Notes to Table of Directors, Nominees and Executive Officers:

Director Nominees

Daniel T. Blue, Jr., 63,65, is the managing partner of the law firm Blue Stephens and Fellers LLP, located in Raleigh, North Carolina, where he has been an attorney since 1976.1973. In 1980, Mr. Blue was elected to the North Carolina House of Representatives and was re-elected twelve times. From 1991 – 1995, Mr. Blue was twice elected Speaker of the North Carolina House of Representatives. Mr. Blue currently serves in the North Carolina Senate, representing Wake County.County, and was elected in March 2014 as the Senate Minority Leader. Mr. Blue is the immediate past Chair of the Board of Trustees of Duke University. He is also a member of the Duke University Health System and a former director of Duke University Management Company. Mr. Blue has been a director of the Company and First Bank since 2010.

Mr. Blue has an extensive background in law and public service, and has skills related to executive decision making, as well as oversight, governance and management of large organizations.

Jack D. Briggs, 72,74, is a funeral director and is president and owner of J. Briggs, Inc., Davidson Funeral Home, Inc., Carter Funeral Home, Inc., and Mountain View of Denton, Inc., and secretary of Piedmont Funeral Home. Mr. Briggs has been in the funeral director business since 1970. Mr. Briggs has been a director of the Company since its formation in 1983 and a director of First Bank since 1976.

Mr. Briggs brings entrepreneurial and business-building skills and experience to the Company, having successfully founded and acquired several businesses. Additionally, as owner and operator of a company, Mr. Briggs has over 4244 years of experience overseeing the preparation of financial statements and the review of accounting matters.

R. Walton Brown, 59, was the chairman of the Board of Directors, President, and Chief Executive Officer of Carolina Community Bancshares, Inc., a bank holding company headquartered in Latta, South Carolina, from its inception in 1995 until its acquisition by the Company in January 2003. He served as the president of Carolina Community Bank, the bank subsidiary of Carolina Community Bancshares, and its predecessors from 1979 until January 2003, and now serves as Executive Vice President of the Company and First Bank. Mr. Brown has been a director of the Company and First Bank since 2003.

Mr. Brown has extensive financial industry experience and brings both financial services and corporate governance perspectives as a result of his work history.

David L. Burns, 73, served as President of Z.V. Pate, a Laurel Hill-based holding company for agricultural, timber, restaurant and retail sales interests, with over 1,000 employees, from 1983 until his retirement at the end of 2009. He currently serves as Chair of the Board of Directors of Z.V. Pate. Mr. Burns has been a director of the Company since 1988 and a director of First Bank since 1992.

During his long tenure as a board member, Mr. Burns has developed knowledge of the Company’s business, history, organization, and executive management that has enhanced his ability as a director. Mr. Burns also brings executive decision making skills and business acumen resulting from his work history with Z.V. Pate. He has also demonstrated his leadership skills with his involvement in numerous professional and civic organizations.

John F. Burns, 64, served as a director and President and Chief Executive Officer of First Savings Bancorp, Inc. when First Savings merged with the Company in 2000, having been employed by First Savings since 1972. Since 2000, he has served as a director of the Company and First Bank and has been employed as an Executive Vice President of the Company and First Bank.

Mr. Burns has over 39 years of banking experience and brings both financial services and corporate governance perspectives as a result of his work history.

Mary Clara Capel, 53,55, is a member of senior management as the director of administration at Capel, Incorporated, a rug manufacturer, importer and exporter located in Troy, North Carolina, where she has been employed since 1981, including tentwelve years in her current position. She is also the owner of aan internet retail business in Chapel Hill, North Carolina. Ms. Capel has been a director of the Company and First Bank since 2005. Ms. Capel is the current chairman of the Board of Directors of the Company.

Ms. Capel brings business executive decision making and oversight skills as a result of her 3033 years of experience with a third-generation family business, which has grown from its rug manufacturing operation in Troy, North Carolina to importing and exporting rugs worldwide.

James C. Crawford, III, 55,57, served on the Board of Directors, including as its Chairman, of Great Pee Dee Bancorp, Inc., a bank holding company headquartered in Cheraw, South Carolina, from 1992 until its acquisition by the Company in April 2008. Mr. Crawford is the retired Chairman and Chief Executive Officer of B.C. Moore and Sons, Inc., a department store chain. Mr. Crawford has been a director of the Company and First Bank since 2008. Mr. Crawford is the current chairman of the Board of Directors of First Bank.

Mr. Crawford brings extensive experience with accounting and finance, as well as oversight and management of multiple businesses.

R. Winston Dozier, 55, is the former owner and operator of Quik Chek, Inc., a convenience store with 34 locations, headquartered in Troy, North Carolina. Mr. Dozier owned and operated Quik Chek from 1980 until its sale in 2006. Mr. Dozier has been a director of the Company and First Bank since 2010.

Mr. Dozier brings entrepreneurial and business-building skills and experience to the Company, having successfully managed his own company for 26 years. Additionally, as owner and operator of a company, Mr. Dozier brings many years of experience overseeing the preparation of financial statements and the review of accounting matters.

James G. Hudson, Jr., 72,74, served as a director and President and Chief Executive Officer of Century Bancorp, Inc., a bank holding company headquartered in Thomasville, North Carolina, at the time of its acquisition by the Company in 2001, having been employed with Century Bancorp since 1972. Mr. Hudson has served as a director of the Company and First Bank since 2001. He was employed as an Executive Vice President of First Bank from 2001 until his retirement in May 2008.

Mr. Hudson has over 3940 years of banking experience and brings both financial services and corporate governance perspectives as a result of his work history.

Richard H. Moore,51, serves,53, was named as President and Chief Executive Officer of the Company in June 2012. Prior to joining the Company, he served as a managing director of San Diego-based Relational Investors LLC, a Registered Investment Advisor that advises the investment decisions of some of the largest pension funds in the world. He has served in this role since April 2009. Prior to joining Relational Investors, Mr. Moore served two terms as State Treasurer of North Carolina.Carolina and served for four years as the Secretary of Crime Control and Public Safety. Mr. Moore also previously served as Chair of the North Carolina State Banking Commission for eight years. Mr. Moore served two terms on the Board of Executives of the New York Stock Exchange and continues to serve on the New York Stock Exchange Regulation board. Mr. Moore was previously an Assistant U.S. Attorney and also practiced corporate, real estate and tax law for many years. Mr. Moore is currently a former trustee of Wake Forest University and servesserved on its Investment Committee. Mr. Moore is also a director of the Durham-based North Carolina Mutual Life Insurance Company. Mr. Moore has been a director of the Company and First Bank since 2010.

Mr. Moore’s career has provided him with extensive financial and accounting experience and gives him keen insight with respect to budget and audit matters, as well as the oversight, governance and management of larger organizations.

Jerry L. Ocheltree, 52, was named as the President and Chief Executive Officer of the Company as of January 1, 2007. He was named as the President of First Bank in September 2005, a position he still holds. Mr. Ocheltree joined First Bank in 1998, serving as a Senior Vice President – Regional Executive until his election as President. Mr. Ocheltree has been a director of the Company since 2006 and First Bank since 2005.

Mr. Ocheltree brings deep institutional knowledge and perspective regarding the Company’s strengths, challenges and opportunities. He also has extensive banking experience.

George R. Perkins, Jr., 72,74, is the retired Chief Executive Officer of Frontier Spinning Mills, Inc., a yarn manufacturer located in Sanford, North Carolina. Mr. Perkins served in this role from 1996 until his retirement in 2009. Mr. Perkins has been a director of the Company and First Bank since 1996.

Mr. Perkins brings executive decision making skills and business acumen to the Company as a result of his professional experience in the textile industry.

Thomas F. Phillips, 66,68, is an automobile dealer and owner of Phillips Ford, located in Carthage, North Carolina. He served as a director of First Savings Bancorp, Inc. from 1985 until its merger with the Company in 2000. Mr. Phillips has served as a director of the Company and First Bank since 2000. Mr. Phillips currently serves as the Chair of the Board of Directors of the Company.

Mr. Phillips brings over 2729 years of financial experience gained during his director terms with First Savings Bancorp and the Company. Mr. Phillips has extensive skills in accounting, finance and risk management.

Frederick L. Taylor, II, 42,44, is President of Troy Lumber Company, located in Troy, North Carolina, where he has been employed since 1992. Mr. Taylor has been a director of the Company and First Bank since 2005.

Mr. Taylor brings business-building skills and experience to the Company. Additionally, Mr. Taylor has experience in overseeing the preparation of financial statements and review of accounting matters.

