31, 1998, the Company had approximately $78 million more in interest-bearing liabilities that are subject to interest rate changes within one year than earning assets. This generally would indicate that net interest income would experience downward pressure in a rising interest rate environment and would benefit from a declining interest rate environment. However, this method of analyzing interest sensitivity only measures the magnitude of the timing differences and does not address earnings, market value, or management actions. Also, interest rates on certain types of assets and FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 18 of 23
liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. In addition to the effects of "when" various rate-sensitive products reprice, market rate changes may not result in uniform changes in rates among all products. For example, included in interest-bearing liabilities at March 31, 1998 subject to interest rate changes within one year are deposits totaling $137.4 million comprised of NOW, savings, and certain types of money market deposits with interest rates set by management. These types of deposits historically have not repriced coincidentally with or in the same proportion as general market indicators. Thus, the Company believes that near term net interest income would not likely experience significant downward pressure from rising interest rates. Similarly, management would not expect a significant increase in near term net interest income from falling interest rates. As of March 31, 1998, approximately 90% of interest-earning assets could be repriced within five years and substantially all interest-bearing liabilities could be repriced within five years. The Company has no market risk sensitive instruments held for trading purposes, nor does it maintain any foreign currency positions. The expected maturities and relative fair values of the Company's other than trading market risk sensitive financial instruments is substantially the same as it was at December 31, 1997 - see the SEC Form 10-K for the year ended December 31, 1997 for additional information. FORWARD LOOKING STATEMENTS The foregoing discussion may 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, 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 judgment 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, actions of government regulators, the level of market interest rates, and general economic conditions. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 19 of 23
Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits The following exhibits are filed with this report or, as noted, are incorporated by reference. Management contracts, compensatory plans and arrangements are marked with an asterisk (*). 3.a.i Copy of Articles of Incorporation of the Registrant and amendments thereto, was filed as Exhibit 3(a) to the Registrant's Registration Statement Number 33-12692, and is incorporated herein by reference. 3.a.ii Copy of the amendment to Articles of Incorporation - adding a new Article Nine, filed as exhibit 3(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1988, and is incorporated herein by reference. 3.b.i Copy of the Bylaws of the Registrant and amendments thereto, was filed as Exhibit 3(b) to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994, and is incorporated herein by reference. 10 Material Contracts 10.a Data processing Agreement dated October 1, 1984 by and between Bank of Montgomery (First Bank) and Montgomery Data Services, Inc. was filed as Exhibit 10(k) to the Registrant's Registration Statement Number 33-12692, and is incorporated herein by reference. 10.b First Bank Salary and Incentive Plan, as amended, was filed as Exhibit 10(m) to the Registrant's Registration Statement Number 33-12692, and is incorporated herein by reference. (*) 10.c First Bancorp Savings Plus and Profit Sharing Plan (401(k) savings incentive plan and trust), as amended January 25, 1994 and July 19, 1994, was filed as Exhibit 10(c) to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994, and is incorporated herein by reference. (*) 10.d Directors and Officers Liability Insurance Policy of First Bancorp, dated July 16, 1991, was filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991, and is incorporated herein by reference. 10.e Indemnification Agreement between the Company and its Directors and Officers was filed as Exhibit 10(t) to the Registrant's Registration Statement Number 33-12692, and is incorporated herein by reference. 10.f First Bancorp Employees' Pension Plan, as amended on August 16, 1994, was filed as Exhibit 10(g) to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994, and is incorporated herein by reference. (*) 10.g First Bancorp Senior Management Supplemental Executive Retirement Plan dated May 31, 1993, was filed as Exhibit 10(k) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, and is incorporated herein by reference. (*) FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 20 of 23
10.h First Bancorp Senior Management Split-Dollar Life Insurance Agreements between the Company and the Executive Officers, as amended on December 22, 1994, was filed as Exhibit 10(i) to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994, and is incorporated herein by reference. (*) 10.i First Bancorp 1994 Stock Option Plan was filed as Exhibit 10(n) to the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1994, and is incorporated herein by reference. (*) 10.j Severance Agreement between the Company and Patrick A. Meisky dated December 29, 1995 was filed as Exhibit 10(o) to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995, and is incorporated by reference. (*) 10.k Amendment to the First Bancorp Savings Plus and Profit Sharing Plan (401(k) savings incentive plan and trust), dated December 17, 1996, was filed as Exhibit 10(m) to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996, and is incorporated herein by reference. (*) 27.1 Financial Data Schedules pursuant to Article 9 of Regulation S-X for the period ended March 31, 1998. 27.2 Financial Data Schedules pursuant to Article 9 of Regulation S-X for the period ended March 31, 1997 - restated for financial accounting standard number 128, "Earnings Per Share" (b) There were no reports filed on Form 8-K during the quarter ended March 31, 1998. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 21 of 23
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST BANCORP May 13, 1998 BY: /s/James H. Garner ---------------------------- James H. Garner President (Principal Executive Officer), Treasurer and Director May 13, 1998 BY: /s/Anna G. Hollers ---------------------------- Anna G. Hollers Executive Vice President and Secretary May 13, 1998 BY: /s/Eric P. Credle ---------------------------- Eric P. Credle Vice President and Chief Financial Officer FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 22 of 23
<TABLE> <CAPTION> EXHIBIT CROSS REFERENCE INDEX Exhibit Page(s) - ------- ------- <S> <C> <C> 3.a.i Copy of Articles of Incorporation of the Registrant * 3.a.ii Copy of the amendment to Articles of Incorporation 3.b.i Copy of the Bylaws of the Registrant * 10.a Data processing Agreement by and between Bank of Montgomery (First Bank) and Montgomery Data Services, Inc. * 10.b First Bank Salary and Incentive Plan, as amended * 10.c First Bancorp Savings Plus and Profit Sharing Plan (401(k) savings incentive plan and trust), as amended * 10.d Directors and Officers Liability Insurance Policy of First Bancorp * 10.e Indemnification Agreement between the Company and its Directors and Officers * 10.f First Bancorp Employees' Pension Plan * 10.g First Bancorp Senior Management Supplemental Executive Retirement Plan * 10.h First Bancorp Senior Management Split-Dollar Life Insurance Agreements between the Company and the Executive Officers * 10.i First Bancorp 1994 Stock Option Plan * 10.j Severance Agreement between the Company and Patrick A. Meisky * 10.k Amendment to the First Bancorp Savings Plus and Profit Sharing Plan (401(k) savings incentive plan and trust) * 27.1 Financial Data Schedules pursuant to Article 9 of Regulation S-X for the three months ended March 31, 1998 27.2 Financial Data Schedules pursuant to Article 9 of Regulation S-X for the three months ended March 31, 1997 - restated for financial accounting standard number 128, "Earnings Per Share" </TABLE> * Incorporated herein by reference. FIRST BANCORP (No 0-15572), FORM 10-Q, March 31, 1998 Page 23 of 23