Pro Forma Combined Financial Results of the Company and Carolina Bank

($ in thousands, except share data)	Pro Forma Combined Nine Months Ended September 30, 2017
Net interest income	$	119,899
Noninterest income		35,236
Total revenue		155,135

Net income available to common shareholders		35,176

Earnings per common share
Basic	$	1.43
Diluted		1.43

Condensed Balance Sheet of Bank and Related Fair Value Adjustments

($ in thousands)	As Recorded by Carolina Bank			Initial Fair Value Adjustments			Measurement Period Adjustments			As Recorded by First Bancorp
Assets
Cash and cash equivalents	$	81,466			(2	) (a)		—			81,464
Securities		49,629			(261	) (b)		—			49,368
Loans, gross		505,560			(5,469	) (c)		146	(l)		497,522
					(2,715	) (d)		—
Allowance for loan losses		(5,746	)		5,746	(e)		—			̶
Premises and equipment		17,967			4,251	(f)		(319	) (m)		21,899
Core deposit intangible		—			8,790	(g)		—			8,790
Other		34,976			(4,804	) (h)		2,225	(n)		32,397
Total		683,852			5,536			2,052			691,440

Liabilities
Deposits	$	584,950			431	(i)		—			585,381
Borrowings		21,855			(2,855	) (j)		(262	) (o)		18,738
Other		12,855			225	(k)		(444	) (p)		12,636
Total		619,660			(2,199	)		(706	)		616,755

Net identifiable assets acquired											74,685

Total cost of acquisition
Value of stock issued				$	114,478
Cash paid in the acquisition					25,279
Total cost of acquisition											139,757

Goodwill recorded related to acquisition of Carolina Bank										$	65,072

Explanation of Fair Value Adjustments

(a)

This adjustment was recorded to a short-term investment to its estimated fair value.

(b)

This fair value adjustment was recorded to adjust the securities portfolio to its estimated fair value.

(c)

This fair value adjustment represents the amount necessary to reduce performing loans to their fair value due to interest rate factors and credit factors. Assuming the loans continue to perform, this amount will be amortized to increase interest income over the remaining lives of the related loans.

(d)

This fair value adjustment was recorded to write-down purchased credit impaired loans assumed in the acquisition to their estimated fair market value.

(e)

This fair value adjustment reduced the allowance for loan losses to zero as required by relevant accounting guidance.

(f)

This adjustment represents the amount necessary to increase premises and equipment from its book value on the date of acquisition to its estimated fair market value.

(g)

This fair value adjustment represents the value of the core deposit base assumed in the acquisition based on a study performed by an independent consulting firm. This amount was recorded by the Company as an identifiable intangible asset and will be amortized as expense on an accelerated basis over seven years.

(h)

This fair value adjustment primarily represents the net deferred tax liability associated with the other fair value adjustments made to record the transaction.

(i)

This fair value adjustment was recorded because the weighted average interest rate of Carolina Bank’s time deposits exceeded the cost of similar wholesale funding at the time of the acquisition. This amount is being amortized to reduce interest expense on an accelerated basis over the deposits’ remaining five year life.

(j)

This fair value adjustment was primarily recorded because the interest rate of Carolina Bank’s trust preferred securities was less than the current interest rate on similar instruments. This amount is being amortized on approximately a straight-line basis to increase interest expense over the remaining life of the related borrowing, which is 18 years.

(k)

This fair value adjustment represents miscellaneous adjustments needed to record assets and liabilities at their fair value.

(l)

This fair value adjustment was a miscellaneous adjustment to increase the initial fair value of gross loans.

(m)

This fair value adjustment relates to miscellaneous adjustment to decrease the initial fair value of premises and equipment.

(n)

This fair value adjustment relates to changes in the estimate of deferred tax assets/liabilities associated with the acquisition and adjustments to decrease the initial fair value of the foreclosed real estate acquired in the transaction based on newly obtained valuations.

(o)

This fair value adjustment relates to miscellaneous adjustments to decrease the initial fair value of borrowings.

(p)

This fair value adjustment relates to a change in the estimate of a contingent liability.

The following unaudited pro forma financial information presents the combined results of the Company and Carolina Bank as if the acquisition had occurred as of January 1, 2016, after giving effect to certain adjustments, including amortization of the core deposit intangible, and related income tax effects. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and Carolina Bank constituted a single entity during such period.

Condensed Balance Sheet of Bank and Related Fair Value Adjustments

($ in thousands)	As Recorded by Asheville Savings Bank			Initial Fair Value Adjustments			Measurement Period Adjustments			As Recorded by First Bancorp
Assets
Cash and cash equivalents	$	41,824			—			—			41,824
Securities		95,020			—			—			95,020
Loans, gross		617,159			(9,631	) (a)		—			606,180
					(1,348	) (b)		—
Allowance for loan losses		(6,685	)		6,685	(c)		—			—
Presold mortgages		3,785			—			—			3,785
Premises and equipment		10,697			9,857	(d)		—			20,554
Core deposit intangible		—			9,760	(e)		120	(i)		9,880
Other		35,944			(5,851	) (f)		(777	) (j)		29,316
Total		797,744			9,472			(657	)		806,559

Liabilities
Deposits	$	678,707			430	(g)		—			679,137
Borrowings		20,000			—			—			20,000
Other		8,943			298	(h)		(822	) (k)		8,419
Total		707,650			728			(822	)		707,556

Net identifiable assets acquired											99,003

Total cost of acquisition
Value of stock issued				$	169,299
Cash paid in the acquisition					17,939
Total cost of acquisition											187,238

Goodwill recorded related to acquisition of Asheville Savings Bank										$	88,235

Explanation of Fair Value Adjustments

(a)

This fair value adjustment represents the amount necessary to reduce performing loans to their fair value due to interest rate factors and credit factors. Assuming the loans continue to perform, this amount will be amortized to increase interest income over the remaining lives of the related loans.

(b)

This fair value adjustment was recorded to write-down purchased credit impaired loans assumed in the acquisition to their estimated fair market value.

(c)

This fair value adjustment reduced the allowance for loan losses to zero as required by relevant accounting guidance.

(d)

This adjustment represents the amount necessary to increase premises and equipment from its book value on the date of acquisition to its estimated fair market value.

(e)

This fair value adjustment represents the value of the core deposit base assumed in the acquisition based on a study performed by an independent consulting firm. This amount was recorded by the Company as an identifiable intangible asset and is being amortized as expense on an accelerated basis over seven years.

(f)

This fair value adjustment primarily represents the net deferred tax liability associated with the other fair value adjustments made to record the transaction.

(g)

This fair value adjustment was recorded because the weighted average interest rate of Asheville Savings Bank’s time deposits exceeded the cost of similar wholesale funding at the time of the acquisition. This amount is being amortized to reduce interest expense on an accelerated basis over their remaining five year life.

(h)

This fair value adjustment represents miscellaneous adjustments needed to record assets and liabilities at their fair value.

(i)

This fair value adjustment relates to a change in the final amount of the core deposit intangible asset from the amount originally estimated.

(j)

This fair value adjustment relates to the write-down of a foreclosed property based on an updated appraisal and the related deferred tax asset adjustment.

(k)

This fair value adjustment was recorded to adjust the tax liability assumed on the acquisition date based on updated information.