Virginia Thomasson, 60,62, is a Certified Public Accountant with the firm Holden, Thomasson, & Longfellow, P.C., located in Southern Pines, North Carolina, where she has been a partner since 1988. She served as a director of First Savings Bancorp, Inc. from 1997 until its merger with the Company in 2000. Ms. Thomasson has served as a director of the Company and First Bank since 2000. Ms. Thomasson has been designated as an “audit committee financial expert” in accordance with SEC regulations.

Ms. Thomasson brings to the Company experience and skills in public accounting and over 1416 years of financial industry experience.

Dennis A. Wicker, 59,61, is a partner in the law firm Nelson Mullins Riley and Scarborough, LLP, located in Raleigh, North Carolina, a position he has held since 2009. From 2008 to 2009, Mr. Wicker was a shareholder and a member of the Executive Committee of the law firm of SZD Wicker, LPA, and from 2001 to 2008 he was a partner in the law firm of Helms, Mullis & Wicker, LLP. Mr. Wicker served as Lieutenant Governor of North Carolina from 1993 to 2001. Mr. Wicker has been a director of the Company and First Bank since 2001. For each of the past five years, Mr. Wicker has also beencurrently serves as a director of the following public companies: Coca Cola Bottling Company Consolidated and within the past five years served as a director of Air T, Inc.

Mr. Wicker has an extensive background in law and public service and brings to the Company executive decision making, governance and risk assessment skills.

John C. Willis, 69,71, is a private investor in restaurant and real estate interests. Mr. Willis has been a director of the Company since its formation in 1983 and a director of First Bank since 1980.

During his long tenure as a board member, Mr. Willis has developed knowledge of the Company’s business, history, organization, and executive management that has enhanced his ability as a director.

Executive Officers

In addition to Mr. Brown, Mr. J. Burns, and Mr. Ocheltree,Moore, the executive officers of the Company and First Bank are as follows:

Anna G. HollersR. Walton Brown, 61, is Chief Operating Officer, Executive Vice President, and Secretary of the Company and First Bank. Ms. Hollers has served as Secretary of the Company and First Bank since 1983, asan Executive Vice President of the Company and First Bank and has served in those positions since 1994,joining the Company in 2003. Mr. Brown was the chairman of the Board of Directors, President, and was named Chief OperatingExecutive Officer of Carolina Community Bancshares, Inc., a bank holding company headquartered in 2005. She has been employedLatta, South Carolina, from its inception in 1995 until its acquisition by the Company since its formation in 1983 and by First Bank since 1972.

Teresa C. Nixon, 54, was Executive Vice President and the Chief Lending Officer of First Bank until March 30, 2012. SheJanuary 2003. He served as Chief Lending Officer since joining Firstthe president of Carolina Community Bank, in 1989the bank subsidiary of Carolina Community Bancshares, and its predecessors from 1979 until January 2003. Mr. Brown served as Executive Vice Presidenta director of the Company from 2003 to 2013. Mr. Brown has been a director of First Bank since 1994.2000 and continues to serve in that role.

David G. GriggJohn F. Burns, 61,66, is an Executive Vice President of the Company and is the Chief Information Officer of First Bank. He has served as Chief Information Officer and Executive Vice President since 2010,Bank and has served in similar capacitiesthose positions since joining the Company in 2000. Mr. Burns served as a director and President and Chief Executive Officer of First Savings Bancorp, Inc. when First Savings merged with the Company in 2000, having been employed by First Savings since 1972. Mr. Burns served as director of the Company from 2000 until 2013. Mr. Burns has been a director of First Bank since 2000 and continues to serve in that role.

Eric P. Credle, 43,45, is an Executive Vice President of the Company and First Bank and has served as the Chief Financial Officer of the Company and First Bank since joining the Company in 1997.

Cathy A. Dudley, 54, was named an Executive Vice President of First Bank effective March 11, 2014.  Ms. Dudley joined First Bank in 2004 as a Senior Vice President responsible for electronic banking.  Most recently her responsibilities have focused on improving the customer experience. She has direct responsibility for the First Bank Customer Service Center, Training and Human Resources.  Prior to joining First Bank, Ms. Dudley spent 14 years as a management consultant specializing in community banking at firms including KPMG.

Anna G. Hollers, 63, was Chief Operating Officer, Executive Vice President, and Secretary of the Company and First Bank until her retirement on March 31, 2014. Ms. Hollers served as Secretary of the Company and First Bank from 1983 until her retirement, as Executive Vice President of the Company and First Bank from 1994 until her retirement, and as Chief Operating Officer from 2005 until her retirement. She was employed by the Company at its formation in 1983 and by First Bank from 1972 until her retirement.

Timothy S. Maples, 51,53, is an Executive Vice President and Assistant Secretary of the Company and First Bank and Chief Investment Officer of First Bank. He served as Senior Vice President of the Company and First Bank from 2000 to 2010 and has served as Investment Officer of First Bank since joining the Company in 2000. He has served as Assistant Secretary of the Company and First Bank since 2005.

Michael G. Mayer, 54, was named the President of First Bank effective March 10, 2014. Prior to joining the Company, Mr. Mayer most recently served as Chief Executive Officer of 1^st Financial Services Corporation, parent company of Mountain 1^st Bank & Trust, a position he held from January 2010 until 1^st Financial Services Corporation’s acquisition in January of 2014. Mr. Mayer previously served as President and Chief Executive Officer of Carolina Commerce Bank from 2009 until 2010 and Colony Signature Bank (In Organization) from 2007 to 2009, and has held various senior banking positions over his thirty year banking career.

Lee C. McLaurin, 49,52, is an Executive Vice President of the Company and First Bank and has served as the Controller of the Company and First Bank since joining the Company in 1987. He served as Senior Vice President of the Company and First Bank from 1987 to 2010.

Robert T. Patterson, 48, is an Executive Vice President of First Bank and serves as the Co-Chief Credit Officer of First Bank.  Mr. Patterson has served in this position since April 2012.  Prior to April 2012, Mr. Patterson served as a Senior Vice President in First Bank’s credit administration department beginning in January 2009, after having been a branch officer since joining First Bank in 1997.

Rex M. Scott, 58, is a Senior Vice President of First Bank and serves as the Chief Information Officer of First Bank. Mr. Scott was named Chief Information Officer of First Bank in October 2012 after joining First Bank in October 2011 as an information technology officer. Prior to joining First Bank, Mr. Scott served as the Chief Operating Officer for CapStone Bank, a community bank headquartered in Raleigh, North Carolina.

Edward F. Soccorso, 41, is an Executive Vice President of First Bank and serves as the Co- Chief Credit Officer of First Bank.  Mr. Soccorso joined the Company in 2012.  Prior to joining First Bank, Mr. Soccorso was Director at Piedmont Investment Advisors, LLC where he managed the team dedicated to advising the U.S. Treasury on bank investments made under the Troubled Asset Relief Program (TARP).  Prior to joining Piedmont in 2009, Mr. Soccorso was a Senior Vice President at Four Corners Capital Management, LLC, a Registered Investment Advisor that managed asset backed and fixed income portfolios for institutional investors.

J. Dorson White, Jr., 63, is an Executive Vice President of First Bank and has served as the Chief Retail Banking Officer of First Bank since joining the Company in July 2011. Prior to joining First Bank, Mr. White served as the Chief Operating Officer of East Carolina Bank, a community bank headquartered in Engelhard, North Carolina.

BOARD COMMITTEES AND ATTENDANCE

The Board of Directors has established fivefour standing committees: the Executive Committee, the Strategic Planning Committee, the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. In addition, the Board of Directors may establish other committees from time to time for specific purposes. The following table presents the 20122014 membership of the committees that are described below. The chair of each committee is noted with a “(c)”. Following the table is additional information regarding each committee.

* Mr. D. Burns is serving on these committees until his retirement from the Board of Directors on May 8, 2014.

Executive and Loan Committee

The Executive and Loan Committee is authorized, between meetings of the Board of Directors, to perform all duties and exercise all authority of the Board of Directors, except those duties and authorities exclusively reserved to the Board of Directors by the Company’s bylaws or by statute. The Executive and Loan Committee also serves as Loan Committee for First Bank. The Executive and Loan Committee held 1114 meetings during 2011.2013.

Strategic Planning Committee

In late 2011, the Board of Directors established the Strategic Planning Committee. The purpose of this committee is to confer with and advise management and the Board of Directors about strategic matters, budget matters, material transactions and strategic investments. The Strategic Planning Committee met once in 2011.

Audit Committee

The Audit Committee is responsible for the appointment, compensation and oversight of the Company’s independent auditors, and must approve in advance all audit fees and the terms of all non-audit services provided by the independent auditors. The Audit Committee also reviews and presents to the Board of Directors information regarding the effectiveness of the Company’s policies and procedures with respect to auditing, accounting, and internal controls. The Audit Committee also reviews the Company’s financial reporting process on behalf of the Board of Directors. All of the current members of the Audit Committee are independent, as defined by the Nasdaq Stock Market (“NASDAQ”) and the Securities Exchange Act, as well as the Company’s Corporate Governance Guidelines. The Audit Committee held 11six meetings during 2011.2013.

The Board of Directors has determined that Ms. Thomasson is an “audit committee financial expert” within the meaning of SEC rules and regulations. The Audit Committee reviews and ratifies its charter on an annual basis. The Audit Committee charter is available on the Company’s website at www.firstbancorp.comwww.LocalFirstBank.com under the tab “Investor“About Us – Investor Relations – Governance Documents.”

Compensation Committee

Generally, the Compensation Committee is responsible for reviewing the compensation policies and benefit plans of the Company and for making recommendations regarding the compensation of its executive officers. The Compensation Committee also administers the Company’s equity compensation plans. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees. Each of the current members of this committee are independent under the rules and regulations of NASDAQ. The Compensation Committee held seventhree meetings during 2011.2013. The Compensation Committee operates under a charter that has been approved by the Board of Directors. The Compensation Committee reviews and ratifies its charter on an annual basis, and the charter is available on the Company’s website at www.firstbancorp.comwww.LocalFirstBank.com under the tab “Investor“About Us – Investor Relations – Governance Documents.”

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for i) identifying qualified individuals to become Board members, ii) determining the composition of the Board and its committees, and iii) developing and implementing the Company’s corporate governance guidelines. The Nominating and Corporate Governance Committee will consider shareholder nominees for Board membership. Any shareholder wishing to nominate a candidate for director must follow the procedures described in the section “Nominations For Director” above. The section below entitled “Corporate Governance Policies and Practices - Director Nomination Process” describes the process utilized by the Nominating and Corporate Governance Committee for identifying and evaluating candidates to be nominated as directors. The Nominating and Corporate Governance Committee reviews and ratifies its charter on an annual basis, and the charter is available on the Company’s website at www.firstbancorp.comwww.LocalFirstBank.com under the tab “Investor“About Us – Investor Relations – Governance Documents.” Each of the current members of this committee are independent as defined by NASDAQ rules and the Company’s Corporate Governance Guidelines. The Nominating and Corporate Governance Committee held two meetingsone meeting during 2011.2013.

Attendance

The Board of Directors held 14six meetings during 2011. In 2011, except for Ms. Wallace, all2013. All of the directors and nominees for re-election attended at least 75% of the aggregate of the meetings of the Board of Directors and the committees described above on which they served during the period they were directors and members of such committees. Ms. Wallace attended 10 of 14 Board of Director meetings and 6 of 11 Executive and Loan Committee Meetings held in 2011. Ms. Wallace had health issues during 2011 that prevented her consistent attendance.

CORPORATE GOVERNANCE POLICIES AND PRACTICES

The Company has developed, and operates under, corporate governance principles and practices that are designed to maximize long-term shareholder value, align the interests of the board and management with those of the Company’s shareholders, and promote the highest ethical conduct among the Company’s directors and employees. Highlights of the Company’s corporate governance policies, practices and procedures are described below.

Director Independence

The Board of Directors believes that a substantial majority of the board should consist of directors who are independent under rules set forth by NASDAQ and as defined in our Corporate Governance Guidelines. The Board of Directors makes an annual determination regarding the independence of each of the Company’s directors. The Board last made these determinations for each member of the board in March 2012,2014, based on the review of director questionnaires designed to elicit information regarding independence. The Board has determined that 1411 of its 1813 current directors are independent as contemplated by NASDAQ. The fourtwo individuals who are not independent are Mr. Brown, Mr. J. Burns, Mr. Ocheltree,Moore and Mr. Wicker. Mr. Brown, Mr. J. Burns and Mr. Ocheltree areMoore is not independent because they arehe is a current employeesemployee of the Company. Mr. Wicker is not considered independent due to payments made by the Company to a family member – see “Certain Transactions” below.during 2011 and 2012.

Annual Director Re-Election

Since the Company’s inception, its bylaws have required that directors must stand for re-election to the Board of Directors at each annual shareholders’ meeting. The Board of Directors believes that this policy makes it easier for shareholders to hold directors more directly accountable for corporate performance compared to the staggered-board structure in use at many public companies, which permits directors to hold their positions for several years.

Separation of the Offices of Chairman and Chief Executive Officer

The Board of Directors believes that one of its main purposes is to protect shareholders’ interests by providing independent oversight of management, including the Chief Executive Officer. Although not required by the Company’s bylaws, the Board of Directors has historically believed, and continues to believe, that this objective is facilitated by having an independent director serve as Chairman, thereby separating the offices of Chairman of the Board of Directors and Chief Executive Officer. The Chairman of the Board is responsible for approving meeting schedules and agendas, as well as acting as a liaison between the Chief Executive Officer and the independent directors.

The Board’s Role in Risk Oversight

The Board of Directors believes that each member in his or her fiduciary capacity has a responsibility to monitor and manage risks faced by the Company. At a minimum, this requires the members of our Board of Directors to be actively engaged in board discussions, review materials provided to them, and know when it is appropriate to request further information from management and/or engage the assistance of outside advisors. Furthermore, because the banking industry is highly regulated, certain risks to the Company are monitored by the Board of Directors and the Audit Committee through its review of the Company’s compliance with regulations set forth by its regulatory authorities, including the FDIC, and recommendations contained in regulatory examinations.

Because we believe risk oversight is a responsibility for each member of the Board of Directors, we do not concentrate the Board’s responsibility for risk oversight in a single committee. Instead, each of our committees concentrates on specific risks for which they have an expertise, and each committee is required to regularly report to the Board of Directors on its findings. For example, the Audit Committee regularly monitors the Company’s exposure to fraud and internal control risk. Our Compensation Committee’s role in monitoring the risks related to our compensation structure is discussed in further detail below. See “Compensation Committee Report” on page 27.

Executive Sessions

The Board of Directors has adopted a resolution requiring that the independent directors of the Company meet at least twice a year in executive session with no non-independent directors or employees of the Company present. At these meetings, the independent directors discuss strategic or other key issues regarding the Company. Two of these executive sessions were held in 2011.2013.

Director Nomination Process

The Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become Board members and recommending to the Board the individuals for nomination as members of the Board. The goal of the Nominating and Corporate Governance Committee is to create a Board that will demonstrate objectivity and the highest degree of integrity on an individual and collective basis. In evaluating current members and new candidates, the Nominating and Corporate Governance Committee considers the needs of the Board and the Company in light of the current mix of director skills and attributes. In addition to requiring that each director possess the highest integrity and character, the Nominating and Corporate Governance Committee’s evaluation of director candidates includes an assessment of issues and factors regarding an individual’s familiarity with the Company’s geographic market area, independence as defined by the various regulatory authorities, business experience, accounting and financial expertise, diversity, and awareness of the Company’s responsibilities to its customers, employees, regulatory bodies, and the communities in which it operates. The Nominating and Corporate Governance Committee also takes into consideration the Board’s established policies relating to the Board’s retirement policy and the ability of directors to devote adequate time to Board and committee matters. When the Nominating and Corporate Governance Committee is considering current Board members for nomination for re-election, the Committee also considers prior Board contributions and performance, as well as meeting attendance records.

The Nominating and Corporate Governance Committee does not have any formal guidelines regarding how it should consider diversity in identifying nominees for director. However, the Committee values the diversity on our current board and is generally cognizant of the benefits of a diverse board.

The Nominating and Corporate Governance Committee may seek the input of the other members of the Board and management in identifying and attracting director candidates that are consistent with the criteria outlined above. In addition, the Committee may use the services of consultants or a search firm, although it has not done so in the past. The Nominating and Corporate Governance Committee also will consider recommendations by Company shareholders of qualified director candidates for possible nomination to the Board. Shareholders may recommend qualified director candidates by writing to the Company’s Corporate Secretary at 341 North Main300 SW Broad Street, Troy,Southern Pines, North Carolina 27371.28387. Submissions should include information regarding a candidate’s background, qualifications, experience, and willingness to serve as a director. Based on a preliminary assessment of a candidate’s qualifications, the Nominating and Corporate Governance Committee may conduct interviews with the candidate and request additional information from the candidate. The Committee uses the same process for evaluating all nominees, including those recommended by shareholders.

In addition, the Company’s bylaws contain specific conditions under which persons may be nominated directly by shareholders as directors at an annual meeting of shareholders. The provisions include the condition that shareholders comply with the advance notice time-frame requirements described under the section entitled “Nominations for Director” above.

Stock Ownership Requirements

The Company’s Board of Directors has adopted a common stock ownership policy for members of the Board. This policy requires that any candidate for the Board must either own, or commit to acquire, common stock of the Company with a monetary value of at least $50,000. Prior to 2011, there was no time deadline for acquiring the required amount of stock. This policy was amended in 2011 to state that newlyNewly elected directors have one year from the date of their election to acquire the necessary stock, with directors who had not met this requirement at that time having until February 28, 2012 to do so.stock. Once the $50,000 ownership requirement is met, the Board member is deemed to have satisfied this requirement even if subsequent decreases in the Company’s stock price cause the value of the member’s holdings to fall below $50,000. All directors are currently in compliance with this policy. The Board believes that this stock ownership policy substantially enhances shareholder value by materially aligning the Board’s interests with those of the shareholders.

Mandatory Retirement

The Company’s bylaws state that no individual may be elected to, or may serve on, the Board of Directors any time after his or her 75th birthday, except that if a director is elected to the Board prior to his or her 75th birthday and reaches the age of 75 while serving as a director, such director’s term shall continue until the next annual meeting of shareholders, at which time the director shall retire. The bylaws allow for the Board to make exceptions to this limitation in connection with mergers or acquisitions. The bylaws also state that the foregoing provisions do not apply to any individual during the time such individual is serving as chief executive officer of the Company.

Communications with Directors

The Board of Directors believes that it is important that a direct and open line of communication exist between the Board and the shareholders and other interested parties. Any shareholder or other interested party who desires to contact one or more of the Company’s directors may send a letter to the following address:

First Bancorp Board of Directors

POP.O. Box 417

Troy, North Carolina 27371

In addition, any shareholder or other interested party who has any concerns or complaints relating to accounting, internal controls or auditing matters may contact the Audit Committee by writing to the following address:

First Bancorp Audit Committee

POP.O. Box 417

Troy, North Carolina 27371

All such communications will be forwarded to the appropriate party as soon as practicable without being screened.

Annual Meeting Policy

Directors are expected to attend the Company’s annual meeting of shareholders. Except for Mr. Blue, Mr. Moore, and Ms. Wallace, allAll members of the 20112013 Board attended the Company’s 20112013 annual meeting of shareholders.

Cumulative Voting

The Company’s bylaws provide for the availability of “cumulative voting” in the election of directors. Under cumulative voting, each shareholder calculates the number of votes available to such shareholder by multiplying the number of votes to which his or her shares are normally entitled by the number of directors for whom the shareholder is entitled to vote. The shareholder can then cast the sum for a single candidate or can distribute it in any manner among any number of candidates. For example, if 1712 directors are to be elected, a shareholder who owns 1,000 shares will have 17,00012,000 votes. This shareholder can cast all of these votes for one candidate, or 1,000 for 1712 candidates, or 2,8332,000 for each of six candidates, or any other mathematically possible combination.

The purpose of cumulative voting is to preserve the right of minority shareholders, or a group of shareholders acting together, to obtain representation on the Board of Directors that is roughly proportional to their ownership interest in the corporation. The Company’s Board of Directors believes that the minority representation guaranteed by cumulative voting is an appropriate feature of corporate democracy and is not likely to cause harmful factionalism on the board.

Cumulative voting procedures will not be followed at the annual meeting unless a shareholder calls for cumulative voting as provided in the Company’s Articles of Incorporation, by announcing at the meeting before the voting for directors starts, his or her intention to vote cumulatively. See the third paragraph under “Proposal 1- Election of Directors” above for additional information regarding cumulative voting.

Code of Ethics

The Board of Directors has adopted a Code of Ethics that applies to the Company’s directors and employees, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. The Code includes guidelines relating to ethical handling of actual or potential conflicts of interest, compliance with laws, accurate financial reporting, and procedures for promoting compliance with, and reporting violations of, the Code of Ethics. The Code of Ethics is available on the Company’s websiteat www.FirstBancorp.comwww.LocalFirstBank.com under the tab “Investor Relations-“About Us – Investor Relations – Governance Documents.” Any amendments or waivers to the Code of Ethics will be disclosed in the same location on the Company’s website.

The nominees who receive the highest number of votes cast, up to the number of directors to be elected, shall be elected as directors. The Board of Directors recommends that shareholders vote “FOR” the proposal to elect the 1712 nominees as directors. Unless indicated to the contrary, proxies will be voted “FOR” the 1712 nominees listed above.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

In this section, we discuss our compensation program as it pertains to our principal executive officer, our principal financial officer and our three other most highly compensated executive officers in 2011. We refer2013 (NEOs), as well as one former executive officer. As discussed below, the compensation policies relating to theseour current Chief Executive Officer, who joined our company in June 2012, are discussed separately in cases where they differ materially from those for our other five persons throughout as the “namednamed executive officers” (NEOs)officers (Other NEOs). Our discussion focuses on compensation and practices relating to 2011,2013, our most recently completed fiscal year.

Implications of Participation in the Troubled Asset Relief Program Capital Purchase Program on Executive Compensation Arrangements

In October 2008, the Emergency Economic Stabilization Act (EESA) was enacted, which gave the United States Treasury Department (Treasury) the authority to develop programs to stabilize U.S. financial institutions.  The EESA was amended in February 2009 by the American Recovery and Reinvestment Act of 2009 (ARRA or the Stimulus Act). Pursuant to EESA and ARRA, the Treasury developed the Troubled Asset Relief Program (TARP), which includes the Capital Purchase Program (CPP).  We entered into a Securities Purchase Agreement on January 9, 2009 with the Treasury under the CPP, which required that we comply with special rules applicable to our executive compensation during the period that the Treasury held equity or debt securities of our Company. On September 1, 2011, we redeemed all of the securities that had been issued to the Treasury that subjected us to the special rules related to executive compensation. Because we were subject to these rules from January 1, 2011 through September 1, 2011, they impacted our compensation practices for the majority of the year.

The special rules related to executive compensation, which were applicable for us from January 1, 2011 through September 1, 2011, required, among other things, that we:

 Participation in the CPP also required that the Compensation Committee, in conjunction with the Company’s senior risk officers, take certain steps in an effort to ensure compliance with the prohibition of incentive compensation arrangements that involve unnecessary and excessive risk taking. As such, the Compensation Committee and our senior officers responsible for risk management met periodically to discuss and review the relationship between our risk management policies and practices and the incentive compensation arrangements for our senior executive officers. Within this framework, a variety of topics were discussed, including:

As a result of this review and discussion, the Compensation Committee determined that the design and goals of the existing incentive compensation arrangements for our senior executive officers do not create an incentive for our senior executive officers to take unnecessary and excessive risks that threaten the value of our financial institution.

Structure and Role of the Compensation Committee

The Compensation Committee of our Board of Directors consists entirely of independent directors. It operates under a written charter that the board has adopted.

The Compensation Committee is primarily responsible for the following:

The Committee does not give the CEO any explicit parameters in recommending base salary adjustments for the other executive officers. Instead, the committee expects the CEO to use reasonable judgment, based on his years of experience in the banking industry, his review of peer data, his subjective observations of the current business environment and the officers’ performance.

Compensation Philosophy and Objectives

The objectives of our executive compensation programs are:

Our compensation program seeks to reward our executives’ contributions to corporate performance, including contributions of leadership, effort, creative ideas, industry and operational knowledge, and ethical behavior, all in pursuit of increasing shareholder value. The committee’s general philosophy is that we should compensate our executive officers at approximately the same average level as corresponding officers at similarly situated peer financial service companies. While that is our general philosophy, we may position a base salary in the upper quartile of the market due to experience, performance, or competitive situations. Also, we provide incentives that may result in compensation reaching the upper quartile of the market when performance exceeds targets.

Because the committeeCompensation Committee bases its compensation decisions on the objectives and philosophy described above, it does not take into account an individual’s net worth or the wealth the individual has accumulated from prior compensation.

Competitive Positioning

Periodically, the committeeCompensation Committee engages outside compensation consultants to evaluate whether our compensation practices are consistent with meeting our objectives. In these engagements, the outside consultant typically compares our compensation practices and compensation levels to those of a peer group of similarly situated financial service companies. The consultant then provides the committeeCommittee with analysis and recommendations.

In 2010, the Compensation Committee engaged Grant Thornton, a nationally recognized compensation expert, to provide analysis and recommendations regarding 2011 compensation for our NEOs. In December 2010 and February 2011, Grant Thornton presented the committee with its findings, which it based on a study of 2009 proxy data (the most recent data then available).

The Grant Thornton analysis compared the compensation of our NEOs to a representative sample of 15 publicly traded financial institutions that were comparable to the Company in either location and asset size or in performance measures. This peer group consisted of the following companies:

The Grant Thornton analysis indicated that the Company was generally performing in the 50^th to 75^th percent quartile for most of the performance measures reviewed and that the salaries paid to our NEOs were in approximately that same range. Accordingly, the Compensation Committee approved the same 3% raise for the NEOs that had been approved for the rest of the Company’s employees.

Composition of Compensation

We provide a mix of pay elements to compensate our NEOs. Of this mix, the largest elements have been base salary (as discussed further below), annual incentive bonus, and equity grants.

The committee designed our Annual Incentive Plan to provide our NEOs with the opportunity to earn an annual cash bonus of 35% to 50% of their base salary if we achieved targeted levels of financial performance, with the opportunity for each officer to earn up to twice the target percentage if certain goals were met. The committee and the board believe that a meaningful, but not overwhelming, amount of each NEO’s annual direct compensation should be tied to achieving corporate performance targets. The committee believes this structure reflects a proper balance of direct compensation that provides our officers with a baseline level of financial stability (in the form of base salary), while also providing an appropriate incentive for achieving annual targets that drive our corporate performance. In 2011, because of the restrictions imposed by the Stimulus Act and the Treasury related to our participation in the CPP, no cash bonuses were awarded to four of our five NEOs. One of our NEOs was eligible for a cash bonus under the Annual Incentive Plan because his ranking within our company in terms of total compensation fell outside of the restrictions.

In 2007, based upon recommendations made by a third-party compensation consultant, the board recommended and our shareholders approved a new equity plan – the “First Bancorp 2007 Equity Plan.” This plan allows us flexibility to structure incentive awards using various types of equity-based compensation, including performance units, restricted stock, stock options, and stock appreciation rights. Since our adoption of this plan we have made four grants to NEOs for varying reasons as set forth below.

In 2008, we made an equity grant to 19 senior officers, including each of our NEOs, comprised of stock options and performance units. Each performance unit represents the right to acquire one share of First Bancorp common stock upon satisfaction of the vesting conditions. The vesting of these awards was subject to both (1) our achievement of specific goals for earnings per share during the three annual performance periods ending on each of December 31, 2008, 2009 and 2010, and (2) in general, the executive’s continued employment for a period of two years beyond the annual performance period. We viewed this grant, which was recommended by our compensation consultant, as a type of long-term incentive arrangement that is prevalent at many public companies. In making these grants, we believed they would benefit the Company by enhancing our ability to retain executives and linking equity awards to performance.

In December 2009, the Compensation Committee awarded shares of restricted stock to four NEOs (Mr. Ocheltree, Ms. Hollers, Ms. Nixon, Mr. Credle) because the committee believed, based on an analysis provided by Grant Thornton as discussed above, that the Company lagged its peer group in grants of equity awards to its NEOs, and in order to recognize those officers’ additional responsibilities assumed in the acquisition of a failed bank. Also, the committee recognized that these four NEOs were ineligible for any cash bonus under the Company’s Annual Incentive Plan because of the restrictions imposed by the Stimulus Act and the Treasury related to our participation in the CPP. The value of the restricted stock award was determined by multiplying the NEO’s 2010 base salary by a percentage (35% for Mr. Ocheltree and 25% for the three others). These awards were granted in amounts and terms that were permitted by the Stimulus Act and Treasury rules for companies participating in the CPP.

In February 2011 and 2012, we made additional grants of restricted stock to the same four NEOs, primarily in recognition that these same NEOs were again ineligible for any cash bonus due to our participation in the CPP. See additional discussion below under the “Equity Grants.”below.

Executive Compensation Program Overview

The five primary components of our executive compensation program are:

TheIn the information that follows, we discuss the compensation of our Chief Executive Officer and then we discuss the compensation of our Other NEOs.

Compensation of Richard H. Moore, Chief Executive Officer

Based on consultations with Blanchard Consulting Group, an independent compensation consultant that the Compensation Committee has periodically engaged to assist in evaluating executive compensation, the following sections briefly describeterms were negotiated as part of Mr. Moore’s employment agreement that was entered into on August 28, 2012:

Base Salary - Mr. Moore’s initial annual base salary was set at $475,000, which Blanchard Consulting Group assessed and concluded was slightly below the estimated average of a peer group that is substantially similar to the peer group shown on page 20. As an offset to the below-market salary and as an inducement to Mr. Moore to enter into an employment agreement with the Company and resign from his other employment, it was agreed that Mr. Moore would have the opportunity to earn annual bonuses and long-term incentive compensation at levels at, or above, the peer group if the Company achieved significantly improved performance. With the employment agreement being entered into in late 2012, the Compensation Committee determined that Mr. Moore’s annual base salary should remain at $475,000 for 2013.

Performance Incentive Plan – Mr. Moore’s employment agreement states that beginning January 1, 2013, Mr. Moore has the opportunity to earn an annual bonus with a value of between $150,000 and $600,000 based on the Company’s attainment of an annual earnings goal established by the Compensation Committee for that year (discussed below). This equates to between 32% and 126% of Mr. Moore’s annual salary of $475,000. Based on their review of an analysis provided by Blanchard Consulting Group, the Committee concluded that the annual performance bonus percentages were in approximately the 75^th percentile when compared to the peer group, which, as noted above, was contemplated when determining Mr. Moore’s base salary.

According to the employment agreement, the bonus earned is to be paid 50% in cash and 50% in restricted stock, with the stock vesting in one-third increments at each of these components.the following three year ends. If the actual earnings for a year are at the “Threshold” level, Mr. Moore will earn a bonus with a value of $150,000; if they are at the “Target” level, he will earn a bonus with a value of $300,000; and if they are at the “Maximum” level, he will earn a bonus with a value of $600,000. The amount payable where performance is greater than Threshold but less than Target or greater than Target but less than Maximum are to be determined on the basis of straight line interpolation between points. The payment of the bonus is conditioned on the Company having achieved a satisfactory regulatory review as of such date as determined by the board of directors.

As noted above, the bonus under Mr. Moore’s employment agreement is based on the Company’s attainment of an earnings goal. The earnings goal for 2013 was defined by the Compensation Committee as an earnings per share goal that was to be measured in a manner consistent with generally accepted accounting principles, except that it excludes certain items of income and expense that are volatile, unpredictable and generally relate to actions taken by the Company that occurred prior to Mr. Moore’s employment and are almost entirely out of his control. Accordingly, loan discount accretion related to two-failed bank transactions, provisions for loan losses, securities gains/losses, foreclosed property write-downs, indemnification asset income/expense and other gains/losses are examples of items that the Compensation Committee believed should be excluded from the measurement (as well as the related tax impact). The Compensation Committee also determined that the number of common shares used in determining the earnings per share goal should be based on the Company’s shares outstanding prior to the Company’s December 2012 capital raise, so as not to unduly penalize Mr. Moore for the Company’s decision to raise capital that arose after the earnings goal was set. For 2013, the Compensation Committee established a Threshold earnings per share goal of $1.72 (calculated in the manner described above) that the Compensation Committee believed was an appropriate estimate of earnings (as adjusted) for 2013. The Target goal of $1.89 earnings per share was set at a level 10% higher than the Threshold and the Maximum goal of $2.06 earnings per share represented an additional 10% improvement over the Target earnings per share goal.

At a meeting held on February 11, 2014, the Compensation Committee reviewed the Company’s earnings performance for 2013 as it relates to the adjusted earnings goal discussed above. Based on their review, the Compensation Committee determined that the Company’s actual earnings per share, calculated in the manner discussed above was $1.78, which was between the Threshold goal and the Target goal. The Compensation Committee also determined that the results of the annual regulatory review were satisfactory. Additionally, the Compensation Committee discussed the improvement in many of the Company’s key financial measures, improvement in several of the Company’s internal processes, and the improvement in the Company’s stock price since Mr. Moore’s appointment as CEO, with the members noting that on the day prior to Mr. Moore joining the Company, the Company’s stock price was $9.25 per share, while the stock price was $16.62 per share on December 31, 2013 and $17.33 per share on February 10, 2014. Additionally, the Compensation Committee noted that a Blanchard Consulting Group peer study that was reviewed in November 2013 (discussed below) indicated that Mr. Moore’s total compensation was below the average of a peer group of similarly sized banks. As a result of this review, the Compensation Committee decided that notwithstanding the bonus amount that would have been payable under the parameters set in the Performance Incentive Plan for Mr. Moore, the additional performance factors warranted the Committee exercising its discretion to grant Mr. Moore a bonus of $150,000 in cash and $150,000 in stock, with the price of the stock used to determine the number of shares to be issued based on the Company’s stock price as of August 27, 2012, which was the day before the execution of the employment agreement with Mr. Moore. The Company’s stock price on August 27, 2012 was $9.58, which when divided into $150,000 resulted in 15,657 shares being granted to Mr. Moore on February 11, 2014, with the Compensation Committee determining that one-third of the stock grant would vest immediately and the other two thirds will vest in equal amounts on January 1 of the following two years so long as Mr. Moore is an employee of the Company on those dates and subject to standard clawback provisions. On February 11, 2014, the price of the Company’s stock was $17.77, which resulted in the value of the stock grant to Mr. Moore totaling $278,225, and thus the total value of the 2013 bonus amounting to $428,225 (under the assumption that the stock fully vests).

Long-Term Incentive Compensation – Upon the execution of the employment agreement in August 2012, Mr. Moore was granted 75,000 options to buy Company stock at an exercise price of $9.76 per share, which was the price of the Company’s common stock on the date of grant, and 40,000 shares of restricted stock of the Company. The 75,000 options will vest on December 31, 2014 if the Company achieves an earnings goal in 2014 (calculated the same as described above), which the Committee estimated would be a 30% improvement from the Company’s approximate level of performance at the time the award was granted. The 40,000 shares of restricted stock will vest on December 31, 2015 if the Company achieves an earnings goal in 2015 (calculated the same as described above) that would be a 50% improvement from the approximate level of performance at the time the award was granted. Assuming the awards vest, the option grant was estimated to have a value of approximately $274,000 on the grant date, which was approximately 58% of Mr. Moore’s base salary, while the restricted stock grant was valued at $394,000, or approximately 83% of base salary. The Compensation Committee determined that the value of the awards was at or near the top of the range compared to summary database statistics provided by Blanchard Consulting Group for banks across the nation with between $1-$5 billion in assets as it relates to long-term incentive plan opportunity levels. The database statistics were used instead of the peer group listed on page 20 because it was believed by Blanchard Consulting Group to have more complete data for incentive-based long-term equity compensation grants. Based on the below market base salary accepted by Mr. Moore and the fact that the Compensation Committee believed that the earnings targets were very challenging, the Compensation Committee determined these elements of long-term incentive compensation to be appropriate.

In addition to the financial terms discussed above, other provisions of Mr. Moore’s employment agreement include the following:

Changes for 2014

At the February 11, 2014 Compensation Committee meeting, the Committee increased Mr. Moore’s base salary from $475,000 in 2013 to $525,000 for 2014. The increase in salary was granted based the Compensation Committee’s review of the Company’s performance discussed above and the results of a November 2013 Blanchard Consulting Group peer study (discussed below) that indicated Mr. Moore’s base salary and total compensation were below that of the peer group.

Except as otherwise described, the following section discusses the compensation of our Other NEOs. As discussed below, Jerry Ocheltree, a former executive officer, retired from the Company in June 2013. In connection with his retirement, Mr. Ocheltree and the Company entered a Retirement Agreement and Release of Claims that was filed on Form 8-K with the Securities and Exchange Commission on June 13, 2013 (the “Retirement Agreement”) and superseded his existing employment agreement.

We pay each officer a base salary because it provides a minimum level of compensation and is necessary for recruitment and retention. The committeeCompensation Committee intends that our Other NEOs’ base salaries will provide them with a competitive baseline level of compensation based on their individual experience, performance and scope of responsibility. An important aspect of base salary is the ability of the committee,Compensation Committee, the board and the CEO (in the case of other officers’ salaries) to use annual base salary adjustments to reflect an individual’s performance or changed responsibilities.

Base salary levels are also important because we generally tie the amount of incentive compensation and retirement benefits to an officer’s base salary. For example, awards under our annual bonus plan, the Annual Incentive Plan, are denominated as a percentage of base salary.

For 2011, as discussed above, we reviewed an analysis prepared by Grant Thornton. The Grant Thornton analysis indicated that the Company was generally performing in the 50^th to 75^th percent quartileIn setting salaries for most of the performance measures reviewed and that the salaries paid to our NEOs were in approximately that same range. Accordingly,2013, the Compensation Committee approveddecided that salaries for our Other NEOs would remain the same 3% raisein 2013 as they were in 2012 for the NEOs that had been approved for the restfollowing reasons (however, see discussion of the Company’s employees.Ed Soccorso below):

In order to set salaries for our Other NEOs in 2012, the Compensation Committee engaged Blanchard Consulting Group to provide analysis and recommendations regarding 2012 compensation for our NEOs.recommendations. In November and December 2011, Blanchard Consulting Group presented the committeeCommittee with its findings, which it based on a study of 2010 proxy data (the most recent data then available).

The Blanchard Consulting Group analysis compared the compensation of our NEOs to a representative sample of 25 publicly traded financial institutions that were comparable to the Company in either location and asset size or in performance measures. This peer group consisted of the following companies:

The Blanchard Consulting Group analysis indicated that the Company’s performance measures ranked within a wide range of percentiles compared to the peer group, with certain performance measures near or above the 75^th percentile and other performance measures being near or below the 25^th percentile. Overall, Blanchard Consulting Group concluded that the Company’s performance was comparable to that of its peers. This same analysis indicated that the salaries paid to our NEO’s were generally comparable to the 75^th percentile of peers. The Compensation Committee discussed that in recent years, it had targeted NEO salaries to be in the 50^th to 75^th percentile compared to peers. Based on its review of the Blanchard Consulting Group analysis, the Compensation Committee concluded that the Other NEO salaries were at the top of the range they had targeted, and accordingly, the Compensation Committee concluded that NEO salaries would remain the same in 2012 as they were in 2011. And as noted above, the Compensation Committee determined that NEO salaries for 2013 would also remain unchanged, other than Mr. Soccorso’s salary. At the time of the late 2011 review, the Company’s NEOs included its former Chief Credit Officer, whose salary was $314,150, which was significantly higher than Mr. Soccorso’s salary, who assumed many of the Chief Credit Officer responsibilities upon his hiring in August 2012. Mr. Soccorso’s initial salary was $175,000, which was adjusted to $195,000 in 2013 as his responsibilities continued to increase.

In November 2013, the Compensation Committee met with Blanchard Consulting Group in order to review executive compensation matters. At this meeting, Blanchard Consulting Group presented the Committee with its findings, which it based on a study of 2012 data (the most recent data then available).

The Blanchard Consulting Group analysis compared the compensation of our NEOs to a representative sample of 23 publicly traded financial institutions that were comparable to the Company in either location and asset size or in performance measures. This peer group consisted of the following companies:

The results of the Blanchard study indicated that, except for the Chief Credit Officer position, base salaries for our Other NEOs were at or near the peer average. The study indicated that the peer average for base salary for the Chief Credit Officer position was significantly higher than the salary of Edward Soccorso, who fulfills many of those same roles for the Company and has the title “Co-Chief Credit Officer”. Based on review of the Blanchard study and an assessment of the responsibilities and performance of our Other NEOs, the Compensation Committee made certain adjustments to the salaries of our Other NEOs.

The following table presents the salaries of our Other NEOs during 2011, with those same2013 and the salaries also being applicable to 2012:for 2014, as determined by the Compensation Committee.

2.The Compensation Committee designed our Annual Cash Incentive Plan to provide our Other NEOs with the opportunity to earn an annual cash bonus of 35% to 50% of their base salary if we achieved targeted levels of financial performance, with the opportunity for each officer to earn up to twice the target percentage if certain goals were met. The Compensation Committee and the board believe that a meaningful, but not overwhelming, amount of each of our Other NEO’s annual direct compensation should be tied to achieving corporate performance targets. The Compensation Committee believes this structure reflects a proper balance of direct compensation that provides our officers with a baseline level of financial stability (in the form of base salary), while also providing an appropriate incentive for achieving annual targets that drive our corporate performance.

We have an annual incentive bonus plan under which we pay

Our Annual Incentive Plan pays cash bonuses within the first 75 days of each Februaryyear based on corporate performance in the preceding fiscal year. Each participant’s total possible bonus is based on a target bonus percentage set for each participant. The plan uses multiple performance measures to determine the amount of each participant’s total bonus. The board assigns a weight to each performance measure, with the sum of the weights equal to 100%. The weight is the percentage of each participant’s total bonus that will be based on that particular performance measure. The board also sets threshold, target and maximum performance levels for each measure. If we do not achieve the threshold performance level, participants earn no bonus for that measure. Participants earn 50% of their target bonus for the measure if we meet the threshold level, 100% if we meet the target level and 200% if we achieve the maximum level. Bonuses are directly proportional to performance between any of these set points. Thus, an officer’s bonus amount could range from 0% to 200% of the officer’s target bonus percentage.

The committee recommended topercentage under the board that the 2011 performance goals for the Company’s officers (other than those classified as regional or branch officers) be earnings per share, core deposit growth (excluding time deposits, including retail repurchase agreements), and efficiency ratio (noninterest expense divided by the sum of 1) tax-equivalent net interest income and 2) noninterest income). The committee recommended that the earnings per share goal be weighted 50% and that the other two goals be weighted 25% each. The board approved these recommendations. We selected these performance measures because we believe that the attainment of goals related to these factors would be beneficial to shareholders in both the short-term and the long-term. Earnings per share is a direct profitability measure. We believe that growth in our core deposits is important to fund the future growth and profitabilityterms of the Company. The efficiency ratio encourages maximizing revenue and minimizing expense. The specific targets set for each performance measurement for 2011 and the degree to which they were attained is discussed under “Equity Grants” below.plan.

Prior to 2011,2010, the committeeCompensation Committee recommended, and the board approved, the following target bonuses for our Other NEOs. In order to determine each officer’s cash bonus, the percentage listed below is multiplied by the officer’s base salary, which is then multiplied by the sum of the performance percentages earned that are described above. Based on the challenging economic conditions facing the banking industry and the Company’s lowlower levels of expected profitability in 2011 compared to priorrecent years, for each of the past four years, the Compensation Committee decided early in 2011 that every participant’s target bonus percentage would be reduced to one-third of its established level. Accordingly, each Other NEO’s target bonus was reduced as reflected in the table below.

Based on restrictions imposed by the Stimulus Act and the Treasury related to our participation in the CPP, we were prohibited from paying any cash bonus to our five most highly compensated employees for 2011. This prohibition applied to four of our five NEOs with respect to cash bonuses based on 2011 performance, but did not apply to David Grigg, our other NEO. Accordingly, Mr. Grigg was eligible to participate in our Annual Incentive Plan (along with the rest of our company’s officers, excluding one officer who was among our five most highly compensated employees).

As detailed below in the section titled “Grants of Plan-Based Awards,” our actual results for 2011 did not meet the minimum thresholds for earnings per share, while the core deposit growth goal was attained at slightly above the threshold level and the efficiency ratio goal was attained between the threshold and target levels. The total performance percentage was 36.1%, and, accordingly, that percentage was multiplied by the product of Mr. Grigg’s salary and his target bonus percentage (as adjusted) to determine his bonus for 2011. As discussed above, the other four NEOs were ineligible to receive this bonus in 2011 due to our participation in the CPP.

3. Equity Grants

As discussed earlier, due to the restrictions imposed by the Stimulus Act and the Treasury related to our participation in the CPP, four of our five NEO’s were ineligible for the cash bonuses related to the annual cash incentive bonus plan discussed above. Cash bonuses related to 2010 performance for those officers who were not restricted from receiving a cash bonus were approved by the Compensation Committee at a meeting held in February 2011. At that same meeting, we analyzed how much our four NEOs who were ineligible to participate in the Annual Cash Incentive Plan would have received had they been participants and used that as a basis to make equity grants.

The following table shows the thresholds, targets, maximums, and maximumsweightings for each performance goal underthat the Annual Incentive Plan, along withCompensation Committee recommended to the actual resultsboard for 20102013 performance goals for the Company’s officers (other than those classified as regional or branch officers) and the performance percentages that resulted from the actual results. For 2010 the performance measureThe dollar amounts in lines 4 and weightings were the same as those discussed above that were applicable for 2011, the earnings per share goal was weighted at 50% and the other two goals were assigned a weight of 25% each.5 are in thousands:

(1)We selected each of the above goals for our executive officer compensation because we selected those same types of goals for our branch employees and we desired to have the interests of our executive officers aligned as much as possible with our employees in the field. The Company’s 2010 efficiency ratio using amounts obtained directlyfollowing includes some of the specific reasons we selected each goal:

The term “non-covered” noted above means that we exclude from its published financial statementsthe calculation assets assumed in two failed-bank acquisitions that are covered by loss-share agreements with the FDIC. We believed it was 55.11%, which would have resulted in a payout just underappropriate to exclude those assets from the maximum level. However,measurement criteria due to their unique characteristics.

In addition to the goals noted above, the Compensation Committee determinedalso set two triggers that this ratio was inequitably enhanced (lowered) by certain accounting entries relatedthe Company had to meet for any of the Company’s failed bank acquisition that had not been anticipated whenabove-described bonuses to be paid. In other words, if the goals were set. Accordingly, the committee adjusted the ratio to exclude those entries, which resulted in an adjusted efficiency ratio of 60.86%. The adjusted ratioCompany did not meetachieve both triggers, no bonuses would be paid to our Other NEOs no matter what the “threshold” and thus no performance percentage payout resulted from this goal.results were for the eight goals noted above. The two triggers were:

As shown above, the total payout percentage according to the terms of the Annual Incentive Plan was 26.7%. To this amount, in determining the amount of the restricted stock grants for the NEOs not eligible to participate in the Annual Incentive Plan, the Committee added 12.5% as a result of its assessment of the results of the Company’s regulatory examinations occurring during 2010. Thus, the adjusted performance percentage for the purposes of this review was 39.2%.

Accordingly, the following table illustrates how each NEO’s incentive bonus for 2010 would have been calculated, had each NEO been eligible to participate in the Annual Incentive Plan:

(1) Due to challenging economic conditions facing the banking industry and the Company’s low levels of expected profitability in 2010 compared to prior years, the Compensation Committee decided early in 2010 that every officer’s target bonus percentage would be reduced to one-third of its established level. See pages 19 and 20 for additional discussion.

Based on this review, we decided to award these four NEOs restricted stock with a value that was equal to the amounts shown above based upon the Company’s closing stock price on February 24, 2011. Our Company’s closing stock price on February 24, 2011 was $14.54 and accordingly the following number of restricted shares were granted: Mr. Ocheltree - 2,232, Ms. Hollers - 1,134, Ms. Nixon - 1,096, Mr. Credle - 990. These awards were granted in amounts and terms that were permitted by the Stimulus Act and Treasury rules for companies participating in the CPP.

In February 2012, we used a similar philosophy to award additional restricted stock to the same four NEOs related to 2011 performance.

The following table shows the thresholds, targets, and maximums for each goal under the Annual Incentive Plan, along with the actual results for 2011 and the performance percentages that resulted from the actual results. As previously discussed, the earnings per share goal was weighted at 50% and the other two goals were assigned a weight of 25% each.

As shown above, the total payout percentage according to the terms of the Annual Incentive Plan was 36.1%. 95.8% and the Compensation Committee determined that the two triggers noted above were achieved.

Accordingly, the following table illustrates how each Other NEO’s incentive bonus for 2011 would have been calculated, had each NEO been2013 was calculated. These payments were made in March 2014. (Mr. Ocheltree was not eligible to participate infor payment since he was not an employee of the Annual Incentive Plan:Company at December 31, 2013).

(1) As previously discussed, due to challenging economic conditions facing the banking industry and the Company’s lowlower levels of expected profitability in 2011 compared to priorrecent years, for each of the past four years, the Compensation Committee decided early in 2011 that every officer’s target bonus percentage would be reduced to one-third of its established level. See pages 19 and 20 for additional discussion.

Based on this review, we decided to award these four NEOs restricted stock with a value that was equalIn addition to the amountsamount shown above, based upon the Company’s closing stock price on February 23, 2012. Our Company’s closing stock price on February 23, 2012 was $10.96 and accordinglyCompensation Committee granted Mr. Soccorso a discretionary bonus of $20,000 primarily in recognition of his efforts in various initiatives within the following number of restricted shares were granted: Mr. Ocheltree – 2,807, Ms. Hollers- 1,426, Ms. Nixon – 1,378, Mr. Credle – 1,245. These awards were granted in amounts and termsCompany during 2013.

For 2014, the Compensation Committee determined that were permitted by the Stimulus Act and Treasury rulestarget bonus percentage for companieseach officer participating in the CPP.Annual Incentive Plan, including each of our Other NEOs, would only be reduced by one-third of the original percentage.

4.    BenefitsAs previously discussed, during 2014 we made an equity grant to our Chief Executive Officer related to performance for 2013. There were no equity grants made to our Other NEOs in (or for) 2013. Our current plan that allows for the grant of equity awards expires May 2, 2014. In order to maintain our flexibility to grant equity awards in the future, the board has adopted, and is submitting to the Company’s shareholders for approval, the First Bancorp 2014 Equity Plan. See Proposal 4 below.

We provide a competitive benefits program for our NEOs.NEOs, including our Chief Executive Officer. We provide these benefits in order to retain and attract an appropriate caliber of talent and recognize that other companies with which we compete for talent provide similar benefits to their executive officers.

The following table lists our current benefit programs and shows, for each, the employees eligible for each benefit:

(1) Our defined benefit pension plan covers all full-time employees hired on or before June 11, 2009.

Supplemental Executive Retirement Plan

We sponsor a supplemental executive retirement plan, or SERP, for the benefit of certain members of our senior management, including each of the NEOs.our Other NEOs, except for Mr. Soccorso (our Chief Executive Officer is also not a participant). The purpose of the SERP is to provide additional monthly pension benefits to ensure that each participant will receive lifetime pension benefits beyond the amounts that we can pay under our qualified pension plan. The SERP generally provides participants with an annual benefit at retirement equal to 3% of final average compensation multiplied by years of service, up to a maximum of 60% of final average compensation. The amount of a participant’s SERP benefit is reduced by (1) the amount payable under our qualified pension plan, and (2) 50% of the participant’s primary Social Security benefit.

We set the benefits payable under the SERP in 1993 at the inception of the plan, in consultation with an employee benefits consultant who assisted us with plan design. At that time, the employee benefits consultant provided peer information and gave his expert opinion that the benefits payable under this plan were reasonable and would further our objectives of attracting and retaining senior management executives. The committee believes these reasons are still valid.

During 2012, we decided that we wanted to offer a uniform set of retirement benefits that would be applicable to all employees and not just those that were hired after June 11, 2009 or those that had achieved a certain level within the Company. Accordingly, effective December 31, 2012, in addition to freezing the qualified defined benefit pension plan (as noted above), we also froze our SERP, which means that the participants of that plan will not earn future benefits under the plan.

In March 2014, we amended the SERP to provide that any executive officer who earned at least 40 years of service with the Company would be deemed to have automatically met the normal retirement age and normal retirement date for purposes of the retirement benefit under the SERP. As noted on page 35, this amendment had an immediate impact as it related to the retirement of Ms. Hollers.

Perquisites

We provide only very limited perquisites. During 2011,2013, the only perquisites provided to any of the NEOs were as follows:

5.    Post-Termination Compensation

Accelerated Vesting

Our current equity plan and the SERP have change in control provisions that automatically vest all participants in the benefits of each plan in the event of a change in the control of our company.Company. We believe that other companies with which we compete for executive talent provide a similar acceleration benefit, and that these provisions therefore assist us in attracting and retaining talent.

Employment Agreements

We have two-year or three-year, automatically renewing(or had) employment agreements with each of our NEOs. The employment agreement with our Chief Executive Officer has been previously described. See “Compensation of Richard H. Moore, Chief Executive Officer” above.

Mr. Ocheltree’s employment agreement terminated upon his retirement from the NEOs. Company in June 2013 and was superseded by a Retirement Agreement and Release of Claims that is described in note 5 to the All Other Compensation Table on page 30 below. Ms. Hollers retired from the Company effective March 31, 2014 in accordance with the terms of her employment agreement, which has several provisions related to confidentiality and non-competition that continue past the last day of her employment.

As of December 31, 2013, Ms. Hollers, Mr. Credle and Mr. J. Burns each had a three-year employment agreement that automatically renews for a new three year term on each anniversary date unless either party gives written notice of non-renewal. During 2012, we provided written notice to each of these officers that their employment agreements would not automatically renew on their next anniversary date. We made this decision because we concluded that it had been many years since the employment agreements had been entered into, and we wanted an opportunity to review the terms of the agreements and make any adjustments needed to align them with changing philosophies and current market conditions. Because of the notification provided, our employment agreement with Ms. Hollers was scheduled to expire in August 2014, and as noted above, Ms. Hollers retired from the Company in March 2014. Our employment agreement with Mr. Credle will expire in August 2014, while our agreement with Mr. Burns will expire in September 2014. At, or prior to expiration, it is expected that we will offer Mr. Credle and Mr. Burns new employment agreements that will incorporate changes arising from the aforementioned review.

In March 2014, Mr. Soccorso entered into an employment agreement with the Company that includes the results of our review of employment agreements. The most significant difference between Mr. Soccorso’s agreement and the agreements that we have historically entered into with our NEOs is that the term is for only one year instead of three years. The Compensation Committee decided that this change was desirable and beneficial to the Company because it represents a lesser legal commitment to the 19 officers that have these agreements and is consistent with the term of the employment agreement that we have with Mr. Moore.

Each of these agreements provides for the payment of certain severance benefits to the officer upon termination of employment in certain circumstances, including following a change in the control of our company. For more information about these benefits, see the section below captioned “Executive Compensation – Potential Payments Upon Termination.” Each agreement also contains non-competition and confidentiality covenants that protect our company if the officer leaves.

The objectives of the Other NEO employment agreements arewere as follows:

The committeeCompensation Committee and the board believe the amount of the severance benefits potentially payable to each Other NEO under these agreements is reasonable and consistent with industry standards.

The above discussion describeddescribes the five primary components of our executive compensation program. The following section describes other guidelines and procedures affecting executive compensation.

Other Guidelines and Procedures Affecting Executive Compensation

Stock Option Grants

When we approve a stock option grant, we set a date in the future as the measurement date for the exercise price of the stock option. We do not “back-date” stock option grants. We do not have a policy or practice of making stock option grants during periods in which there is material non-public information about our company.Company.

Tax Considerations

It has been and continues to be our intent that all incentive payments be deductible unless maintaining deductibility would undermine our ability to meet our primary compensation objectives or is otherwise not in our best interest. At this time, essentially all compensation we have paid to the NEOs is deductible under the federal tax code, except for income realized from exercise of incentive stock options by some NEOs.

Share Ownership Guidelines for Named Executive Officers

We do not require our NEOs to own any minimum amount of our common stock. We may consider a minimum stock ownership policy in the future, but the committee does not currently believe that such a policy is necessary. We believe that the way we compensate our NEOs aligns their interest sufficiently with that of the shareholders.

Consideration of Prior-Year Shareholder Advisory Vote

At the 20112013 annual meeting of shareholders, on the proposal approving, on an advisory basis, the compensation paid to our named executive officers as disclosed in the proxy statement for that annual meeting, 95 percent of the votes cast were cast in favor of the proposal. The Compensation Committee considered this high level of support as providing confirmation that the shareholders support our compensation policies and decisions for our named executive officers, and determined that its approach to the 20122014 compensation policies and decisions would remain generally consistent with the approach in 2011.

2013.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of First Bancorp has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on its review and discussion, the Compensation Committee recommended to the board that the Compensation Discussion and Analysis be included in this proxy statement and in First Bancorp’s annual report on Form 10-K for filing with the Securities and Exchange Commission.

During 2011,The Compensation Committee has conducted a risk-based assessment of the Company’s compensation plans, policies and practices to determine whether such plans, policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. Based on this assessment, the Compensation Committee discussedhas concluded that the Company’s compensation plans, policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. As part of its assessment, the Compensation Committee evaluated the Company’s compensation plans and whether any limits or restrictions were needed in orderprograms to minimize anydetermine their propensity to cause undue risk taking by employees, including senior executive officers, relative to the level of risk associated with:

(A) Senior Executive Officer (SEO) compensation plans that could lead SEOs to take unnecessarywith the Company’s business model and excessive risks that could threaten the value of First Bancorp;

(B) Employee compensation plans that unnecessarily expose First Bancorp to risks; and

(C) Employee compensation plans that could encourage the manipulation of reported earnings of First Bancorp to enhance the compensation of an employee.

In these discussions, theoperations. The Compensation Committee concludedbelieves that for 2011, the only significant aspectCompany does not use highly leveraged short-term incentives that encourage high risk behavior at the expense or detriment of compensation relatedlong-term value and which are reasonably likely to any employee compensation plan that could lead to the taking of unnecessary or excessive risks or that could encourage the manipulation of reported earnings was the earnings per share goal setcreate a material adverse effect. The Compensation Committee completed its assessment in 2014 as part of our 2011 Annual Incentive Plan goals.

As previously discussed, we had an earnings per share (EPS) goal setits obligation to oversee the compensation risk assessment process for 2011 as part of our Annual Incentive Plan goals, as follows:

the Company.

Our actual EPS for 2011 was $0.44, and thus we did not achieve the threshold levels of EPS for either measurement. Accordingly, there was no corresponding performance payment under the Annual Incentive Plan.

The Compensation Committee discussed whether the EPS goals could lead to the taking of unnecessary or excessive risks or could encourage the manipulation of reported earnings. We decided that these risks were minimal for the following reasons:

Submitted by the Compensation Committee of First Bancorp’s board of directors.

Summary Compensation Table

The following table shows the compensation we paid in each of the last three fiscal years to the NEOs.

20112013 SUMMARY COMPENSATION TABLE

Notes: