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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K/A

Amendment No. 1





Annual Report
Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934



|                                            |  |                               
|------------------------------------------- |  | ------------------------------
|For the fiscal year ended December 31, 2011 |  | Commission File Number 0-13823
|                                            |  |                               





FNB UNITED CORP.

(Exact name of Registrant as specified in its Charter)



|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|North Carolina                           |  | 56-1456589                          
|(State of Incorporation)                 |  | (I.R.S. Employer Identification No.)
|                                         | 
|150 South Fayetteville Street            |  |                                     
|Asheboro, North Carolina                 |  | 27203                               
|(Address of principal executive offices) |  | (Zip Code)                          

(336) 626-8300

(Registrants telephone number, including area code)





Securities
Registered Pursuant to Section 12(g) of the Securities Exchange Act of 1934:

Title of each class

Common Stock, $0.00 par value





Indicate by check mark if the
registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.    Yes   ̈    No  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  x    No   ̈

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrants knowledge, in definitive proxy or information statements
incorporated by reference to Part III of this Form 10-K or any amendment to this Form 10-K.     ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one)



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The aggregate market value of the Registrants common stock held by non-affiliates of the Registrant, as of June 30, 2011, was approximately $4.6 million. As of March 26, 2012, the
Registrant had outstanding 21,102,668 shares of Common Stock.

Portions of the Proxy Statement of the Registrant for the Annual Meeting of
Shareholders to be held on June 21, 2012, are incorporated by reference in Part III of this report.









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FNB UNITED CORP.

Table of Contents



|         |  |                                                                                       |  |  |    | 
|-------- |  | ------------------------------------------------------------------------------------- |  |  | -- | 
|PART II  |  |                                                                                       |  |  |    | 
|         |  |                                                                                      
|Item 6.  |  | SELECTED FINANCIAL DATA                                                               |  |  | 4  | 
|         |  |                                                                                      
|Item 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  |  | 5  | 
|         |  |                                                                                      
|PART IV  |  |                                                                                       |  |  |    | 
|         |  |                                                                                      
|Item 15. |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                            |  |  | 31 | 
|         |  |                                                                                      
|         |  | SIGNATURES                                                                            |  |  | 32 | 



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EXPLANATORY NOTE

FNB United Corp. is filing this Amendment No. 1 (Amendment No. 1) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the Form 10-K), as
filed with the Securities and Exchange Commission on March 30, 2012, solely to correct certain mathematical errors in the calculation of 2011 average balances and ratios calculated using these average balances in Item 6, Selected
Financial Data, and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. There was no impact on the financial statements of FNB United Corp. as a result of these changes.

The errors appear in Item 6 under the Average Balances, Performance Ratios, Asset Quality Ratios and Capital and Liquidity Ratios headings. The
errors appear in Item 7 under the Executive Overview, Results of Operations, Net Interest Income (including Tables 1 and 2), and Balance Sheet Review, and the following headings of the specified tables under Asset QualityAllowance for
Loan Losses (Table 16, Asset Quality Ratios heading), and Deposits (Table 18, Average Balances heading).

In accordance with Rule 12b-15
of the Securities Exchange Act of 1934, as amended (the Exchange Act), this Amendment No. 1 sets forth below the complete text of Item 6, Selected Financial Data and Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, as amended. In addition, new Certifications of our Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act are filed
as exhibits to this Amendment No 1.

This Amendment No. 1 does not include any additional changes, nor does it update any disclosures to
reflect developments since the Form 10-K. In particular, any forward-looking statements included in this Amendment No. 1 represent management's view as of the filing date of the Form 10-K. Accordingly, this Amendment No. 1 should
be read in conjunction with the Form 10-K.

This Amendment No. 1 contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such actual results
to differ materially from those set forth in these forward-looking statements are included in Part I, Item 1A, Risk Factors beginning on page 13 of the Form 10-K.



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|Item 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The tables below set forth selected consolidated financial data as of the dates or for the periods indicated. This data should be read in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations in Item 7 and the Consolidated Financial Statements and Notes in Item 8 of this Report.



|                                                                                                              |  |                                           |           |    |      |   |           |      |  |   |           |    |  |      |           |    |  |   |           |  
|------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | --------- | -- | ---- | - | --------- | ---- |  | - | --------- | -- |  | ---- | --------- | -- |  | - | --------- | -
|(dollars in thousands, except per share data)                                                                 |  | As of and for the Year Ended December 31, |          
|                                                                                                              |  | 2011                                      |           |    | 2010 |   |           | 2009 |  |   | 2008      |    |  | 2007 |          
|Income Statement Data                                                                                         |  |                                           |           |    |      |   |           |      |  |   |           |    |  |      |           |    |  |   |           |  
|Net interest income                                                                                           |  | $                                         | 39,555    |    |      | $ | 51,650    |      |  | $ | 60,535    |    |  | $    | 59,568    |    |  | $ | 63,602    |  
|Provision for loan losses                                                                                     |  |                                           | 67,362    |    |      |   | 132,755   |      |  |   | 61,509    |    |  |      | 27,759    |    |  |   | 5,514     |  
|Noninterest income                                                                                            |  |                                           | 21,970    |    |      |   | 27,622    |      |  |   | 13,442    |    |  |      | 19,039    |    |  |   | 18,359    |  
|Noninterest expense                                                                                           |  |                                           | 125,040   |    |      |   | 75,679    |      |  |   | 111,615   |    |  |      | 112,212   |    |  |   | 57,217    |  
|Income/(loss) before goodwill impairment charges - from continuing operations                                 |  |                                           | (131,518  | )  |      |   | (130,421  | )    |  |   | (50,166   | )  |  |      | (2,137    | )  |  |   | 12,875    |  
|Income/(loss) from continuing operations, net of taxes                                                        |  |                                           | (131,518  | )  |      |   | (130,421  | )    |  |   | (102,561  | )  |  |      | (58,137   | )  |  |   | 12,875    |  
|(Loss)/income from discontinued operations, net of taxes                                                      |  |                                           | (5,796    | )  |      |   | (1,406    | )    |  |   | 865       |    |  |      | (1,672    | )  |  |   | (514      | )
|Net income/(loss)                                                                                             |  |                                           | (137,314  | )  |      |   | (131,827  | )    |  |   | (101,696  | )  |  |      | (59,809   | )  |  |   | 12,361    |  
|Preferred stock gain on retirement, net of accretion, and dividends                                           |  |                                           | 44,592    |    |      |   | (3,294    | )    |  |   | (2,871    | )  |  |      |          |    |  |   |          |  
|Net income/(loss) to common shareholders                                                                     |  |                                           | (92,722   | )  |      |   | (135,121  | )    |  |   | (104,567  | )  |  |      | (59,809   | )  |  |   | 12,361    |  
|                                                                                                              |  |                                           |           |    |     
|Period End Balances                                                                                           |  |                                           |           |    |      |   |           |      |  |   |           |    |  |      |           |    |  |   |           |  
|Assets                                                                                                        |  | $                                         | 2,409,108 |    |      | $ | 1,902,369 |      |  | $ | 2,101,296 |    |  | $    | 2,044,434 |    |  | $ | 1,906,506 |  
|Loans held for sale (1)                                                                                       |  |                                           | 4,529     |    |      |   |          |      |  |   | 4,567     |    |  |      | 5,695     |    |  |   | 5,779     |  
|Loans held for investment(2)                                                                                  |  |                                           | 1,217,535 |    |      |   | 1,303,975 |      |  |   | 1,563,021 |    |  |      | 1,585,195 |    |  |   | 1,446,116 |  
|Allowance for loan losses(1)                                                                                  |  |                                           | 39,360    |    |      |   | 93,687    |      |  |   | 49,229    |    |  |      | 34,720    |    |  |   | 17,381    |  
|Goodwill (1)                                                                                                  |  |                                           | 3,905     |    |      |   |          |      |  |   |          |    |  |      | 52,395    |    |  |   | 108,395   |  
|Deposits                                                                                                      |  |                                           | 2,129,111 |    |      |   | 1,696,390 |      |  |   | 1,722,128 |    |  |      | 1,514,747 |    |  |   | 1,441,042 |  
|Borrowings                                                                                                    |  |                                           | 123,910   |    |      |   | 218,315   |      |  |   | 261,459   |    |  |      | 365,757   |    |  |   | 231,125   |  
|Shareholders equity                                                                                          |  |                                           | 129,015   |    |      |   | (28,837   | )    |  |   | 98,359    |    |  |      | 147,917   |    |  |   | 216,256   |  
|                                                                                                              |  |                                           |           |    |     
|Average Balances                                                                                              |  |                                           |           |    |      |   |           |      |  |   |           |    |  |      |           |    |  |   |           |  
|Assets                                                                                                        |  | $                                         | 1,911,943 |    |      | $ | 2,036,603 |      |  | $ | 2,158,123 |    |  | $    | 2,040,204 |    |  | $ | 1,862,602 |  
|Loans held for sale(1)                                                                                        |  |                                           | 12,849    |    |      |   | 2,731     |      |  |   | 8,347     |    |  |      | 5,622     |    |  |   | 3,531     |  
|Loans held for investment (2)                                                                                 |  |                                           | 1,132,125 |    |      |   | 1,494,959 |      |  |   | 1,583,213 |    |  |      | 1,555,113 |    |  |   | 1,357,256 |  
|Allowance for loan losses(1)                                                                                  |  |                                           | 66,285    |    |      |   | 62,670    |      |  |   | 31,927    |    |  |      | 20,493    |    |  |   | 15,882    |  
|Goodwill (1)                                                                                                  |  |                                           | 574       |    |      |   |          |      |  |   | 39,045    |    |  |      | 108,241   |    |  |   | 108,593   |  
|Deposits                                                                                                      |  |                                           | 1,725,512 |    |      |   | 1,725,019 |      |  |   | 1,639,830 |    |  |      | 1,483,749 |    |  |   | 1,440,604 |  
|Borrowings                                                                                                    |  |                                           | 190,864   |    |      |   | 226,660   |      |  |   | 334,332   |    |  |      | 322,643   |    |  |   | 188,790   |  
|Shareholders equity                                                                                          |  |                                           | (22,809   | )  |      |   | 68,190    |      |  |   | 172,217   |    |  |      | 215,571   |    |  |   | 212,841   |  
|                                                                                                              |  |                                           |           |    |     
|Per Common Share Data                                                                                         |  |                                           |           |    |      |   |           |      |  |   |           |    |  |      |           |    |  |   |           |  
|Net (loss)/income per share before goodwill impairment charges from continuing operations - basic and diluted |  | $                                         | (20.71    | )  |      | $ | (1,170.48 | )    |  | $ | (464.55   | )  |  | $    | (18.73    | )  |  | $ | 113.72    |  
|Net (loss)/income per share after goodwill impairment charges from continuing operations - basic and diluted  |  |                                           | (20.71    | )  |      |   | (1,170.48 | )    |  |   | (923.47   | )  |  |      | (509.63   | )  |  |   | 113.72    |  
|Net (loss)/income per common share from discontinued operations - basic and diluted                           |  |                                           | (1.38     | )  |      |   | (12.31    | )    |  |   | 7.58      |    |  |      | (14.66    | )  |  |   | (4.53     | )
|Net (loss)/income per common share - basic and diluted                                                        |  |                                           | (22.09    | )  |      |   | (1,182.79 | )    |  |   | (915.89   | )  |  |      | (524.29   | )  |  |   | 109.19    |  
|Cash dividends declared                                                                                       |  |                                           |          |    |      |   |          |      |  |   | 5.00      |    |  |      | 45.00     |    |  |   | 60.00     |  
|Book value (3)                                                                                                |  |                                           | 6.11      |    |      |   | (714.72   | )    |  |   | 404.95    |    |  |      | 1,294.34  |    |  |   | 1,892.52  |  
|Tangible book value (3)                                                                                       |  |                                           | 5.54      |    |      |   | (751.24   | )    |  |   | 361.46    |    |  |      | 785.44    |    |  |   | 886.48    |  
|                                                                                                              |  |                                           |           |    |     
|Performance Ratios                                                                                            |  |                                           |           |    |      |   |           |      |  |   |           |    |  |      |           |    |  |   |           |  
|Return on average assets before goodwill impairment charges                                                   |  |                                           | (6.88     | )% |      |   | (6.40     | )%   |  |   | (2.32     | )% |  |      | (0.10     | )% |  |   | 0.69      | %
|Return on average assets                                                                                      |  |                                           | (6.88     | )  |      |   | (6.40     | )    |  |   | (4.75     | )  |  |      | (2.85     | )  |  |   | 0.69      |  
|Return on average tangible assets (3)                                                                         |  |                                           | (6.92     | )  |      |   | (6.42     | )    |  |   | (4.85     | )  |  |      | (3.02     | )  |  |   | 0.74      |  
|Return on average equity before goodwill impairment charges (4)                                               |  |                                           | N/M       |    |      |   | (191.26   | )    |  |   | (29.13    | )  |  |      | (0.99     | )  |  |   | 6.05      |  
|Return on average equity(4)                                                                                   |  |                                           | N/M       |    |      |   | (191.26   | )    |  |   | (59.55    | )  |  |      | (26.97    | )  |  |   | 6.05      |  
|Return on average tangible shareholders equity (3)                                                           |  |                                           | N/M       |    |      |   | (205.09   | )    |  |   | (80.26    | )  |  |      | (58.11    | )  |  |   | 13.53     |  
|Net interest margin (tax equivalent)                                                                          |  |                                           | 2.29      |    |      |   | 2.81      |      |  |   | 3.12      |    |  |      | 3.40      |    |  |   | 4.01      |  
|Dividend payout on common shares                                                                              |  |                                           | N/M       |    |      |   | N/M       |      |  |   | N/M       |    |  |      | (0.09     | )  |  |   | 0.55      |  
|                                                                                                              |  |                                           |           |    |     
|Asset Quality Ratios                                                                                          |  |                                           |           |    |      |   |           |      |  |   |           |    |  |      |           |    |  |   |           |  
|Allowance for loan losses to period end loans held for investment (1)                                         |  |                                           | 3.23      | %  |      |   | 7.18      | %    |  |   | 3.15      | %  |  |      | 2.19      | %  |  |   | 1.20      | %
|Nonperforming loans to period end allowance for loan losses(1)                                                |  |                                           | 269.24    |    |      |   | 352.12    |      |  |   | 354.29    |    |  |      | 276.57    |    |  |   | 107.63    |  
|Net charge-offs (annualized) to average loans held for investment                                             |  |                                           | 10.75     |    |      |   | 5.92      |      |  |   | 2.97      |    |  |      | 0.67      |    |  |   | 0.28      |  
|Nonperforming assets to period end loans held for investment and foreclosed property (5)                      |  |                                           | 16.29     |    |      |   | 28.70     |      |  |   | 13.12     |    |  |      | 6.45      |    |  |   | 1.50      |  
|                                                                                                              |  |                                           |           |    |     
|Capital and Liquidity Ratios                                                                                  |  |                                           |           |    |      |   |           |      |  |   |           |    |  |      |           |    |  |   |           |  
|Average equity to average assets                                                                              |  |                                           | (1.19     | )% |      |   | 3.35      | %    |  |   | 7.98      | %  |  |      | 10.57     | %  |  |   | 11.43     | %
|Total risk-based capital                                                                                      |  |                                           | 13.81     |    |      |   | (2.56     | )    |  |   | 10.29     |    |  |      | 10.39     |    |  |   | 10.43     |  
|Tier 1 risk-based capital                                                                                     |  |                                           | 11.71     |    |      |   | (2.56     | )    |  |   | 6.86      |    |  |      | 6.94      |    |  |   | 8.03      |  
|Leverage capital                                                                                              |  |                                           | 6.70      |    |      |   | (1.86     | )    |  |   | 5.68      |    |  |      | 6.11      |    |  |   | 7.54      |  
|Average loans to average deposits                                                                             |  |                                           | 65.61     |    |      |   | 86.66     |      |  |   | 96.55     |    |  |      | 104.81    |    |  |   | 94.21     |  
|Average loans to average deposits and borrowings                                                              |  |                                           | 59.08     |    |      |   | 76.60     |      |  |   | 80.20     |    |  |      | 86.09     |    |  |   | 83.30     |  



|(1) | Excludes discontinued operations.
|--- | ---------------------------------

|(2) | Loans held for investment, net of unearned income, before allowance for loan losses. 2011 ending balance includes loans acquired from Granite.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Refer to the Non-GAAP Measures section in Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Net loss to common shareholders, which excludes preferred stock dividends, divided by average realized common equity which excludes accumulated other comprehensive
loss.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Nonperforming loans and nonperforming assets include loans past due 90 days or more that are still accruing interest.
|--- | ---------------------------------------------------------------------------------------------------------------------



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|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Managements discussion and analysis of the financial condition and results of operations of FNB represents an overview of the consolidated financial
conditions and results of operations of FNB for each of the last three years. Certain reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation. This discussion and analysis should be
read in conjunction with the Consolidated Financial Statements and Notes presented in Item 8 of this Report. Results of operations for the periods included in this review are not necessarily indicative of results to be obtained during any
future period.

Important Note Regarding Forward-Looking Statements

This Report on Form 10-K contains statements that FNB believes are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These statements generally relate
to FNBs financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking terminology, such as believes, expects, or are
expected to, plans, projects, goals, estimates, may, should, could, would, intends to, outlook or anticipates,
or variations of these and similar words, or by discussions of strategies that involve risks and uncertainties. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to,
those described in this Report on Form 10-K, or the documents incorporated by referenced in it. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may
make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information actually known to us at the time. We undertake no obligation to update publicly any forward-looking statements, whether as
a result of new information, future events or otherwise.

Forward-looking statements contained in this Report on Form 10-K are based on
current expectations, estimates and projections about FNBs business, managements beliefs and assumptions made by management. These statements are not guarantees of FNBs future performance and involve certain risks, uncertainties
and assumptions (called Future Factors), which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. Future factors include, without limitation:



| |  |  | changes in interest rates, spreads on earning assets and interest-bearing liabilities, the shape of the yield curve and interest rate sensitivity
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a prolonged period of low interest rates;
| | - |  | -----------------------------------------



| |  |  | continued and increased credit losses and material changes in the quality of our loan portfolio;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | continued decline in the value of our OREO;
| | - |  | -------------------------------------------



| |  |  | financial resources in the amount, at the times and on the terms required to support our future business;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | increased competitive pressures in the banking industry or in FNBs markets;
| | - |  | ----------------------------------------------------------------------------



| |  |  | less favorable general economic conditions, either nationally or regionally; resulting in, among other things, a reduced demand for credit or other
services;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continued deterioration in the housing markets and reduced demand for mortgages;
| | - |  | --------------------------------------------------------------------------------



| |  |  | changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | the outcome of legislation and regulation affecting the financial services industry, including FNB, including the effects underway as a result of the
implementation of the Dodd-Frank Act;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in accounting principles and standards;
| | - |  | -----------------------------------------------



| |  |  | adverse changes in financial performance or condition of FNBs borrowers, which could affect repayment of such borrowers outstanding loans;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | containing costs and expenses;
| | - |  | ------------------------------



| |  |  | increasing price and product/service competition by competitors;
| | - |  | ----------------------------------------------------------------



| |  |  | rapid technological development and changes;
| | - |  | --------------------------------------------



| |  |  | the effect of any mergers, acquisitions or other transactions to which we or our subsidiary may from time to time be a party;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | FNBs failure of assumptions underlying the establishment of our ALL; and
| | - |  | -------------------------------------------------------------------------



| |  |  | FNB success at managing the risks involved in the foregoing,
| | - |  | ------------------------------------------------------------



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All forward-looking statements speak only as of the date on which such statements are made, and FNB
undertakes no obligation to update any statement, to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

Important Factors Impacting Comparability of Results

We have accounted for our purchase of
Granite Corp., using the acquisition method of accounting as of October 21, 2011, the acquisition date. The results of our operations for the year ended December 31, 2011 include the results of Granite Corp. for the 71 day period from
October 21, 2011 through December 31, 2011. The results of operations for the years ended December 31, 2010 and 2009 do not reflect the results of Granite Corp. for those periods. Our balance sheet as of December 31, 2011
includes the assets, liabilities and equity of Granite Corp., while our balance sheets as of December 31, 2010 and 2009 do not include the assets, liabilities and equity of Granite Corp. as of those dates.

Executive Overview

We are a bank
holding company headquartered in Asheboro, North Carolina. We operate two bank subsidiaries: CommunityOne Bank, N.A. (CommunityOne), a national banking association headquartered in Asheboro, North Carolina and, through Bank of Granite
Corporation (Granite Corp.), Bank of Granite (Granite), a state chartered bank headquartered in Granite Falls, North Carolina. As of December 31, 2011, CommunityOne had 45 branches, $843.9 million in loans and $1.4
billion in deposits. As of December 31, 2011 Granite had 18 branches, $373.9 million in loans and $688.5 million in deposits. Our common stock trades on the Nasdaq Capital Market under the symbol FNBN.

Through our bank subsidiaries, we offer a complete line of consumer, mortgage and business banking services, including loan, deposit, cash management,
investment management and trust services, to individual and business customers through operations located in Alamance, Alexander, Ashe, Burke, Caldwell, Catawba, Chatham, Gaston, Guilford, Iredell, Mecklenburg, Montgomery, Moore, Orange, Randolph,
Richmond, Rowan, Scotland, Watauga and Wilkes counties in North Carolina. Management believes that the banks have a relatively stable deposit base and no material amount of deposits is obtained from any single depositor or group of depositors,
including federal, state and local governments.

CommunityOne owns three subsidiaries: Dover Mortgage Company (Dover); First
National Investor Services, Inc.; and Premier Investment Services, Inc. (Premier). Dover previously engaged in the business of originating, underwriting and closing mortgage loans for sale in the secondary market. Dover ceased operations
in the first quarter of 2011 and filed for Chapter 11 bankruptcy on February 15, 2012. First National Investor Services, Inc. holds deeds of trust for CommunityOne. Premier is inactive. Through Granite Corp., we also own Granite Mortgage, Inc.,
which ceased mortgage operations in 2009 and filed for Chapter 11 bankruptcy on February 15, 2012. FNB also owns FNB United Statutory Trust I, FNB United Statutory Trust II, and Catawba Valley Capital Trust II, which were formed to facilitate
the issuance of trust preferred securities.

We earn revenue primarily from interest on loans, securities investments and fees charged for
financial services provided to our customers. Offsetting these revenues are the cost of deposits and other funding sources, provision for loan losses and write-downs in the value of our OREO, and other operating costs such as: salaries and employee
benefits, occupancy, data processing expenses and tax expense.

During 2011, our primary goal was to secure additional equity capital, add
critical management expertise, and reduce problem assets, all as part of a strategic plan to comply with the Orders. We made significant progress against these goals and are pleased to report that on October 21, 2011, we completed the following
transactions as part of a recapitalization (the Recapitalization):



| |  |  | A capital raise of $310 million in a private placement (the Private Placement), at a price of $16.00 per share (taking into effect the
Reverse Stock Split), with investments from (1) affiliates of each of The Carlyle Group (Carlyle), and Oak Hill Capital Partners (Oak Hill Capital) and, together with Carlyle (the Anchor Investors), pursuant
to investment agreements with each of the Anchor Investors, and (2) various other investors, including certain of our directors and officers (the Additional Investors), and, together with the Anchor Investors, the Investors,
pursuant to subscription agreements, with each of such Additional Investors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Concurrently with the Private Placement, (1) the exchange of 51,500 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series A par
value $10.00 per share and liquidation preference $1,000 per share, held by the U.S. Treasury and all accrued and unpaid dividends thereon, for an aggregate of 1,085,554
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | shares of our common stock, pursuant to an agreement between FNB United and the U.S. Treasury (the TARP Exchange Agreement), and (2) the amendment of the warrant (the
Amended TARP Warrant), issued to the U.S. Treasury to purchase 22,072 shares of our common stock at an exercise price of $16.00 per share; and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The settlement by CommunityOne of $2.5 million aggregate principal amount of subordinated debt outstanding and held by SunTrust Bank
(SunTrust) for cash in the amount equal to the sum of 35% of the principal amount thereof plus 100% of the unpaid and accrued interest thereon as of the closing date, and the repurchase by CommunityOne from SunTrust of the shares of
nonvoting, nonconvertible, nonredeemable cumulative preferred stock of CommunityOne held by SunTrust and having an aggregate liquidation preference of $12.5 million for cash in an amount equal to the sum of 25% of the aggregate liquidation
preference plus 100% of the unpaid and accrued dividends thereon as of the closing date.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In connection with the
Recapitalization, on October 21, 2011, we also consummated the acquisition of Granite Corp., pursuant to the terms and conditions of the Agreement and Plan of Merger, dated as of April 26, 2011 (as amended, the Merger
Agreement), by and among FNB, Merger Sub and Granite Corp. Under this agreement, Merger Sub merged with and into Granite Corp., with Granite Corp continuing as the surviving corporation and as a wholly owned subsidiary of FNB.

Upon the closing of the Merger, each outstanding share of Granite Corp. common stock, par value $1.00 per share, other than shares held by FNB, Granite
Corp. or any of their respective wholly owned subsidiaries and other than shares owned in a fiduciary capacity or as a result of debts previously contracted, was converted into the right to receive 3.375 shares of FNBs common stock. As a
result of the Merger, we issued approximately 521,595 shares of FNB common stock to Granite Corp. stockholders in the aggregate adjusting for the Reverse Stock Split discussed below.

Immediately following the consummation of the Recapitalization and the Merger, nine members of the Board of Directors resigned. H. Ray McKenney, Jr. and R. Reynolds Neely, Jr., remained on the Board of
Directors following the Recapitalization and Merger. Boyd C. Wilson, Jr., formerly a director of Granite Corp.; John Bresnan, a Managing Director of Carlyle; Scott B. Kauffman, a Principal of Oak Hill Capital, Brian E. Simpson, Robert L. Reid,
Austin A. Adams, Jerry R. Licari, J. Chandler Martin and Louis A. Jerry Schmitt were appointed to the Board of Directors. Each of the newly appointed directors will serve until their election at the next appropriate annual meeting of
shareholders and until any of their successors are duly elected and qualified, or until each such individuals earlier death, resignation or removal.

Additionally, the following individuals were appointed as the executive officers of FNB upon the completion of the Recapitalization and the Merger: Brian E. Simpson, Chief Executive Officer; Robert L.
Reid, President; and David L. Nielsen, Chief Financial Officer. Additionally, our new senior management team includes David C. Lavoie as Chief Risk Officer, Gregory P. Murphy as Chief Workout Officer, and Angus M. McBryde III as Treasurer.

On October 31, 2011, we affected a one-for-one hundred Reverse Stock Split of our common stock, for which shareholder approval was
obtained on October 19, 2011. The Reverse Stock Split was effective as of the close of business on October 31, 2011 in accordance with the filing of Articles of Amendment to our Articles of Incorporation with the Secretary of State of
North Carolina.

To protect our ability to use certain tax assets, such as net operating loss carryforwards to offset future income, we have
established a Tax Benefits Preservation Plan, dated as of April 15, 2011. Pursuant to this Plan, on April 8, 2011, the FNB Board of Directors declared a dividend of one preferred share purchase right (Right) in respect of each
share of common stock of FNB outstanding at the close of business on April 25, 2011, referred to as Record Date, and to become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date as defined in the Plan. Each Right represents the right to purchase, upon the terms and subject to the conditions in the Plan, 1/100th of a share of Junior Participating Preferred Stock, Series B, par value $10.00 per share, as
adjusted for the Reserve Stock Split, for $0.64, subject to adjustment in the event of a stock split or dividends relating to the Preferred Stock. FNBs use of the Tax Benefits in the future would be significantly limited if it experiences an
ownership change for U.S. federal income tax purposes. In general, an ownership change will occur if there is a cumulative increase in FNBs ownership by 5-percent shareholders (as defined under U.S. income
tax laws) that exceeds 50 percentage points over a rolling three-year period. The Plan is designed to reduce the likelihood that we will experience an ownership change by discouraging any person from becoming a beneficial owner of 4.99% or more of
the then outstanding common shares. There is no guarantee, however, that the Plan will prevent FNB from experiencing an ownership change.



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During 2012, we intend to distribute to each holder of record of our common stock as of the close of
business on October 20, 2011, or the business day immediately preceding the closing date of the Merger, in a Warrant Offering non-transferable warrants to purchase common stock from FNB. As a result of the Reverse Stock Split, in this Warrant
Offering, each shareholder will receive a warrant to purchase one share of our common stock for every 400 shares of common stock held as of October 20, 2011, at an exercise price of $16.00 per share.

Our net loss from continuing operations increased by 0.8% to $131.5 million in 2011, compared to a net loss of $130.4 million the previous year. The
primary drivers of our results were the significant loan and OREO resolution activity during 2011 and reductions in nonperforming assets, and the impact of that activity on reduced provision for loan losses, increased OREO expenses and reduced loan
income during 2011. The purchase of Granite on October 21, 2011 also contributed $3 million of net income for the 71 days we owned it. Diluted loss per common share from continuing operations declined from $1,170.48 in 2010 to $20.71 in 2011,
primarily as a result of the additional 21 million common shares we issued in connection with the Recapitalization adjusted for the Reverse Stock Split, and $44.6 million of gains on the retirement of preferred stock, net of accretion and
dividends.

Our principal source of revenue is net interest income and we experienced significant pressure on our net interest margin in 2011,
falling from 2.81% in 2010 to 2.29% in 2011, reflecting the impact of nonperforming loans in the process of resolution, the holding of excess cash positions in low yielding accounts with the Federal Reserve, the impact of sales of investment
securities in 2010 and 2011 with proceeds reinvested at lower rates, offset by continued reduction in the cost of interest bearing liabilities, primarily deposits, and the impact of the assets and liabilities acquired in the Merger.

Problem asset resolution activity was robust during 2011 as we moved aggressively to reduce problem asset levels. Including the Merger, net loan
charge-offs increased to $121.7 million in 2011, compared to $88.5 million in 2010, and OREO expenses, including gains and losses on sale and write-downs, increased $36.9 million in 2011 to $51.4 million. During 2011 we foreclosed on $132.5 million
of net loans and transferred them to OREO and disposed of $77.2 million in nonperforming loans and OREO through sales. As a result of these efforts, nonperforming assets decreased 44.8% to $216.4 million at December 31, 2011, from $392.3
million at the close of 2010. Excluding the impact of the OREO assets acquired in the Granite acquisition, nonperforming assets dropped 49.2%, or $193.0 million, at CommunityOne from December 31, 2010 levels. The level of nonperforming loans
decreased 67.9% from 2010 to 2011, from $329.9 million or 25.3% of loans held for investment at December 31, 2010 to $106.0 million, or 8.7% of loans held for investments at December 31, 2011. With the improved asset quality profile, the
provision for loan losses decreased 49.3% to $67.4 million in 2011, compared to $132.8 million in 2010. Accordingly, the ALL decreased to 3.23% of loans held for investment at December 31, 2011, a decrease from 7.18% in 2010. Excluding the
loans acquired in the Merger, recorded at estimated fair value and which required no ALL at December 31, 2011, the ALL as a percentage of loans held for investment was 4.67%. Non-performing assets decreased to 9.0% of total assets in 2011 from
20.6% in 2010.

Our total assets at December 31, 2011, including discontinued operations, were $2.4 billion, up 26.6%, or $506.7 million,
from December 31, 2010, primarily as a result of the Merger. Our gross loans declined significantly in 2011 as a result of payoffs, charge-offs and problem loan resolution through loan sale or foreclosure. Gross loans amounted to $1.2 billion
at December 31, 2011, decreasing 6.6% from the prior year, and decreasing by 35.3% when excluding the impact of loans acquired in the Merger. As a result of the cash received as part of the Recapitalization, the problem asset resolution efforts
and pay down activity in our loan portfolio, we held $553.4 million in cash, due from banks and interest bearing bank balances, primarily being held as excess cash at the Federal Reserve, at December 31, 2011, a 245% increase from 2010.
Subsequent to the Recapitalization, we have worked to reduce our excess liquidity position by reducing non-core liabilities, including the repayment of $86 million in short term Federal Home Loan Bank (FHLB) advances, and the managed
attrition of some single product and public funds CD deposits. Excluding the impact of the Merger, total deposits were reduced 15.1% from 2010, and including the Merger, total deposits increased $432.7 million, or 25.5% to $2.1 billion in 2011 from
the prior year.

Looking forward to 2012, we have set out three core objectives for our company: (1) continue to reduce problem asset
levels and increase asset quality, (2) return CommunityOne and Granite to service in their communities and grow our loan portfolios, and (3) integrate CommunityOne and Granite flawlessly. These three objectives are expected to be our focus
during 2012.



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We are continuing our efforts to reduce problem asset levels, and we have increased our overall work out
staffing, focused on identifying problem assets early, moving those assets to nonaccrual status when appropriate, and working out or transferring those assets to OREO. We also are continuing our successful loan note sale and OREO property sale
programs put in place at CommunityOne during 2011, and extending them to Granite. We have instituted a dual signature loan approval process and adopted new credit policies and procedures, which are in the process of being rolled out to both
CommunityOne and Granite. We also have created an internal loan review function responsible for reviewing loan portfolios and credit processes.

Continuing with our back to business efforts, we are making great progress in returning our 100+ year old CommunityOne and Granite franchises back to
service in their communities. We have reorganized the banks into 4 key business lines: a commercial banking line, a retail banking line, a mortgage banking line and a wealth management line and have completed the selection and naming of key officers
in each business. Lending has resumed with clear parameters, targets and goals, and the mortgage area in particular has begun 2012 with good demand, particularly in the refinancing area.

To achieve our goal of integrating CommunityOne and Granite flawlessly, we are well into the planning stages of merging the two institutions by late summer, subject to obtaining required regulatory
approvals to do so. Merging the institutions in a flawless manner will minimize disruption to our customer base and aid in the achievement of our merger integration goals.

Results of Operations

Net loss from continuing operations for 2011 was $131.5 million, as
compared to a net loss of $130.4 million in 2010, resulting in diluted loss per common share from continuing operations of $1,170.48 in 2010 as compared to diluted loss per common share from continuing operations of $20.71 in 2011. The primary
drivers of our results were the significant loan and OREO resolution activity during 2011 and reductions in nonperforming assets, and the impact of that activity on reduced provision for loan losses, increased OREO expenses and reduced loan income
during 2011. The 2011 results of operations include the results of Granite beginning October 21, 2011, the Merger date.

Return on
average assets was (6.88)% in 2011, compared to (6.40) % in 2010 and (4.75)% in 2009. In 2011, return on average tangible assets (calculated by deducting average goodwill and core deposit premiums from average assets) amounted to (6.92)%
compared to (6.42)% in 2010 and (4.85)% in 2009.

Net Interest Income

Our principal source of revenue is net interest income. Net interest income represents the difference between interest and fees on interest-earning assets, principally loans and investments, and interest
expense on interest-bearing liabilities, principally customer deposits. Net interest income is affected by changes in interest rates and spreads and changes in the average balances and mix of interest-earning assets and interest-bearing liabilities.

Table 1 sets forth for the periods indicated information with respect to FNBs average balances of assets and liabilities, as well as
the total dollar amounts of interest income (taxable equivalent basis) from earning assets and interest expense on interest-bearing liabilities, resultant rates earned or paid, net interest income, net interest spread and net yield on earning
assets. Net interest spread refers to the difference between the average yield on earning assets and the average rate paid on interest-bearing liabilities. Net yield on earning assets, or net interest margin, refers to net interest income divided by
average earning assets and is influenced by the level and relative mix of earning assets and interest-bearing liabilities.



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Table 1

Average Balance Sheet and Net Interest/Dividend Income Analysis

Fully Taxable
Equivalent Basis



|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|--------------------------------------------------------- |  | ----------------------- | --------- | - | --------------- | - | ------ | ------------------ |  |  | ------------------ | - |  | --------------- | --------- |  | ------------------ | - | ------ | ------------------ |  |  | --------------- | - |  | ------------------ | --------- |  |  | - | ------- |  |  |  | ---- | -
|                                                          |  | Year Ended December 31, |          
|                                                          |  | 2011                    |           |   | 2010            |   |        | 2009               | 
|(dollars in thousands)                                    |  | AverageBalance (3)      |           |   | Income /Expense |   |        | AverageYield /Rate |  |  | AverageBalance (3) |   |  | Income /Expense |           |  | AverageYield /Rate |   |        | AverageBalance (3) |  |  | Income /Expense |   |  | AverageYield /Rate |          
|Interest earning assets:                                  |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|Loans (1)(2)                                              |  | $                       | 1,137,817 |   |                 | $ | 52,876 |                    |  |  | 4.65               | % |  | $               | 1,497,690 |  |                    | $ | 68,569 |                    |  |  | 4.58            | % |  | $                  | 1,591,560 |  |  | $ | 82,914  |  |  |  | 5.21 | %
|Taxable investment securities                             |  |                         | 339,754   |   |                 |   | 9,484  |                    |  |  | 2.79               |   |  |                 | 255,629   |  |                    |   | 11,976 |                    |  |  | 4.68            |   |  |                    | 281,047   |  |  |   | 16,256  |  |  |  | 5.78 |  
|Tax-exempt investment securities (1)                      |  |                         | 5,150     |   |                 |   | 346    |                    |  |  | 6.72               |   |  |                 | 33,169    |  |                    |   | 1,551  |                    |  |  | 4.68            |   |  |                    | 49,884    |  |  |   | 2,256   |  |  |  | 4.52 |  
|Overnight Federal funds sold                              |  |                         |          |   |                 |   |       |                    |  |  |                   |   |  |                 | 1,585     |  |                    |   | 3      |                    |  |  | 0.19            |   |  |                    | 10,851    |  |  |   | 21      |  |  |  | 0.19 |  
|Other earning assets                                      |  |                         | 257,524   |   |                 |   | 820    |                    |  |  | 0.32               |   |  |                 | 48,702    |  |                    |   | 500    |                    |  |  | 1.03            |   |  |                    | 19,326    |  |  |   | 377     |  |  |  | 1.95 |  
|Assets of discontinued operations                         |  |                         | 7,157     |   |                 |   | 67     |                    |  |  | 0.94               |   |  |                 | 33,614    |  |                    |   | 552    |                    |  |  | 1.64            |   |  |                    | 48,660    |  |  |   | 1,661   |  |  |  | 3.41 |  
|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|Total earning assets                                      |  |                         | 1,747,402 |   |                 |   | 63,593 |                    |  |  | 3.64               |   |  |                 | 1,870,389 |  |                    |   | 83,151 |                    |  |  | 4.45            |   |  |                    | 2,001,328 |  |  |   | 103,485 |  |  |  | 5.17 |  
|                                                          |  |                         |           |   |                 |   |        |                    | 
|Non-earning assets:                                       |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|Cash and due from banks                                   |  |                         | 25,570    |   |                 |   |        |                    |  |  |                    |   |  |                 | 64,686    |  |                    |   |        |                    |  |  |                 |   |  |                    | 26,381    |  |  |   |         |  |  |  |      |  
|Goodwill and core deposit premium                         |  |                         | 5,263     |   |                 |   |        |                    |  |  |                    |   |  |                 | 4,598     |  |                    |   |        |                    |  |  |                 |   |  |                    | 44,438    |  |  |   |         |  |  |  |      |  
|Other assets, net                                         |  |                         | 132,503   |   |                 |   |        |                    |  |  |                    |   |  |                 | 93,084    |  |                    |   |        |                    |  |  |                 |   |  |                    | 83,095    |  |  |   |         |  |  |  |      |  
|Assets of discontinued operations                         |  |                         | 1,205     |   |                 |   |        |                    |  |  |                    |   |  |                 | 3,846     |  |                    |   |        |                    |  |  |                 |   |  |                    | 2,881     |  |  |   |         |  |  |  |      |  
|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|Total assets                                              |  | $                       | 1,911,943 |   |                 |   |        |                    |  |  |                    |   |  | $               | 2,036,603 |  |                    |   |        |                    |  |  |                 |   |  | $                  | 2,158,123 |  |  |   |         |  |  |  |      |  
|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|                                                          |  |                         |           |   |                 |   |        |                    | 
|Interest-bearing liabilities:                             |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|Interest-bearing demand deposits                          |  | $                       | 246,989   |   |                 | $ | 1,759  |                    |  |  | 0.71               | % |  | $               | 228,054   |  |                    | $ | 2,277  |                    |  |  | 1.00            | % |  | $                  | 198,343   |  |  | $ | 2,250   |  |  |  | 1.13 | %
|Savings deposits                                          |  |                         | 49,628    |   |                 |   | 122    |                    |  |  | 0.25               |   |  |                 | 43,224    |  |                    |   | 112    |                    |  |  | 0.26            |   |  |                    | 40,301    |  |  |   | 106     |  |  |  | 0.26 |  
|Money market deposits                                     |  |                         | 315,203   |   |                 |   | 2,114  |                    |  |  | 0.67               |   |  |                 | 321,180   |  |                    |   | 3,129  |                    |  |  | 0.97            |   |  |                    | 308,690   |  |  |   | 4,381   |  |  |  | 1.42 |  
|Time deposits                                             |  |                         | 942,259   |   |                 |   | 15,684 |                    |  |  | 1.66               |   |  |                 | 974,192   |  |                    |   | 19,393 |                    |  |  | 1.99            |   |  |                    | 940,138   |  |  |   | 25,753  |  |  |  | 2.74 |  
|Retail repurchase agreements                              |  |                         | 8,973     |   |                 |   | 52     |                    |  |  | 0.58               |   |  |                 | 13,355    |  |                    |   | 98     |                    |  |  | 0.73            |   |  |                    | 18,737    |  |  |   | 127     |  |  |  | 0.68 |  
|Federal Home Loan Bank advances                           |  |                         | 122,388   |   |                 |   | 2,547  |                    |  |  | 2.08               |   |  |                 | 140,078   |  |                    |   | 3,517  |                    |  |  | 2.51            |   |  |                    | 185,284   |  |  |   | 5,795   |  |  |  | 3.13 |  
|Federal funds purchased                                   |  |                         |          |   |                 |   |       |                    |  |  |                   |   |  |                 | 1,537     |  |                    |   | 4      |                    |  |  | 0.26            |   |  |                    | 58,609    |  |  |   | 156     |  |  |  | 0.27 |  
|Other borrowed funds                                      |  |                         | 59,503    |   |                 |   | 1,298  |                    |  |  | 2.18               |   |  |                 | 71,690    |  |                    |   | 2,105  |                    |  |  | 2.94            |   |  |                    | 71,702    |  |  |   | 2,407   |  |  |  | 3.36 |  
|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|Total interest-bearing liabilities                        |  |                         | 1,744,943 |   |                 |   | 23,576 |                    |  |  | 1.35               |   |  |                 | 1,793,310 |  |                    |   | 30,635 |                    |  |  | 1.71            |   |  |                    | 1,821,804 |  |  |   | 40,975  |  |  |  | 2.25 |  
|                                                          |  |                         |           |   |                 |   |        |                    | 
|Noninterest-bearing liabilities and shareholders equity: |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|Noninterest-bearing demand deposits                       |  |                         | 171,433   |   |                 |   |        |                    |  |  |                    |   |  |                 | 158,369   |  |                    |   |        |                    |  |  |                 |   |  |                    | 152,358   |  |  |   |         |  |  |  |      |  
|Other liabilities                                         |  |                         | 14,980    |   |                 |   |        |                    |  |  |                    |   |  |                 | 15,852    |  |                    |   |        |                    |  |  |                 |   |  |                    | 10,028    |  |  |   |         |  |  |  |      |  
|Shareholders equity/(deficit)                            |  |                         | (22,809   | ) |                 |   |        |                    |  |  |                    |   |  |                 | 68,190    |  |                    |   |        |                    |  |  |                 |   |  |                    | 172,217   |  |  |   |         |  |  |  |      |  
|Liabilities of discontinued operations                    |  |                         | 3,396     |   |                 |   |        |                    |  |  |                    |   |  |                 | 882       |  |                    |   |        |                    |  |  |                 |   |  |                    | 1,716     |  |  |   |         |  |  |  |      |  
|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|Total liabilities and equity                              |  | $                       | 1,911,943 |   |                 |   |        |                    |  |  |                    |   |  | $               | 2,036,603 |  |                    |   |        |                    |  |  |                 |   |  | $                  | 2,158,123 |  |  |   |         |  |  |  |      |  
|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|                                                          |  |                         |           |   |                 |   |        |                    | 
|Net interest income and net yield on earning assets (4)   |  |                         |           |   |                 | $ | 40,017 |                    |  |  | 2.29               | % |  |                 |           |  |                    | $ | 52,516 |                    |  |  | 2.81            | % |  |                    |           |  |  | $ | 62,510  |  |  |  | 3.12 | %
|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  
|                                                          |  |                         |           |   |                 |   |        |                    | 
|Interest rate spread (5)                                  |  |                         |           |   |                 |   |        |                    |  |  | 2.29               | % |  |                 |           |  |                    |   |        |                    |  |  | 2.74            | % |  |                    |           |  |  |   |         |  |  |  | 2.92 | %
|                                                          |  |                         |           |   |                 |   |        |                    |  |  |                    |   |  |                 |           |  |                    |   |        |                    |  |  |                 |   |  |                    |           |  |  |   |         |  |  |  |      |  



|(1) | The fully tax equivalent basis is computed using a federal tax rate of 35%.
|--- | ---------------------------------------------------------------------------

|(2) | Average loan balances include nonaccruing loans and loans held for sale.
|--- | ------------------------------------------------------------------------

|(3) | Average balances include market adjustments to fair value for securities and loans held for sale.
|--- | -------------------------------------------------------------------------------------------------

|(4) | Net yield on earning assets is computed by dividing net interest income by average earning assets.
|--- | --------------------------------------------------------------------------------------------------

|(5) | Earning asset yield minus interest bearing liabilities rate.
|--- | ------------------------------------------------------------

Net interest income was $39.6 million in 2011, compared to $51.7 million in 2010. This decrease of $12.1 million, or 23.4%, resulted primarily from a 6.6% decrease in the level of average earning assets
and by a decline in the net yield on earning assets, or net interest margin, from 2.81% in 2010 to 2.29% in 2011. Primary drivers of this 52 basis point decrease in net interest margin in 2011 were the impact of nonperforming loans and lower
interest rates on loan renewals during 2011 on loan portfolio yields, a decrease in average investment portfolio yields as a result of lower reinvestment yields following significant portfolio sales in 2010 and 2011, and an increase in other earning
assets resulting primarily from the Recapitalization and the Merger which were invested primarily at the Federal Reserve at a low average yield. In 2010, the decrease in net interest income of $9.9 million, or 14.7%, resulted primarily from a 6.5%
decrease in the level of average earning assets accompanied by a decline in the net yield on earning assets, or net interest margin, from 3.12% in 2009 to 2.81% in 2010. On a taxable equivalent basis, the changes in net interest income were a $12.5
million decrease in 2011 and a decrease of $10.0 million for 2010, reflecting changes in the relative mix of taxable and non-taxable earning assets in each year.

In 2011, the net interest spread decreased by 45 basis points from 2.74% in 2010, to 2.29% in 2011, reflecting the net effect of decreases in both the average total yield on earning assets and the average
rate paid on interest-bearing



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liabilities, or cost of funds. The yield on earning assets decreased by 81 basis points, from 4.45% in 2010 to 3.64% in 2011, offset by a decrease in the cost of funds of 36 basis points, from
1.71% to 1.35%. In 2010, the 18 basis point decrease in net interest spread resulted from a 72 basis points decrease in the yield on earning assets, which was partially offset by a 54 basis points decrease in the cost of funds.

Changes in the net interest margin and net interest spread tend to correlate with movements in the prime rate of interest. There are variations, however,
in the degree and timing of rate changes, compared to prime, for the different types of earning assets and interest-bearing liabilities.

Table 2 analyzes net interest income on a taxable equivalent basis, as measured by volume and rate variances. The table reflects the extent to which
changes in the interest income and interest expense are attributable to changes in volume (changes in volume multiplied by prior year rate) and changes in rate (changes in rate multiplied by prior year volume).

Table 2

Volume and Rate Variance
Analysis



|                                           |  |                |         |   |              |   |        |               |  |   |                |   |  |              |        |   |               |   |         |   |  |   |         |  
|------------------------------------------ |  | -------------- | ------- | - | ------------ | - | ------ | ------------- |  | - | -------------- | - |  | ------------ | ------ | - | ------------- | - | ------- | - |  | - | ------- | -
|(dollars in thousands)                     |  | 2011 vs 2010   |         |   | 2010 vs 2009 |  
|                                           |  | VolumeVariance |         |   | RateVariance |   |        | TotalVariance |  |   | VolumeVariance |   |  | RateVariance |        |   | TotalVariance |  
|Interest income:                           |  |                |         |   |              |   |        |               |  |   |                |   |  |              |        |   |               |   |         |   |  |   |         |  
|Loans, net                                 |  | $              | (16,476 | ) |              | $ | 783    |               |  | $ | (15,693        | ) |  | $            | (4,890 | ) |               | $ | (9,455  | ) |  | $ | (14,345 | )
|Taxable investment securities              |  |                | 3,941   |   |              |   | (6,433 | )             |  |   | (2,492         | ) |  |              | (1,470 | ) |               |   | (2,810  | ) |  |   | (4,280  | )
|Tax exempt investment securities           |  |                | (1,310  | ) |              |   | 105    |               |  |   | (1,205         | ) |  |              | (756   | ) |               |   | 51      |   |  |   | (705    | )
|Overnight Federal funds sold               |  |                | (3      | ) |              |   |       |               |  |   | (3             | ) |  |              | (18    | ) |               |   |        |   |  |   | (18     | )
|Other earning assets                       |  |                | 2,144   |   |              |   | (1,824 | )             |  |   | 320            |   |  |              | 573    |   |               |   | (450    | ) |  |   | 123     |  
|Assets of discontinued operations          |  |                | (434    | ) |              |   | (51    | )             |  |   | (485           | ) |  |              | (514   | ) |               |   | (595    | ) |  |   | (1,109  | )
|                                           |  |                |         |   |              |   |        |               |  |   |                |   |  |              |        |   |               |   |         |   |  |   |         |  
|Total interest income                      |  |                | (12,138 | ) |              |   | (7,420 | )             |  |   | (19,558        | ) |  |              | (7,075 | ) |               |   | (13,259 | ) |  |   | (20,334 | )
|                                           |  |                |         |   |              |   |        |               |  |   |                |   |  |              |        |   |               |   |         |   |  |   |         |  
|                                           |  |                |         |   |              |  
|Interest expense:                          |  |                |         |   |              |   |        |               |  |   |                |   |  |              |        |   |               |   |         |   |  |   |         |  
|Interest-bearing demand deposits           |  |                | 189     |   |              |   | (707   | )             |  |   | (518           | ) |  |              | 337    |   |               |   | (310    | ) |  |   | 27      |  
|Savings deposits                           |  |                | 17      |   |              |   | (7     | )             |  |   | 10             |   |  |              | 8      |   |               |   | (2      | ) |  |   | 6       |  
|Money market deposits                      |  |                | (58     | ) |              |   | (957   | )             |  |   | (1,015         | ) |  |              | 177    |   |               |   | (1,429  | ) |  |   | (1,252  | )
|Time deposits                              |  |                | (636    | ) |              |   | (3,073 | )             |  |   | (3,709         | ) |  |              | 933    |   |               |   | (7,293  | ) |  |   | (6,360  | )
|Retail repurchase agreements               |  |                | (32     | ) |              |   | (14    | )             |  |   | (46            | ) |  |              | (36    | ) |               |   | 7       |   |  |   | (29     | )
|Federal Home Loan Bank advances            |  |                | (444    | ) |              |   | (526   | )             |  |   | (970           | ) |  |              | (1,414 | ) |               |   | (864    | ) |  |   | (2,278  | )
|Federal funds purchased                    |  |                | (4      | ) |              |   |       |               |  |   | (4             | ) |  |              | (152   | ) |               |   |        |   |  |   | (152    | )
|Other borrowed funds                       |  |                | (358    | ) |              |   | (449   | )             |  |   | (807           | ) |  |              |       |   |               |   | (302    | ) |  |   | (302    | )
|                                           |  |                |         |   |              |   |        |               |  |   |                |   |  |              |        |   |               |   |         |   |  |   |         |  
|Total interest expense                     |  |                | (1,326  | ) |              |   | (5,733 | )             |  |   | (7,059         | ) |  |              | (147   | ) |               |   | (10,193 | ) |  |   | (10,340 | )
|                                           |  |                |         |   |              |   |        |               |  |   |                |   |  |              |        |   |               |   |         |   |  |   |         |  
|                                           |  |                |         |   |              |  
|Increase (decrease) in net interest income |  | $              | (10,812 | ) |              | $ | (1,687 | )             |  | $ | (12,499        | ) |  | $            | (6,928 | ) |               | $ | (3,066  | ) |  | $ | (9,994  | )
|                                           |  |                |         |   |              |   |        |               |  |   |                |   |  |              |        |   |               |   |         |   |  |   |         |  

Provision for Loan Losses

This provision is the charge against earnings added to the ALL each year, net of charge-offs and recoveries, to provide a level of allowance considered appropriate to absorb probable losses inherent in
the loan portfolio. The amount of each years charge is affected by several considerations, including managements evaluation of various risk factors in determining the adequacy of the allowance (see Asset Quality
below), actual loan loss experience and loan portfolio growth.

The provision for loan losses was $67.4 million in 2011, $132.8 million in
2010 and $61.5 million in 2009. These changes in the level of the provision for loan losses are discussed and analyzed in detail as part of the discussions in the Asset Quality section.

Noninterest Income

Noninterest income,
excluding discontinued operations, decreased $5.7 million, or 20.5%, to $22.0 million, compared to $27.6 million in 2010. Mortgage loan income, primarily fee income related to loans sold to the secondary market, decreased $2.1 million in 2011 as we
retained more mortgages on our balance sheet and as a result of lower production volumes in 2011. Service charges on deposit accounts decreased $1.2 million in 2011 to $6.2 million, from $7.4 million in 2010, primarily relating to the impact of
changes to Regulation E, which restricted our ability to charge overdraft fees on debit card transactions and required customers with existing accounts to opt in for overdraft coverage of certain types of banking activities. Net securities gains
declined $3.3 million in 2011 to $7.3 million, from $10.6 million in 2010.



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In 2010 noninterest income was $27.6 million, a $14.2 million, or 105.5%, increase as compared to $13.4
million in 2009. Of this increase, $5.0 million was attributable to a non-recurring other-than-temporary impairment (OTTI) charge in 2009 on an investment security that reduced 2009 noninterest income. Mortgage loan income increased $0.5
million in 2010 on increased production and sales of loans in the secondary market. Service charges on deposit accounts decreased $1.6 million in 2010 to $7.4 million, from $9.0 million in 2009, primarily relating to the impact of Regulation E
beginning in July of 2010. Net securities gains of $10.6 million were recognized in 2010 compared to $1.0 million in 2009.

Table 3

Noninterest Income



|                                            |  |              |        |   |      |   |        |      |  |   |        |  
|------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|(dollars in thousands)                      |  | December 31, |       
|                                            |  | 2011         |        |   | 2010 |   |        | 2009 | 
|Service charges on deposit accounts         |  | $            | 6,203  |   |      | $ | 7,358  |      |  | $ | 8,956  |  
|Mortgage loan income                        |  |              | 7      |   |      |   | 2,120  |      |  |   | 1,580  |  
|Cardholder and merchant services income     |  |              | 3,182  |   |      |   | 3,000  |      |  |   | 2,514  |  
|Trust and investment services               |  |              | 1,163  |   |      |   | 1,946  |      |  |   | 1,741  |  
|Bank-owned life insurance                   |  |              | 1,203  |   |      |   | 988    |      |  |   | 1,068  |  
|Other service charges, commissions and fees |  |              | 770    |   |      |   | 1,067  |      |  |   | 1,147  |  
|Gain on extinguishment of debt              |  |              | 1,625  |   |      |   |       |      |  |   |       |  
|Securities gains, net                       |  |              | 7,298  |   |      |   | 10,647 |      |  |   | 989    |  
|Net (loss)/gain on fair value swap          |  |              | (339   | ) |      |   | 273    |      |  |   | 66     |  
|Net impairment loss recognized in earnings  |  |              |       |   |      |   |       |      |  |   | (4,985 | )
|Other income                                |  |              | 858    |   |      |   | 223    |      |  |   | 366    |  
|                                            |  |              |        |   |      |   |        |      |  |   |        |  
|Total noninterest income                    |  | $            | 21,970 |   |      | $ | 27,622 |      |  | $ | 13,442 |  
|                                            |  |              |        |   |      |   |        |      |  |   |        |  

Noninterest Expense

Noninterest expense increased $49.4 million, or 65.2%, to $125.0 million in 2011, from $75.7 million in 2010. The largest component of this change was an increase in our OREO expense, including valuation
adjustments and gains and losses on sale, of $51.4 million in 2011 compared to $14.5 million in 2010, as a result of accelerated asset resolution and disposition activity during 2011 and valuation adjustments required on OREO properties due to
continued weakness in the economy and the effect that the current economic environment is having on the valuation of real estate. In connection with our asset resolution efforts we also incurred increased loan collection expense in 2011 of $4.0
million, to $5.0 million, and recognized a $1.2 million loss on the sales of nonperforming loans. We also incurred one-time merger related expenses of $1.2 million in connection with the Merger. Excluding these items, $4.0 million of noninterest
expenses at Granite incurred from the acquisition date and a $3.0 million mortgage servicing rights impairment charge incurred in 2010, noninterest expense was $62.1 million in 2011, compared to $57.2 million in 2010, an increase of $5.0 million or
8.7%. FDIC insurance for 2011 was $6.7 million compared to $5.9 million for 2010, a 14.5% increase year over year attributable to increased insurance premium assessments and the impact of the Granite acquisition.

Noninterest expense decreased $35.9 million in 2010 to $75.7 million, from $111.6 million in 2009, primarily as a result of goodwill impairment charges
we recorded in 2009 of $52.4 million. OREO-related expenses increased 318.5% to $14.5 million in 2010, compared to $3.5 million in 2009, as a result of valuation adjustments required on OREO properties due to weakness in the economy and the effect
of the economic environment on the valuation of real estate. Excluding the 2009 goodwill impairment charges, other real estate expenses, loan collection expenses and the mortgage servicing rights impairment we recorded in 2010, noninterest expense
was $57.2 million for 2010, compared to $55.0 million in 2009, an increase of $2.1 million or 3.9%. FDIC insurance for 2010 was $5.9 million compared to $4.2 million for 2009, a 40.4% increase year over year.

On November 12, 2009, the FDIC imposed a 13-quarter prepayment of FDIC premiums to replenish the depleted insurance fund requiring insured
depository institutions to prepay their estimated quarterly regular risk-based assessments for the fourth quarter of 2009, through the fourth quarter of 2012 on December 30, 2009, at the same time that institutions paid their regular quarterly
deposit insurance assessments for the third quarter of 2009. As of December 31, 2011, CommunityOne had no remaining balance in the FDIC prepaid assessment.



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Table 4

Noninterest Expense



|                                                 |  |              |         |  |      |   |        |      |  |   |         | 
|------------------------------------------------ |  | ------------ | ------- |  | ---- | - | ------ | ---- |  | - | ------- | 
|(dollars in thousands)                           |  | December 31, |        
|                                                 |  | 2011         |         |  | 2010 |   |        | 2009 | 
|Personnel expense                                |  | $            | 27,725  |  |      | $ | 25,931 |      |  | $ | 27,085  | 
|Net occupancy expense                            |  |              | 4,933   |  |      |   | 4,768  |      |  |   | 5,297   | 
|Furniture, equipment and data processing expense |  |              | 6,648   |  |      |   | 6,744  |      |  |   | 6,816   | 
|Professional fees                                |  |              | 7,335   |  |      |   | 3,680  |      |  |   | 1,888   | 
|Stationery, printing and supplies                |  |              | 471     |  |      |   | 491    |      |  |   | 607     | 
|Advertising and marketing                        |  |              | 645     |  |      |   | 1,479  |      |  |   | 1,876   | 
|Other real estate owned expense                  |  |              | 51,424  |  |      |   | 14,532 |      |  |   | 3,472   | 
|Credit/debit card expense                        |  |              | 1,674   |  |      |   | 1,715  |      |  |   | 1,672   | 
|FDIC insurance                                   |  |              | 6,706   |  |      |   | 5,856  |      |  |   | 4,170   | 
|Goodwill impairment                              |  |              |        |  |      |   |       |      |  |   | 52,395  | 
|Loan collection expense                          |  |              | 5,032   |  |      |   | 1,001  |      |  |   | 727     | 
|Merger-related expense                           |  |              | 1,236   |  |      |   |       |      |  |   |        | 
|Mortgage servicing rights impairment             |  |              |        |  |      |   | 2,995  |      |  |   |        | 
|Prepayment penalty on borrowings                 |  |              | 1,605   |  |      |   | 959    |      |  |   |        | 
|Loss on sale of loans held for sale              |  |              | 1,241   |  |      |   |       |      |  |   |        | 
|Core deposit intangible amortization             |  |              | 897     |  |      |   | 795    |      |  |   | 795     | 
|Other expense                                    |  |              | 7,468   |  |      |   | 4,733  |      |  |   | 4,815   | 
|                                                 |  |              |         |  |      |   |        |      |  |   |         | 
|Total noninterest expense                        |  | $            | 125,040 |  |      | $ | 75,679 |      |  | $ | 111,615 | 
|                                                 |  |              |         |  |      |   |        |      |  |   |         | 

Provision for Income Taxes

Excluding discontinued operations, FNB had an income tax expense totaling $0.6 million for the year ended 2011 compared to an income tax expense of $1.3 million for the same period in 2010. The decrease
for 2011, compared to the prior year, resulted primarily from the impact of the change in the market value of available-for-sale securities on deferred tax assets and the corresponding valuation allowance. FNBs provision for income taxes, as a
percentage of loss before income taxes, excluding discontinued operations, was 0.5% for the year ended December 31, 2011, compared to 1.0% for the same period ended 2010.

Excluding discontinued operations, FNB had an income tax expense totaling $1.3 million for the year ended 2010 compared to an income tax expense of $3.4 million for the same period in 2009. The decrease
for 2010, compared to the prior year, resulted primarily from the impact of the change in the market value of available-for-sale securities on deferred tax assets and the corresponding valuation allowance. FNBs provision for income taxes, as a
percentage of loss before income taxes, excluding discontinued operations, was 1.0% for the year ended December 31, 2010, compared to 4.0% for the same period ended 2009.

During 2009 and 2010, the deferred tax asset was evaluated to determine the amount of deferred tax assets that were realizable in the foreseeable future. In assessing whether deferred tax assets will be
realized, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In evaluating
the positive and negative evidence to support the realization of the asset under current guidance, there is insufficient positive evidence to support a conclusion that it is more likely than not this asset will be realized in the foreseeable future.
A valuation allowance was established with respect to the amount for which it was determined that realization was not more-likely-than-not, and we maintained a full valuation allowance for deferred tax asset less the deferred tax assets associated
with unrealized losses on investment securities at December 31, 2011 and 2010. Adjustments to increase or decrease the valuation allowance are charged or credited, respectively, to income tax expense in continuing operations or other
comprehensive income, as appropriate.

Liquidity

Liquidity for FNB refers to its continuing ability to meet deposit withdrawals, fund loan and capital expenditure commitments, maintain reserve requirements, pay operating expenses and provide funds to
FNB for payment of dividends, debt service and other operational requirements. Liquidity is immediately available from three major



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sources: (a) cash on hand and on deposit at other banks, (b) the outstanding balance of federal funds sold, and (c) the investment securities portfolio. At December 31, 2011,
the total amount these three items was $984.7 million, or 40.9% of total assets, increased by $518.8 million from $465.9 million, or 24.5% of total assets, at December 31, 2010.

A stable deposit base, supplemented by FHLB advances and a modest amount of brokered time deposits, has been sufficient to meet CommunityOne and Granites loan demands. Additionally, FNBs
investment securities portfolio provides a source of readily available liquidity.

Contractual Obligations

Under existing contractual obligations, we will be required to make payments in future periods. Table 5 presents aggregated information about the payments
due under such contractual obligations at December 31, 2011. Benefit plan payments cover estimated amounts due through 2021.

Table 5

Contractual Obligations



|                                   |  |                                             |           |  |                   |   |         |                    |  |   |                |  |  |       |         |  |  |   |           | 
|---------------------------------- |  | ------------------------------------------- | --------- |  | ----------------- | - | ------- | ------------------ |  | - | -------------- |  |  | ----- | ------- |  |  | - | --------- | 
|(dollars in thousands)             |  | Payments Due by Period at December 31, 2011 |          
|                                   |  | One Year orLess                             |           |  | One to ThreeYears |   |         | Three to FiveYears |  |   | Over FiveYears |  |  | Total |        
|Deposits                           |  | $                                           | 1,790,010 |  |                   | $ | 285,213 |                    |  | $ | 53,878         |  |  | $     | 10      |  |  | $ | 2,129,111 | 
|Retail repurchase agreements       |  |                                             | 8,838     |  |                   |   |        |                    |  |   |               |  |  |       |        |  |  |   | 8,838     | 
|Federal Home Loan Bank advances    |  |                                             |          |  |                   |   | 8,000   |                    |  |   |               |  |  |       | 50,370  |  |  |   | 58,370    | 
|Trust preferred securities         |  |                                             |          |  |                   |   |        |                    |  |   |               |  |  |       | 56,702  |  |  |   | 56,702    | 
|Lease obligations                  |  |                                             | 1,510     |  |                   |   | 2,440   |                    |  |   | 2,085          |  |  |       | 10,172  |  |  |   | 16,207    | 
|Estimated benefit plan payments:   |  |                                             |           |  |                   |   |         |                    |  |   |                |  |  |       |         |  |  |   |           | 
|Pension                            |  |                                             | 715       |  |                   |   | 1,485   |                    |  |   | 1,618          |  |  |       | 4,277   |  |  |   | 8,095     | 
|Other                              |  |                                             | 312       |  |                   |   | 376     |                    |  |   | 369            |  |  |       | 978     |  |  |   | 2,035     | 
|                                   |  |                                             |           |  |                   |   |         |                    |  |   |                |  |  |       |         |  |  |   |           | 
|Total contractual cash obligations |  | $                                           | 1,801,385 |  |                   | $ | 297,514 |                    |  | $ | 57,950         |  |  | $     | 122,509 |  |  | $ | 2,279,358 | 
|                                   |  |                                             |           |  |                   |   |         |                    |  |   |                |  |  |       |         |  |  |   |           | 

Commitments, Contingencies and Off-Balance Sheet Risk

In the normal course of business, various commitments are outstanding that are not reflected in the consolidated financial statements. Significant commitments at December 31, 2011 are discussed
below.

Commitments by CommunityOne and Granite to extend credit and undisbursed advances on customer lines of credit are agreements to lend
to a customer as long as there is no violation of any condition established in the contract. At December 31, 2011, total commitments to extend credit and undisbursed advances on customer lines of credit amounted to $265.9 million. Commitments
generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments expire without being fully drawn, the total commitment amounts do not necessarily represent future cash requirements. FNB
evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit is based on the credit evaluation of the borrower.

CommunityOne and Granite issue standby letters of credit whereby each guarantees the performance of a customer to a third party if a specified triggering
event or condition occurs. The guarantees generally expire within one year and may be automatically renewed depending on the terms of the guarantee. All standby letters of credit provide for recourse against the customer on whose behalf the letter
of credit was issued, and this recourse may be further secured by a pledge of assets. The maximum potential amount of undiscounted future payments related to standby letters of credit was $1.8 million at December 31, 2011 and $1.9 million at
December 31, 2010.

CommunityOnes and Granites exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to extend is represented by the contractual notional amount of those instruments. The Banks use the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet
instruments. The fair value of these commitments was not considered material.

FNB does not have any special purpose off-balance sheet
financing.



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Asset/Liability Management and Interest Rate Sensitivity

One of the primary objectives of asset/liability management is to maximize the net interest margin while minimizing the earnings risk associated with
changes in interest rates. One method used to manage interest rate sensitivity is to measure, over various time periods, the interest rate sensitivity positions, or gaps; however, this method addresses only the magnitude of timing differences and
does not address earnings or market value. Therefore, management uses an earnings simulation model to prepare, on a monthly basis, earnings projections based on a range of interest rate scenarios in order to more accurately measure interest rate
risk. For additional information, see Item 7A.

Table 6 presents information about the periods in which the interest-sensitive assets and
liabilities at December 31, 2011 will mature, prepay, or be subject to repricing in accordance with market rates, and the resulting interest-sensitivity gaps. This table shows the sensitivity of the balance sheet at one point in time and is not
necessarily indicative of what the sensitivity will be on other dates.

Table 6

Interest Rate Sensitivity Analysis



|                                                                     |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|-------------------------------------------------------------------- |  | ----------------- | --------- | - | ---------- | - | ------- | ----------- |  | - | -------------- | - |  | ----- | ------- | - |  | - | --------- | -
|                                                                     |  | December 31, 2011 |          
|(dollars in thousands)                                               |  | Rate Maturity     |           |   |            |  
|                                                                     |  | 1-90Days          |           |   | 91-180Days |   |         | 181-365Days |  |   | Beyond OneYear |   |  | Total |        
|Earning Assets                                                       |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|Investment securities (1)                                            |  | $                 | 85,941    |   |            | $ | 36,155  |             |  | $ | 36,993         |   |  | $     | 271,747 |   |  | $ | 430,836   |  
|Loans                                                                |  |                   | 642,448   |   |            |   | 79,592  |             |  |   | 168,602        |   |  |       | 326,893 |   |  |   | 1,217,535 |  
|Loans held for sale                                                  |  |                   | 4,529     |   |            |   |        |             |  |   |               |   |  |       |        |   |  |   | 4,529     |  
|Interest-bearing bank balances                                       |  |                   | 517,643   |   |            |   |        |             |  |   |               |   |  |       |        |   |  |   | 517,643   |  
|Other earning assets                                                 |  |                   | 10,735    |   |            |   | 1,169   |             |  |   |               |   |  |       |        |   |  |   | 11,904    |  
|                                                                     |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|Total interest-earning assets                                        |  |                   | 1,261,296 |   |            |   | 116,916 |             |  |   | 205,595        |   |  |       | 598,640 |   |  |   | 2,182,447 |  
|                                                                     |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|                                                                     |  |                   |           |   |           
|Interest-Bearing Liabilities                                         |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|Interest-bearing deposits:                                           |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|Demand deposits                                                      |  |                   | 349,802   |   |            |   |        |             |  |   |               |   |  |       |        |   |  |   | 349,802   |  
|Savings deposits                                                     |  |                   | 68,236    |   |            |   |        |             |  |   |               |   |  |       |        |   |  |   | 68,236    |  
|Money market deposits                                                |  |                   | 431,790   |   |            |   |        |             |  |   |               |   |  |       |        |   |  |   | 431,790   |  
|Time deposits of $100,000 or more                                    |  |                   | 74,612    |   |            |   | 85,831  |             |  |   | 158,199        |   |  |       | 185,294 |   |  |   | 503,936   |  
|Other time deposits                                                  |  |                   | 110,844   |   |            |   | 118,922 |             |  |   | 161,746        |   |  |       | 149,162 |   |  |   | 540,674   |  
|Retail repurchase agreements                                         |  |                   | 8,838     |   |            |   |        |             |  |   |               |   |  |       |        |   |  |   | 8,838     |  
|Federal Home Loan Bank advances                                      |  |                   |          |   |            |   |        |             |  |   |               |   |  |       | 58,370  |   |  |   | 58,370    |  
|Trust preferred securities                                           |  |                   |          |   |            |   |        |             |  |   |               |   |  |       | 56,702  |   |  |   | 56,702    |  
|                                                                     |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|Total interest-bearing liabilities                                   |  |                   | 1,044,122 |   |            |   | 204,753 |             |  |   | 319,945        |   |  |       | 449,528 |   |  |   | 2,018,348 |  
|                                                                     |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|Interest Sensitivity Gap                                             |  | $                 | 217,174   |   |            | $ | (87,837 | )           |  | $ | (114,350       | ) |  | $     | 149,112 |   |  | $ | 164,099   |  
|                                                                     |  |                   |           |   |            |   |         |             |  |   |                |   |  |       |         |   |  |   |           |  
|Cumulative gap                                                       |  | $                 | 217,174   |   |            | $ | 129,337 |             |  | $ | 14,987         |   |  | $     | 164,099 |   |  | $ | 164,099   |  
|Ratio of interest-sensitive assets to interest-sensitive liabilities |  |                   | 121       | % |            |   | 57      | %           |  |   | 64             | % |  |       | 133     | % |  |   | 108       | %



|(1) | Securities are based on amortized cost.
|--- | ---------------------------------------

FNBs balance sheet was asset-sensitive at December 31, 2011. An asset sensitive position means that in a declining rate environment,
FNBs assets will reprice down faster than liabilities, resulting in a reduction in net interest income. Conversely, when interest rates rise, FNBs earnings position should improve. Included in interest-bearing liabilities subject to rate
changes within 90 days are FNBs interest-bearing demand, savings and money market deposits. These types of deposits historically have not repriced coincidentally with or in the same proportion as general market indicators.

Market Risk

Market risk is the possible
chance of loss from unfavorable changes in market prices and rates. These changes may result in a reduction of current and future period net interest income, which is the favorable spread earned from the excess of interest income on interest-earning
assets, over interest expense on interest-bearing liabilities.

Our market risk arises primarily from interest rate risk inherent in our
lending and deposit-taking activities. The structure of FNBs loan and deposit portfolios is such that a significant decline in interest rates may adversely impact net market values and net interest income. We do not maintain a trading account
nor are we subject to



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currency exchange risk or commodity price risk. Interest rate risk is monitored as part of our asset/liability management function, which is discussed in Asset/Liability Management and
Interest Rate Sensitivity above. The use of interest rate swaps in conjunction with asset/liability management objectives is discussed in Note 1 to the accompanying consolidated financial statements.

Table 7 presents information about the contractual maturities, average interest rates and estimated values at current rates of financial instruments
considered market risk sensitive at December 31, 2011.

Table 7

Market Risk Analysis of Financial Instruments



|                                 |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|-------------------------------- |  | ------------------------------------------- | --------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------ |  | ---------------- | - | ------ | ----- |  | - | ----------------------- |  |  | ------------------------------ | --------- |  |  |  | ---- | - |  | - | --------- | 
|(dollars in thousands)           |  | Contractual Maturities at December 31, 2011 |           |  |      |   |         |      | 
|                                 |  | 2012                                        |           |  | 2013 |   |         | 2014 |  |   | 2015    |  |  | 2016 |        |  | BeyondFive Years |   |        | Total |  |   | AverageInterestRate (1) |  |  | EstimatedValue atCurrent Rates |          
|Financial Assets                 |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|Debt securities (2):             |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|Fixed rate                       |  | $                                           | 21,364    |  |      | $ | 2,176   |      |  | $ |        |  |  | $    | 3,899  |  |                  | $ | 2,098  |       |  | $ | 337,308                 |  |  | $                              | 366,845   |  |  |  | 2.01 | % |  | $ | 368,305   | 
|Variable rate                    |  |                                             |          |  |      |   |        |      |  |   |        |  |  |      |       |  |                  |   |       |       |  |   | 63,991                  |  |  |                                | 63,991    |  |  |  | 2.89 | % |  |   | 63,001    | 
|Loans (3):                       |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|Fixed rate                       |  |                                             | 117,147   |  |      |   | 81,155  |      |  |   | 69,049  |  |  |      | 38,990 |  |                  |   | 41,540 |       |  |   | 191,627                 |  |  |                                | 539,508   |  |  |  | 5.51 | % |  |   | 555,464   | 
|Variable rate                    |  |                                             | 138,712   |  |      |   | 84,148  |      |  |   | 77,897  |  |  |      | 36,390 |  |                  |   | 32,568 |       |  |   | 308,312                 |  |  |                                | 678,027   |  |  |  | 4.35 | % |  |   | 660,691   | 
|Held for sale                    |  |                                             | 4,529     |  |      |   |        |      |  |   |        |  |  |      |       |  |                  |   |       |       |  |   |                        |  |  |                                | 4,529     |  |  |  | 4.37 | % |  |   | 4,529     | 
|Interest-bearing bank balances   |  |                                             | 517,643   |  |      |   |        |      |  |   |        |  |  |      |       |  |                  |   |       |       |  |   |                        |  |  |                                | 517,643   |  |  |  | 0.25 | % |  |   | 517,643   | 
|Other earning assets             |  |                                             | 11,904    |  |      |   |        |      |  |   |        |  |  |      |       |  |                  |   |       |       |  |   |                        |  |  |                                | 11,904    |  |  |  | 1.55 | % |  |   | 11,904    | 
|                                 |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|Total                            |  | $                                           | 811,299   |  |      | $ | 167,479 |      |  | $ | 146,946 |  |  | $    | 79,279 |  |                  | $ | 76,206 |       |  | $ | 901,238                 |  |  | $                              | 2,182,447 |  |  |  | 3.21 | % |  | $ | 2,181,537 | 
|                                 |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|                                 |  |                                             |           |  |      |   |         |      | 
|Financial Liabilities            |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|Interest-bearing demand deposits |  | $                                           | 349,802   |  |      | $ |        |      |  | $ |        |  |  | $    |       |  |                  | $ |       |       |  | $ |                        |  |  | $                              | 349,802   |  |  |  | 0.62 | % |  | $ | 349,802   | 
|Savings deposits                 |  |                                             | 68,236    |  |      |   |        |      |  |   |        |  |  |      |       |  |                  |   |       |       |  |   |                        |  |  |                                | 68,236    |  |  |  | 0.23 | % |  |   | 68,236    | 
|Money market deposits            |  |                                             | 431,790   |  |      |   |        |      |  |   |        |  |  |      |       |  |                  |   |       |       |  |   |                        |  |  |                                | 431,790   |  |  |  | 0.63 | % |  |   | 431,790   | 
|Time deposits:                   |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|Fixed rate                       |  |                                             | 702,255   |  |      |   | 204,421 |      |  |   | 80,350  |  |  |      | 40,274 |  |                  |   | 13,502 |       |  |   | 10                      |  |  |                                | 1,040,812 |  |  |  | 1.53 | % |  |   | 1,050,746 | 
|Variable rate                    |  |                                             | 3,254     |  |      |   | 320     |      |  |   | 122     |  |  |      | 102    |  |                  |   |       |       |  |   |                        |  |  |                                | 3,798     |  |  |  | 3.83 | % |  |   | 3,846     | 
|Retail repurchase agreements     |  |                                             | 8,838     |  |      |   |        |      |  |   |        |  |  |      |       |  |                  |   |       |       |  |   |                        |  |  |                                | 8,838     |  |  |  | 0.42 | % |  |   | 8,838     | 
|Federal Home Loan Bank advances  |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|Fixed rate                       |  |                                             |          |  |      |   |        |      |  |   | 5,000   |  |  |      | 3,000  |  |                  |   |       |       |  |   | 50,370                  |  |  |                                | 58,370    |  |  |  | 2.63 | % |  |   | 62,555    | 
|Trust preferred securities       |  |                                             |          |  |      |   |        |      |  |   |        |  |  |      |       |  |                  |   |       |       |  |   | 56,702                  |  |  |                                | 56,702    |  |  |  | 1.86 | % |  |   | 36,218    | 
|                                 |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 
|Total                            |  | $                                           | 1,564,175 |  |      | $ | 204,741 |      |  | $ | 85,472  |  |  | $    | 43,376 |  |                  | $ | 13,502 |       |  | $ | 107,082                 |  |  | $                              | 2,018,348 |  |  |  | 1.18 | % |  | $ | 2,012,031 | 
|                                 |  |                                             |           |  |      |   |         |      |  |   |         |  |  |      |        |  |                  |   |        |       |  |   |                         |  |  |                                |           |  |  |  |      |   |  |   |           | 



|(1) | The average interest rate related to debt securities is stated on a fully taxable equivalent basis, assuming a 35% federal income tax rate.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Contractual maturities of debt and equity securities are based on amortized cost.
|--- | ---------------------------------------------------------------------------------

|(3) | Nonaccrual loans are included in the balance of loans. The allowance for loan losses is excluded.
|--- | -------------------------------------------------------------------------------------------------

For a further discussion on market risk and how FNB addresses this risk, see Item 7A of this Annual Report on Form 10-K.

Capital Adequacy

Under guidelines
established by the Federal Reserve Board and each federal banking agency, capital adequacy is currently measured for regulatory purposes by certain risk-based capital ratios, supplemented by a leverage capital ratio. The guidelines define an
institutions total qualifying capital as having two components: Tier 1 capital, which must be at least 50% of total qualifying capital and is mainly comprised of common equity, retained earnings and qualifying preferred stock, less certain
intangibles; and Tier 2 capital, which may include the ALL up to a maximum of 1.25% of risk weighted assets, qualifying subordinated debt, qualifying preferred stock and hybrid capital instruments.



The requirements also define the weights assigned to assets and off balance
sheet items to determine the risk weighted asset components of the risk-based capital rules. Total capital, for risk-based purposes, consists of the sum of Tier 1 and Tier 2 capital. The federal banking agencies also generally require a leverage
capital ratio of at least 4% (except for those institutions with the highest regulatory ratings and not experiencing significant growth or expansion). The leverage capital ratio, which serves as a minimum capital standard, considers Tier 1 capital
only and is expressed as a percentage of average total assets for the most recent quarter, after reduction of those assets for goodwill and other disallowed intangible assets at the measurement date. Under the CommunityOne Order with the



16



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OCC, CommunityOne is required to maintain a leverage capital ratio of 9% and a total risk based capital ratio of 12%. Under the Granite Order with the FDIC and NCCOB, Granite is required to
maintain a leverage capital ratio of 8% and a total risk based ratio of 12%. At December 31, 2011, FNB had a total risk-based capital ratio of 13.81% and a Tier 1 risk-based capital ratio of 11.78%. CommunityOne and Granite had a total
risk-based capital ratio of 14.52% and 12.00%, respectively, and a Tier 1 risk-based capital ratio of 13.23% and 12.00%, respectively. FNB had a leverage capital ratio of 6.75% at December 31, 2011, and each of CommunityOne and Granite had
leverage capital ratios of 7.39% and 7.18%, respectively. As of December 31, 2011, neither CommunityOne nor Granite was in compliance with the leverage capital requirement of its respective Order.

Table 8

Regulatory Capital



|                          |  |                             |         |  |      |  |      |      |  |   |         |   |  |  |      |    |  |   |         |  |  |  |      |  
|------------------------- |  | --------------------------- | ------- |  | ---- |  | ---- | ---- |  | - | ------- | - |  |  | ---- | -- |  | - | ------- |  |  |  | ---- | -
|(dollars in thousands)    |  | For year ended December 31, |        
|                          |  | 2011                        |         |  | 2010 |  |      | 2009 | 
|Total risk-based capital  |  |                             |         |  |      |  |      |      |  |   |         |   |  |  |      |    |  |   |         |  |  |  |      |  
|Consolidated              |  | $                           | 193,725 |  |      |  | 13.8 | %    |  | $ | (17,911 | ) |  |  | (1.2 | )% |  | $ | 181,990 |  |  |  | 10.3 | %
|CommunityOne Bank, N.A.   |  |                             | 136,761 |  |      |  | 14.5 |      |  |   | 68,178  |   |  |  | 4.7  |    |  |   | 178,023 |  |  |  | 10.1 |  
|Bank of Granite           |  |                             | 54,647  |  |      |  | 12.0 |      |  |   | N/A     |   |  |  |     |    |  |   | N/A     |  |  |  |     |  
|                          |  |                             |         |  |      | 
|Tier 1 risk-based capital |  |                             |         |  |      |  |      |      |  |   |         |   |  |  |      |    |  |   |         |  |  |  |      |  
|Consolidated              |  |                             | 164,253 |  |      |  | 11.7 |      |  |   | (17,911 | ) |  |  | (1.2 | )  |  |   | 121,207 |  |  |  | 6.9  |  
|CommunityOne Bank, N.A.   |  |                             | 124,639 |  |      |  | 13.2 |      |  |   | 35,813  |   |  |  | 2.5  |    |  |   | 140,604 |  |  |  | 8.0  |  
|Bank of Granite           |  |                             | 54,633  |  |      |  | 12.0 |      |  |   | N/A     |   |  |  |     |    |  |   | N/A     |  |  |  |     |  
|                          |  |                             |         |  |      | 
|Leverage capital          |  |                             |         |  |      |  |      |      |  |   |         |   |  |  |      |    |  |   |         |  |  |  |      |  
|Consolidated              |  |                             | 164,253 |  |      |  | 6.7  |      |  |   | (17,911 | ) |  |  | (0.9 | )  |  |   | 121,207 |  |  |  | 5.7  |  
|CommunityOne Bank, N.A.   |  |                             | 124,639 |  |      |  | 7.4  |      |  |   | 35,813  |   |  |  | 1.8  |    |  |   | 140,604 |  |  |  | 6.6  |  
|Bank of Granite           |  |                             | 54,633  |  |      |  | 7.2  |      |  |   | N/A     |   |  |  |     |    |  |   | N/A     |  |  |  |     |  

The prompt corrective action provisions of federal law also applies to CommunityOne and Granite, which requires the
federal bank agencies to take prompt action to resolve problems of insured depository institutions such as CommunityOne and Granite, as their capital levels decrease.

In order to raise capital, on February 13, 2009, FNB entered into a Purchase Agreement with the U.S. Treasury as a participant in the U.S. Treasury Capital Purchase Program (CPP). As part
of FNBs participation under the CPP, FNB issued to the U.S. Treasury 51,500 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A having a liquidation value per share of $1,000, for a total price of $51.5 million.

The Preferred Stock paid cumulative dividends at the rate of 5% per year for the first five years and thereafter at a rate of 9% per year. As
part of its purchase of the Preferred Stock, the U.S. Treasury received a Warrant to purchase 2,207,143 shares of FNBs common stock at an initial per share exercise price of $3.50. The Warrant provided for the adjustment of the exercise price
and the number of shares of FNBs common stock issuable upon exercise pursuant to customary anti-dilution provisions, such as stock splits or distributions of securities or other assets to holders of FNBs common stock, and upon certain
issuances of FNBs common stock at or below a specified price relative to the initial exercise price. The U.S. Treasury agreed not to exercise voting power with respect to any shares of common stock issued upon exercise of the Warrant.

The proceeds from the offering of the Series A Preferred Stock and related Warrant were allocated between the Series A Preferred Stock and
Warrant based on their relative fair values. The Warrant was assigned a fair value of $1.76 per share, or $3.9 million in the aggregate. As a result, $3.9 million was recorded as the discount on the preferred stock obtained and was scheduled to be
accreted as a reduction in net income available for common shareholders over the following five years at approximately $0.1 million to $0.9 million per year. For purposes of those calculations, the fair value of the shares subject to the Warrant was
estimated using the Black-Scholes option pricing model.

On December 30, 2010 and February 28, 2011, CommunityOne entered into and
consummated conversion agreements with SunTrust Bank, pursuant to which $12.5 million of the outstanding principal amount of the $15.0 million subordinated term loan from SunTrust to the Bank issued on June 30, 2008 was converted into
12.5 million shares of nonvoting, nonconvertible, nonredeemable cumulative preferred stock, par value $1.00 per share, of CommunityOne. CommunityOne amended its articles of association to authorize the preferred stock issued to SunTrust in the
conversions. The preferred stock carried an 8.0% dividend rate.



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On October 21, 2011, FNB completed the following transactions as part of the Recapitalization:



| |  |  | A capital raise of $310 million in the Private Placement, at a price of $16.00 per share (taking into effect the Reverse Stock Split), with investments
from (1) affiliates of each of Carlyle and Oak Hill Capital, pursuant to investment agreements with each of the Anchor Investors, and (2) various Additional Investors, including certain of our directors and officers, pursuant to
subscription agreements with each of such Additional Investors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Concurrently with Private Placement, (1) the exchange of 51,500 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series A par value
$10.00 per share and liquidation preference $1,000 per share, held by the U.S. Treasury and all accrued and unpaid dividends thereon, for an aggregate of $1,085,554 shares of our common stock, pursuant to the TARP Exchange Agreement, and
(2) the amendment the Amended TARP Warrant issued to the U.S. Treasury to purchase 22,072 shares of our common stock at an exercise price of $16.00 per share; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The settlement by CommunityOne of the $2.5 million aggregate principal amount of subordinated debt outstanding and held by SunTrust Bank for cash in
the amount equal to the sum of 35% of the principal amount thereof plus 100% of the unpaid and accrued interest thereon as of the closing date, and the repurchase by CommunityOne from SunTrust of the shares of nonvoting, nonconvertible,
nonredeemable cumulative preferred stock of CommunityOne held by SunTrust and having an aggregate liquidation preference of $12.5 million for cash in an amount equal to the sum of 25% of the aggregate liquidation preference plus 100% of the unpaid
and accrued dividends thereon as of the closing date.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In connection with the Recapitalization, on October 21, 2011, we
also consummated the Merger of Granite Corp., pursuant to the terms and conditions of the Merger Agreement by and among FNB, Merger Sub and Granite Corp. Under this agreement, Merger Sub merged with and into Granite Corp., with Granite Corp.
continuing as the surviving corporation and as a wholly owned subsidiary of FNB.

Upon the closing of the Merger, each outstanding share of
Granite Corp. common stock, par value $1.00 per share, other than shares held by FNB, Granite Corp. or any of their respective wholly owned subsidiaries and other than shares owned in a fiduciary capacity or as a result of debts previously
contracted, was converted, on a pre-reverse stock split basis, into the right to receive 3.375 shares of FNBs common stock. As a result of the Merger and as a result of the Reverse Stock Split, we issued approximately 521,595 shares of FNB
common stock to Granite Corp. stockholders in the aggregate.

On October 31, 2011, we effected the Reverse Stock Split of our common
stock, for which shareholder approval was obtained on October 19, 2011. The Reverse Stock Split was effective as of the close of business on October 31, 2011 in accordance with the filing of Articles of Amendment to our Articles of
Incorporation with the Secretary of State of North Carolina.

Balance Sheet Review

Total assets, including discontinued operations, increased $506.7 million, or 26.6%, in 2011 primarily as a result of the Merger and decreased $198.9
million, or 10%, in 2010. The level of total assets was also affected in 2011 by a decrease of $86.4 million of loans held for investment as a result of payoffs, charge-offs and problem loan resolution through loan sale or foreclosure, offset by
loans acquired in the Merger. Average assets decreased by 6.5% in 2011 compared to a decrease of 5.6% in 2010. Deposits increased $432.7 million, or 26%, to $2.1 billion in 2011 and decreased $25.7 million, or 2% in 2010. The net increase in
deposits was primarily as a result of the Merger, offset by a reduction in public funds and higher rate certificates of deposit. The increases in total assets and total deposits in 2011 were primarily the result of the Merger. Average deposits
declined by 2.7% in 2011 compared to an increase of 5.2% in 2010. In addition, FNB recorded $91.8 million in deferred tax assets and $90.9 million in a corresponding deferred tax valuation allowance for 2011 of which $37.5 million and $36.1 million,
respectively, were recorded as a result of the Merger.

Investment Securities

Investments are carried on the consolidated balance sheet at estimated fair value for available-for-sale securities and at amortized cost for held-to-maturity securities. The following table presents the
amortized costs, fair value and weighted-average yield of securities by contractual maturity at December 31, 2011. The average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations
without call or prepayment penalties prior to the contractual maturity date. Rates are calculated on a fully tax-equivalent basis using a 35% federal income tax rate.



18



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##### Table of Contents

Table 9

Investment Securities Portfolio Analysis

December 31, 2011

Available-for-Sale



|                                               |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|---------------------------------------------- |  | ------------ | ------ | - | ----------- | - | ----- | ------------ |  | - | ------------ | - |  | ----- | ------- | - |  | - | ------- | -
|(dollars in thousands)                         |  | Within 1Year |        |   | 1 to 5Years |   |       | 5 to 10Years |  |   | Over 10Years |   |  | Total |        
|Amortized Cost                                 |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Obligations of:                                |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|U.S. Treasury and government agencies          |  | $            |       |   |             | $ |      |              |  | $ |             |   |  | $     | 7,081   |   |  | $ | 7,081   |  
|U.S. government sponsored agencies             |  |              | 21,399 |   |             |   | 2,097 |              |  |   | 1,500        |   |  |       | 7,483   |   |  |   | 32,479  |  
|States and political subdivisions              |  |              |       |   |             |   | 6,075 |              |  |   |             |   |  |       |        |   |  |   | 6,075   |  
|Residential mortgage-backed securities-GSE     |  |              |       |   |             |   |      |              |  |   |             |   |  |       | 348,884 |   |  |   | 348,884 |  
|Residential mortgage-backed securities-Private |  |              |       |   |             |   |      |              |  |   |             |   |  |       | 33,111  |   |  |   | 33,111  |  
|Corporate notes                                |  |              |       |   |             |   |      |              |  |   | 3,206        |   |  |       |        |   |  |   | 3,206   |  
|                                               |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total available-for-sale securities            |  | $            | 21,399 |   |             | $ | 8,172 |              |  | $ | 4,706        |   |  | $     | 396,559 |   |  | $ | 430,836 |  
|                                               |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|                                               |  |              |        |   |            
|Fair Value                                     |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Obligations of:                                |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|U.S. Treasury and government agencies          |  | $            |       |   |             | $ |      |              |  | $ |             |   |  | $     | 7,188   |   |  | $ | 7,188   |  
|U.S. government sponsored agencies             |  |              | 21,248 |   |             |   | 2,099 |              |  |   | 1,514        |   |  |       | 7,503   |   |  |   | 32,364  |  
|States and political subdivisions              |  |              |       |   |             |   | 6,090 |              |  |   |             |   |  |       |        |   |  |   | 6,090   |  
|Residential mortgage-backed securities-GSE     |  |              |       |   |             |   |      |              |  |   |             |   |  |       | 350,273 |   |  |   | 350,273 |  
|Residential mortgage-backed securities-Private |  |              |       |   |             |   |      |              |  |   |             |   |  |       | 32,217  |   |  |   | 32,217  |  
|Corporate notes                                |  |              |       |   |             |   |      |              |  |   | 3,174        |   |  |       |        |   |  |   | 3,174   |  
|                                               |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total available-for-sale securities            |  | $            | 21,248 |   |             | $ | 8,189 |              |  | $ | 4,688        |   |  | $     | 397,181 |   |  | $ | 431,306 |  
|                                               |  |              |        |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total average yield                            |  |              | 2.75   | % |             |   | 2.22  | %            |  |   | 5.31         | % |  |       | 2.81    | % |  |   | 2.83    | %

On May 3, 2010, FNB reclassified the entire held-to-maturity investment securities portfolio to available-for-sale
investment securities to provide additional liquidity to CommunityOne. At the time of reclassification, the held-to-maturity investment securities were carried at amortized cost of $83.2 million with an unrealized net gain of $3.5 million. In
addition, we have elected to hold investment securities purchased in the Merger as available-for-sale securities.



19



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##### Table of Contents

The following table presents the amortized costs, fair value and weighted-average yield of securities by
contractual maturity at December 31, 2010. The average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity
date. Rates are calculated on a fully tax-equivalent basis using a 35% federal income tax rate.

December 31, 2010

Available-for-Sale



|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|-------------------------------------- |  | ------------ | ----- | - | ----------- | - | ----- | ------------ |  | - | ------------ | - |  | ----- | ------- | - |  | - | ------- | -
|(dollars in thousands)                 |  | Within 1Year |       |   | 1 to 5Years |   |       | 5 to 10Years |  |   | Over 10Years |   |  | Total |        
|Amortized Cost                         |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Obligations of:                        |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|U.S. Treasury and government agencies  |  | $            | 20    |   |             | $ |      |              |  | $ |             |   |  | $     |        |   |  | $ | 20      |  
|U.S. government sponsored agencies     |  |              | 5,003 |   |             |   |      |              |  |   | 18,487       |   |  |       |        |   |  |   | 23,490  |  
|States and political subdivisions      |  |              | 1,300 |   |             |   | 4,127 |              |  |   | 4,261        |   |  |       | 14,179  |   |  |   | 23,867  |  
|Residential mortgage-backed securities |  |              |      |   |             |   |      |              |  |   | 8,566        |   |  |       | 250,250 |   |  |   | 258,816 |  
|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total available-for-sale securities    |  | $            | 6,323 |   |             | $ | 4,127 |              |  | $ | 31,314       |   |  | $     | 264,429 |   |  | $ | 306,193 |  
|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|                                       |  |              |       |   |            
|Fair Value                             |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Obligations of:                        |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|U.S. Treasury and government agencies  |  | $            | 21    |   |             | $ |      |              |  | $ |             |   |  | $     |        |   |  | $ | 21      |  
|U.S. government sponsored agencies     |  |              | 5,161 |   |             |   |      |              |  |   | 18,355       |   |  |       |        |   |  |   | 23,516  |  
|States and political subdivisions      |  |              | 1,309 |   |             |   | 4,104 |              |  |   | 4,172        |   |  |       | 14,873  |   |  |   | 24,458  |  
|Residential mortgage-backed securities |  |              |      |   |             |   |      |              |  |   | 8,568        |   |  |       | 248,768 |   |  |   | 257,336 |  
|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total available-for-sale securities    |  | $            | 6,491 |   |             | $ | 4,104 |              |  | $ | 31,095       |   |  | $     | 263,641 |   |  | $ | 305,331 |  
|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total average yield                    |  |              | 4.64  | % |             |   | 3.32  | %            |  |   | 2.46         | % |  |       | 2.52    | % |  |   | 2.56    | %

The following table presents the amortized costs, fair value and weighted-average yield of securities by contractual
maturity at December 31, 2009. The average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. Rates
are calculated on a fully tax-equivalent basis using a 35% federal income tax rate.

December 31, 2009

Available-for-Sale



|                                       |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|-------------------------------------- |  | ------------ | ------ | - | ----------- | - | ------ | ------------ |  | - | ------------ | - |  | ----- | ------- | - |  | - | ------- | -
|(dollars in thousands)                 |  | Within 1Year |        |   | 1 to 5Years |   |        | 5 to 10Years |  |   | Over 10Years |   |  | Total |        
|Amortized Cost                         |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|Obligations of:                        |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|U.S. Treasury and government agencies  |  | $            |       |   |             | $ | 61     |              |  | $ |             |   |  | $     |        |   |  | $ | 61      |  
|U.S. government sponsored agencies     |  |              |       |   |             |   | 32,395 |              |  |   | 33,031       |   |  |       | 6,270   |   |  |   | 71,696  |  
|States and political subdivisions      |  |              | 4,043  |   |             |   | 6,833  |              |  |   | 15,806       |   |  |       | 18,582  |   |  |   | 45,264  |  
|Residential mortgage-backed securities |  |              |       |   |             |   |       |              |  |   |             |   |  |       | 99,307  |   |  |   | 99,307  |  
|Equity securities                      |  |              |       |   |             |   |       |              |  |   |             |   |  |       | 2,667   |   |  |   | 2,667   |  
|Corporate notes                        |  |              | 7,971  |   |             |   | 5,939  |              |  |   |             |   |  |       |        |   |  |   | 13,910  |  
|                                       |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total available-for-sale securities    |  | $            | 12,014 |   |             | $ | 45,228 |              |  | $ | 48,837       |   |  | $     | 126,826 |   |  | $ | 232,905 |  
|                                       |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|                                       |  |              |        |   |            
|Fair Value                             |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|Obligations of:                        |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|U.S. Treasury and government agencies  |  | $            |       |   |             | $ | 63     |              |  | $ |             |   |  | $     |        |   |  | $ | 63      |  
|U.S. government sponsored agencies     |  |              |       |   |             |   | 33,278 |              |  |   | 33,406       |   |  |       | 6,283   |   |  |   | 72,967  |  
|States and political subdivisions      |  |              | 4,057  |   |             |   | 6,989  |              |  |   | 15,763       |   |  |       | 19,619  |   |  |   | 46,428  |  
|Residential mortgage-backed securities |  |              |       |   |             |   |       |              |  |   |             |   |  |       | 101,613 |   |  |   | 101,613 |  
|Collateralized debt obligations        |  |              |       |   |             |   |       |              |  |   |             |   |  |       | 45      |   |  |   | 45      |  
|Equity securities                      |  |              |       |   |             |   |       |              |  |   |             |   |  |       | 2,168   |   |  |   | 2,168   |  
|Corporate notes                        |  |              | 8,081  |   |             |   | 6,265  |              |  |   |             |   |  |       |        |   |  |   | 14,346  |  
|                                       |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total available-for-sale securities    |  | $            | 12,138 |   |             | $ | 46,595 |              |  | $ | 49,169       |   |  | $     | 129,728 |   |  | $ | 237,630 |  
|                                       |  |              |        |   |             |   |        |              |  |   |              |   |  |       |         |   |  |   |         |  
|Total average yield                    |  |              | 4.91   | % |             |   | 4.42   | %            |  |   | 4.55         | % |  |       | 4.46    | % |  |   | 4.49    | %



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##### Table of Contents

December 31, 2009

Held-to-Maturity



|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|-------------------------------------- |  | ------------ | ----- | - | ----------- | - | ----- | ------------ |  | - | ------------ | - |  | ----- | ------ | - |  | - | ------ | -
|(dollars in thousands)                 |  | Within 1Year |       |   | 1 to 5Years |   |       | 5 to 10Years |  |   | Over 10Years |   |  | Total |       
|Amortized Cost                         |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|Obligations of:                        |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|States and political subdivisions      |  | $            | 1,555 |   |             | $ | 4,678 |              |  | $ | 5,906        |   |  | $     | 1,779  |   |  | $ | 13,918 |  
|Residential mortgage-backed securities |  |              |      |   |             |   |      |              |  |   |             |   |  |       | 52,127 |   |  |   | 52,127 |  
|Commercial mortgage-backed securities  |  |              |      |   |             |   |      |              |  |   |             |   |  |       | 21,513 |   |  |   | 21,513 |  
|Corporate notes                        |  |              |      |   |             |   | 1,001 |              |  |   |             |   |  |       |       |   |  |   | 1,001  |  
|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|Total held-to-maturity securities      |  | $            | 1,555 |   |             | $ | 5,679 |              |  | $ | 5,906        |   |  | $     | 75,419 |   |  | $ | 88,559 |  
|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|                                       |  |              |       |   |            
|Fair Value                             |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|Obligations of:                        |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|States and political subdivisions      |  | $            | 1,566 |   |             | $ | 4,884 |              |  | $ | 6,136        |   |  | $     | 1,818  |   |  | $ | 14,404 |  
|Residential mortgage-backed securities |  |              |      |   |             |   |      |              |  |   |             |   |  |       | 53,022 |   |  |   | 53,022 |  
|Commercial mortgage-backed securities  |  |              |      |   |             |   |      |              |  |   |             |   |  |       | 23,232 |   |  |   | 23,232 |  
|Corporate notes                        |  |              |      |   |             |   | 863   |              |  |   |             |   |  |       |       |   |  |   | 863    |  
|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|Total held-to-maturity securities      |  | $            | 1,566 |   |             | $ | 5,747 |              |  | $ | 6,136        |   |  | $     | 78,072 |   |  | $ | 91,521 |  
|                                       |  |              |       |   |             |   |       |              |  |   |              |   |  |       |        |   |  |   |        |  
|Total average yield                    |  |              | 2.67  | % |             |   | 3.39  | %            |  |   | 3.75         | % |  |       | 8.80   | % |  |   | 8.01   | %

Additions to the investment securities portfolio depend to a large extent on the availability of funds that are not
otherwise needed to satisfy loan demand and managements expectations regarding future interest rates.

Loans

Our primary source of revenue and largest component of earning assets is the loan portfolio. In 2011, loans, excluding loans held for sale, decreased
$86.4 million, or 6.6%, due to continued payoffs, charge-offs and problem loan resolution through loan sale or foreclosure, weakness in general economic conditions and our uncertain financial condition prior to the Recapitalization and Merger,
offset by loans acquired in the Merger. In 2010, total loans decreased $317.3 million, or 20.0%, due to reduction in loan demand stemming from ongoing uncertainty in the general economy and the market and payoffs, charge-offs and problem loan
resolution through foreclosure.

Table 10 sets forth the major categories of loans for each of the last five years.



Table 10

Loan Portfolio Composition



|                            |  |              |           |  |      |  |       |      |  |   |           |  |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|--------------------------- |  | ------------ | --------- |  | ---- |  | ----- | ---- |  | - | --------- |  |  | ---- | ----- | - |  | - | --------- |  |  |  | ----- | - |  | - | --------- |  |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|(dollars in thousands)      |  | December 31, |          
|                            |  | 2011         |           |  | 2010 |  |       | 2009 |  |   | 2008      |  |  | 2007 |      
|                            |  |              |           |  |      |  |       |      |  |  
|Loans held for sale         |  | $            | 4,529     |  |      |  |       |      |  | $ |          |  |  |      |       |   |  | $ | 58,219    |  |  |  |       |   |  | $ | 17,586    |  |  |  |       |   |  | $ | 20,862    |  |  |  |       |  
|                            |  |              |           |  |      |  |       |      |  |   |           |  |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|                            |  |              |           |  |      |  |       |      |  |  
|Loans held for investment:  |  |              |           |  |      |  |       |      |  |   |           |  |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|Commercial and agricultural |  | $            | 95,203    |  |      |  | 7.8   | %    |  | $ | 93,747    |  |  |      | 7.2   | % |  | $ | 194,134   |  |  |  | 12.4  | % |  | $ | 184,909   |  |  |  | 11.7  | % |  | $ | 182,713   |  |  |  | 12.6  | %
|Real estate-construction    |  |              | 93,044    |  |      |  | 7.6   |      |  |   | 276,976   |  |  |      | 21.2  |   |  |   | 394,427   |  |  |  | 25.2  |   |  |   | 453,668   |  |  |  | 28.6  |   |  |   | 373,401   |  |  |  | 25.8  |  
|Real estate-mortgage:       |  |              |           |  |      |  |       |      |  |   |           |  |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|1-4 family residential      |  |              | 449,797   |  |      |  | 36.9  |      |  |   | 388,859   |  |  |      | 29.8  |   |  |   | 398,134   |  |  |  | 25.5  |   |  |   | 369,948   |  |  |  | 23.3  |   |  |   | 331,194   |  |  |  | 22.9  |  
|Commercial                  |  |              | 535,957   |  |      |  | 44.1  |      |  |   | 494,861   |  |  |      | 38.0  |   |  |   | 529,822   |  |  |  | 33.9  |   |  |   | 540,192   |  |  |  | 34.1  |   |  |   | 522,737   |  |  |  | 36.2  |  
|Consumer                    |  |              | 43,534    |  |      |  | 3.6   |      |  |   | 49,532    |  |  |      | 3.8   |   |  |   | 46,504    |  |  |  | 3.0   |   |  |   | 36,478    |  |  |  | 2.3   |   |  |   | 36,071    |  |  |  | 2.5   |  
|                            |  |              |           |  |      |  |       |      |  |   |           |  |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|Total                       |  | $            | 1,217,535 |  |      |  | 100.0 | %    |  | $ | 1,303,975 |  |  |      | 100.0 | % |  | $ | 1,563,021 |  |  |  | 100.0 | % |  | $ | 1,585,195 |  |  |  | 100.0 | % |  | $ | 1,446,116 |  |  |  | 100.0 | %
|                            |  |              |           |  |      |  |       |      |  |   |           |  |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  

In 2011, loans held for sale increased to $4.5 million as a result of reclassification of problem loans from the held for
investment portfolio that either are or were under contract to be sold to the loans held for sale category. In 2010, there were no loans held for sale. Loans held for sale in periods prior to 2010 represent mortgage loans held for sale into the
secondary market.



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##### Table of Contents

The maturity distribution and interest rate sensitivity of selected loan categories at December 31,
2011 are presented in Table 11.

Table 11

Selected Loan Maturities



|                             |  |                   |        |  |                  |   |        |                |  |   |        |  |  |   |         | 
|---------------------------- |  | ----------------- | ------ |  | ---------------- | - | ------ | -------------- |  | - | ------ |  |  | - | ------- | 
|                             |  | December 31, 2011 |       
|(dollars in thousands)       |  | One Year orLess   |        |  | One to FiveYears |   |        | Over FiveYears |  |   | Total  | 
|Commercial and agricultural  |  | $                 | 45,915 |  |                  | $ | 37,913 |                |  | $ | 11,375 |  |  | $ | 95,203  | 
|Real estate-construction     |  |                   | 47,039 |  |                  |   | 32,728 |                |  |   | 13,277 |  |  |   | 93,044  | 
|                             |  |                   |        |  |                  |   |        |                |  |   |        |  |  |   |         | 
|Total                        |  | $                 | 92,954 |  |                  | $ | 70,641 |                |  | $ | 24,652 |  |  | $ | 188,247 | 
|                             |  |                   |        |  |                  |   |        |                |  |   |        |  |  |   |         | 
|                             |  |                   |        | 
|Sensitivity to rate changes: |  |                   |        |  |                  |   |        |                |  |   |        |  |  |   |         | 
|Fixed interest rates         |  | $                 | 25,784 |  |                  | $ | 25,614 |                |  | $ | 16,874 |  |  | $ | 68,272  | 
|Variable interest rates      |  |                   | 67,170 |  |                  |   | 45,027 |                |  |   | 7,778  |  |  |   | 119,975 | 
|                             |  |                   |        |  |                  |   |        |                |  |   |        |  |  |   |         | 
|Total                        |  | $                 | 92,954 |  |                  | $ | 70,641 |                |  | $ | 24,652 |  |  | $ | 188,247 | 
|                             |  |                   |        |  |                  |   |        |                |  |   |        |  |  |   |         | 

Asset Quality

Management considers the asset quality of FNB to be of primary importance. A formal loan review function, independent of loan origination, is used to identify and monitor problem loans. As part of the
loan review function, we engage a third-party assessment group to review the underwriting documentation and risk grading analysis. In addition to continuing to rely on third-party loan reviews, a formal internal credit review function commenced in
2011 to provide more timely responses. This function reports directly to the Risk Management Committee of the Board of Directors, and is independent of loan origination.

In August 2011, an external loan review of the loan portfolio (as of May 31, 2011) was conducted, covering 33% of the total outstanding portfolio balance. The external loan review resulted in 0.2% of
loans reviewed being downgraded from pass to non-pass. All risk downgrades identified during this review were included as factors in the computation of the ALL as of September 30, 2011. At December 31, 2011, FNB had an ALL of $39.4 million
or 3.23% of loans held for investment, and 4.67% excluding loans acquired in the Merger at estimated fair value and for which no ALL was required at December 31, 2011. As a result of robust non-performing asset resolution activity,
non-performing assets decreased to 9.0% of total assets in 2011 from 20.6% in 2010.

Accounting for Impaired Purchased Loans

Purchased credit-impaired loans (PCI loans) acquired in a business combination are recorded at estimated fair value on the
date of acquisition without the carryover of the related ALL, which include loans purchased in the Merger. We acquired loans in the Merger with an unpaid principal balance net of partial charge-offs recognized to date of $383.1 million and a fair
value adjustment for acquisition accounting purposes of $31.9 million. PCI loans are accounted for under Accounting Standards Codification (ASC) 310-30 when the loans have evidence of credit deterioration since origination and it is
probable at the date of acquisition we will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the date of acquisition may include statistics such as past due status, nonaccrual
status and risk grade. PCI loans generally meet the Companys definition for nonaccrual status, however, management believes there are loans currently accruing that will not furnish the entire principal over the life of the loan. Even if the
borrower is not currently making payments, the Company will classify loans as accruing if the Company can reasonable estimate the amount and timing of future cash flows.The difference between contractually required payments at acquisition
and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent significant increases in cash
flows result in a reversal of the provision for loan losses to the extent of prior charges, or reclassification from nonaccretable difference to accretable yield with a positive impact on future interest income. Further, any excess of cash flows
expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash
flows. We have elected to treat the Granite portfolio under ASC 310-30, with the exception of performing revolving consumer and commercial loans, which are being accounted for under ASC 310-20. At December 31, 2011 no ALL was required for the
acquired Granite loans, and in addition, the acquired Granite loans are recorded on an accruing basis. We recorded $4.5 million in accretable yield during 2011 on the Granite loans.



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Nonperforming Assets

Nonperforming assets are comprised of nonaccrual loans, accruing loans past due 90 days or more, repossessed assets and OREO. Nonperforming loans are loans placed in nonaccrual status when, in
managements opinion, the collection of all or a portion of interest becomes doubtful. Loans are returned to accrual status when the factors indicating doubtful collectability cease to exist and the loan has performed in accordance with its
terms for a demonstrated period of time. OREO represents real estate acquired through foreclosure or deed in lieu of foreclosure and is generally carried at fair value, less estimated costs to sell.

The level of nonperforming loans decreased 67.9% from 2010 to 2011, as a result of aggressive asset resolution efforts in conjunction with the
Recapitalization and Merger. Nonperforming loans decreased from $329.9 million or 25.3% of loans held for investment at December 31, 2010, to $106.0 million, or 8.7% of loans held for investment at December 31, 2011. During the year ended
December 31, 2011, we charged off $128.4 million in loans. The majority of the loans that were charged off were loans that had been in impairment status for more than six months. OREO and repossessed assets were $110.4 million at
December 31, 2011, compared to $62.2 million at December 31, 2010.

The continued softening of the real estate market through 2011
has adversely affected the financial condition and liquidity position of certain borrowers. Real estate secured lending (including commercial, construction, land development, and residential single family housing) is a large portion of our loan
portfolio. These categories constitute $1.1 billion, or approximately 89.4%, of our total loan portfolio. These categories are generally affected by changes in economic conditions, fluctuations in interest rates and the availability of loans to
potential purchasers, changes in tax and other laws and acts of nature. The downturn in the real estate markets in which we originate, purchase, and service mortgage and other loans hurt our business because these loans are secured by real estate.
Further declines will adversely affect the value of real estate collateral of loans secured by real estate, which could adversely affect our future earnings.

Troubled Debt Restructurings

Troubled debt restructurings generally occur when a borrower
is experiencing, or is expected to experience, financial difficulties in the near-term. As a result, we will work with the borrower to prevent further difficulties, and ultimately to improve the likelihood of recovery on the loan. To facilitate this
process, a concessionary modification that would not otherwise be considered may be granted resulting in classification as a troubled debt restructuring. We consider all troubled debt restructurings to be impaired loans. Troubled debt restructurings
can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accruing status, depending on the individual facts and circumstances of the borrower. Generally, a nonaccrual loan that is restructured remains on nonaccrual for a
period of six months to demonstrate the borrower can meet the restructured terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet
the new terms and may result in the loan being returned to accrual status after a shorter performance period. If the borrowers ability to meet the revised payment schedule is not reasonably assured, the loan remains in a nonaccrual status.

The majority of our loan modifications relate to modifying terms on our commercial loan portfolio. Modifications may result in
adjustments to interest rates, frequency of payments or maturity dates. In these cases, we do not typically forgive principal or interest as part of the loan modification. However, it is common for us to seek additional collateral or guarantor
support in exchange for modified terms. The amount of restructured loans decreased during 2011 primarily as a result of our emphasis on nonperforming loan sales. Despite this decrease in 2011, there can be no assurance that restructured loans
will not increase during 2012.

FNBs criteria for nonperforming status, impaired status and troubled debt restructures have been
described earlier. Included in the table below are $4.5 million in loans held for sale that are impaired loans and on nonaccrual status.

The
following table presents our level and composition of nonperforming loans as of December 31:

Table 12

Nonperforming Loans



|                                  |  |      |         |  |      |   |         | 
|--------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|(dollars in thousands)            |  | 2011 |         |  | 2010 |  
|Nonperforming Loans:              |  |      |         |  |      |   |         | 
|Current, nonaccrual               |  | $    | 32,214  |  |      | $ | 76,216  | 
|Delinquent 30-89 days, nonaccrual |  |      | 14,082  |  |      |   | 53,440  | 
|Delinquent 90+ days, nonaccrual   |  |      | 56,677  |  |      |   | 195,412 | 
|Delinquent 90+ days, accruing     |  |      | 3,000   |  |      |   | 4,818   | 
|                                  |  |      |         |  |      |   |         | 
|Total nonperforming loans         |  | $    | 105,973 |  |      | $ | 329,886 | 
|                                  |  |      |         |  |      |   |         | 



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Nonperforming loans and impaired loans are overlapping sets of loans. Impaired loans are problem loans that
may, or may not, have been placed into nonaccrual status. The complete repayment of principal and interest is considered probable for those impaired loans that have not been placed into a nonaccrual status, but not within contracted terms.

The following table presents the level, composition and the reserves associated with those loan balances:

Table 13

Impaired Loans



|                                                          |  |                   |         |  |                    |   |        |         |  |   |                    |  |  |   |        | 
|--------------------------------------------------------- |  | ----------------- | ------- |  | ------------------ | - | ------ | ------- |  | - | ------------------ |  |  | - | ------ | 
|                                                          |  | December 31, 2011 |         |  | December 31, 2010  |  
|(dollars in thousands)                                    |  | Balance           |         |  | AssociatedReserves |   |        | Balance |  |   | AssociatedReserves | 
|Impaired loans, held for sale                             |  | $                 | 4,529   |  |                    | $ |       |         |  | $ |                   |  |  | $ |       | 
|Impaired loans, not individually reviewed for impairment  |  |                   | 5,127   |  |                    |   |       |         |  |   | 717                |  |  |   |       | 
|Impaired loans, individually reviewed, with no impairment |  |                   | 53,885  |  |                    |   |       |         |  |   | 132,435            |  |  |   |       | 
|Impaired loans, individually reviewed, with impairment    |  |                   | 42,356  |  |                    |   | 11,090 |         |  |   | 208,040            |  |  |   | 70,888 | 
|                                                          |  |                   |         |  |                    |   |        |         |  |   |                    |  |  |   |        | 
|Total impaired loans *                                    |  | $                 | 105,897 |  |                    | $ | 11,090 |         |  | $ | 341,192            |  |  | $ | 70,888 | 
|                                                          |  |                   |         |  |                    |   |        |         |  |   |                    |  |  |   |        | 
|                                                          |  |                   |         | 
|Average impaired loans calculated using a simple average  |  | $                 | 212,849 |  |                    |   |        |         |  | $ | 355,131            |  |  |   |        | 



|* | Included at December 31, 2011 and December 31,2010 were $2.9 million and $6.5 million, respectively, in restructured and performing loans.
|- | ------------------------------------------------------------------------------------------------------------------------------------------

At December 31, 2011, the banks had 28 impaired loans exceeding $1.0 million each, with total impairment of $4.7 million, comprised of 26 borrowing
relationships. The average carrying value of impaired loans was $212.8 million in 2011 and $355.1 million in 2010.

Troubled debt
restructurings are a subset of impaired loans. The following table presents the level, accrual status and the reserves associated with these loan balances:

Table 14

Troubled Debt Restructurings



|                                   |  |                   |        |  |                   |   |        |                    |  |   |         |  |  |            |         |  |                    |   |         |  |  |   |        | 
|---------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | ------------------ |  | - | ------- |  |  | ---------- | ------- |  | ------------------ | - | ------- |  |  | - | ------ | 
|(dollars in thousands)             |  | December 31, 2011 |        |  | December 31, 2010 |  
|                                   |  | Balance           |        |  | Nonaccrual        |   |        | AssociatedReserves |  |   | Balance |  |  | Nonaccrual |         |  | AssociatedReserves |  
|Troubled Debt Restructurings       |  |                   |        |  |                   |   |        |                    |  |   |         |  |  |            |         |  |                    |   |         |  |  |   |        | 
|TDRs with no impairment            |  | $                 | 17,836 |  |                   | $ | 16,649 |                    |  | $ |        |  |  | $          | 66,919  |  |                    | $ | 60,345  |  |  | $ |       | 
|TDRs with impairment               |  |                   | 10,498 |  |                   |   | 8,763  |                    |  |   | 3,161   |  |  |            | 79,573  |  |                    |   | 79,573  |  |  |   | 18,908 | 
|                                   |  |                   |        |  |                   |   |        |                    |  |   |         |  |  |            |         |  |                    |   |         |  |  |   |        | 
|Total Troubled Debt Restructurings |  | $                 | 28,334 |  |                   | $ | 25,412 |                    |  | $ | 3,161   |  |  | $          | 146,492 |  |                    | $ | 139,918 |  |  | $ | 18,908 | 
|                                   |  |                   |        |  |                   |   |        |                    |  |   |         |  |  |            |         |  |                    |   |         |  |  |   |        | 

The following table presents the composition of impaired loans across loan types, along with the accrual status and the
associated reserves, by type:

Table 15

Impaired Loans by Type



|                                                |  |                   |         |  |                   |   |         |                    |  |   |          |  |  |            |         |  |                    |   |         |  |  |   |        | 
|----------------------------------------------- |  | ----------------- | ------- |  | ----------------- | - | ------- | ------------------ |  | - | -------- |  |  | ---------- | ------- |  | ------------------ | - | ------- |  |  | - | ------ | 
|(dollars in thousands)                          |  | December 31, 2011 |         |  | December 31, 2010 |  
|                                                |  | Impaired          |         |  | Nonaccrual        |   |         | AssociatedReserves |  |   | Impaired |  |  | Nonaccrual |         |  | AssociatedReserves |  
|Impaired Loans (composition across loan types): |  |                   |         |  |                   |   |         |                    |  |   |          |  |  |            |         |  |                    |   |         |  |  |   |        | 
|Loans held for sale                             |  | $                 | 4,529   |  |                   | $ | 4,529   |                    |  | $ |         |  |  | $          |        |  |                    | $ |        |  |  | $ |       | 
|Commercial and agricultural                     |  |                   | 4,633   |  |                   |   | 4,636   |                    |  |   | 1,506    |  |  |            | 14,176  |  |                    |   | 13,274  |  |  |   | 7,451  | 
|Real estate - construction                      |  |                   | 31,048  |  |                   |   | 30,844  |                    |  |   | 4,899    |  |  |            | 152,465 |  |                    |   | 144,605 |  |  |   | 35,281 | 
|Real estate - mortgage:                         |  |                   |         |  |                   |   |         |                    |  |   |          |  |  |            |         |  |                    |   |         |  |  |   |        | 
|1 - 4 family residential                        |  |                   | 27,693  |  |                   |   | 26,048  |                    |  |   | 2,140    |  |  |            | 41,109  |  |                    |   | 34,994  |  |  |   | 5,448  | 
|Commercial                                      |  |                   | 37,744  |  |                   |   | 36,666  |                    |  |   | 2,415    |  |  |            | 133,254 |  |                    |   | 131,866 |  |  |   | 22,708 | 
|Consumer                                        |  |                   | 250     |  |                   |   | 250     |                    |  |   | 130      |  |  |            | 188     |  |                    |   | 329     |  |  |   |       | 
|                                                |  |                   |         |  |                   |   |         |                    |  |   |          |  |  |            |         |  |                    |   |         |  |  |   |        | 
|Total Impaired Loans                            |  | $                 | 105,897 |  |                   | $ | 102,973 |                    |  | $ | 11,090   |  |  | $          | 341,192 |  |                    | $ | 325,068 |  |  | $ | 70,888 | 
|                                                |  |                   |         |  |                   |   |         |                    |  |   |          |  |  |            |         |  |                    |   |         |  |  |   |        | 

We designate loans as Special Mention when the borrowers financial condition or performance indicates
that the loan may potentially become a problem loan. These loans are not classified as problem loans, nor are they impaired, and they have not been modified under conditions that require designation as troubled debt restructurings. At



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##### Table of Contents

December 31, 2011, we had designated $101.1 million as Special Mention loans, of which 5.2% were delinquent more than 30 days. 26 Special Mention loans had balances over $1.0 million and
comprised approximately 51.9% of the total. Approximately 54.1% of the total Special Mention loans were categorized as land acquisition, development, and construction loans, with non-owner occupied commercial rental properties approximating another
45.1% of that total. These categories are generally affected by changes in economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax and other laws and acts of nature. In particular, a
continuing trend of adverse economic conditions in the residential real estate market may result in Special Mention loans being individually reclassified as problem loans in the future.

Allowance for Loan Losses

In determining the ALL and any resulting provision to be charged
against earnings, particular emphasis is placed on the results of the loan review process. Consideration is also given to a review of individual loans, historical loan loss experience, the value and adequacy of collateral, as well as the economic
conditions in our market area. For loans determined to be impaired, the allowance is based on discounted cash flows using the loans initial effective interest rate or the fair value of the collateral for certain collateral dependent loans.
This evaluation is inherently subjective as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. In addition, the OCC, as an
integral part of its examination process, periodically reviews CommunityOne and Granites ALL. The OCC may require the banks to recognize changes to the allowance based on its judgments about information available to them at the time of its
examinations. Loans are charged off when, in the opinion of management, they are deemed to be uncollectible. Recognized losses are charged against the allowance, and subsequent recoveries are added to the allowance.

Estimated credit losses should meet the criteria for accrual of a loss contingency, i.e., a provision to the ALL, set forth in GAAP. Our methodology for
determining the ALL is based on the requirements of GAAP, the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other regulatory and accounting pronouncements. The ALL is determined by the sum of three separate
components: (i) the impaired loan component, which addresses specific reserves for impaired loans; (ii) the general reserve component, which addresses reserves for pools of homogeneous loans; and (iii) an unallocated reserve
component (if any) based on management's judgment and experience. The loan pools and impaired loans are mutually exclusive; any loan that is impaired should be excluded from its homogenous pool for purposes of that pools reserve calculation,
regardless of the level of impairment. However, FNB has established a de minimis threshold for loan exposures that, if found to be impaired, will have impairment determined by applying the same general reserve rate as nonimpaired loans within the
same pool.

Excluding discontinued operations, the ALL, as a percentage of loans held for investment, amounted to 3.23% at December 31,
2011 compared to 7.18% at December 31, 2010. The substantial reduction in ALL was the result of the Companys aggressive reduction in problem asset levels and recorded net loan charge-offs of $121.7 million in 2011. In addition, the
Company acquired $393.7 million in loans in the Merger which are recorded at estimated fair value and have no ALL associated with them. Excluding these loans, the ALL was 4.67% of loans held for investment. Net charge-offs were $88.5 million in
2010. A substantial portion of 2011 charge-offs were related to impaired loans, and consisted of loans considered wholly impaired and loans with partial impairment. The provision for losses charged to operations in 2011 decreased to $67.4 million
from $132.8 million in 2010. As discussed above, the increase in 2011 charge-offs and the decrease in December 31, 2011 nonperforming loans resulted largely from aggressive loan resolution efforts, and the impact of loan quality issues driven
by worsening economic conditions, including strains in housing and real estate markets.

Management continually performs thorough analyses of
the loan portfolio. As a result of these analyses, certain loans have migrated to higher, more adverse risk grades and an aggressive posture towards the timely charge-off of identified impairment has also continued. Actual past due loans and loan
charge-offs have remained at manageable levels and management continues to diligently work to improve asset quality. Management believes the ALL of $39.4 million at December 31, 2011 is adequate to cover probable losses inherent in the loan
portfolio; however, assessing the adequacy of the allowance is a process that requires considerable judgment. Managements judgments are based on numerous assumptions about current events that it believes to be reasonable, but which may or may
not be valid. Thus, there can be no assurance that loan losses in future periods will not exceed the current allowance or that future increases in the allowance will not be required. No assurance can be given that managements ongoing
evaluation of the loan portfolio in light of changing economic conditions and other relevant circumstances will not require significant future additions to the allowance, thus adversely affecting the operating results of FNB. Changes in the ALL are
presented in Note 8 to the consolidated financial statements.



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##### Table of Contents

Table 16 presents an analysis of the changes in the ALL and of the level of nonperforming assets for each of
the last five years as of December 31.

Table 16

Summary of Allowance for Loan Losses



|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------ | -
|(dollars in thousands)                                 |  | 2011 |         |   | 2010 |   |         | 2009 |  |   | 2008    |   |  | 2007 |        
|Balance, beginning of year                             |  | $    | 93,687  |   |      | $ | 49,461  |      |  | $ | 34,720  |   |  | $    | 17,381  |   |  | $ | 15,943 |  
|Chargeoffs:                                            |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Commercial and agricultural                            |  |      | 10,832  |   |      |   | 9,832   |      |  |   | 3,417   |   |  |      | 6,479   |   |  |   | 1,262  |  
|Real estate - construction                             |  |      | 65,526  |   |      |   | 53,374  |      |  |   | 32,737  |   |  |      | 2,000   |   |  |   | 459    |  
|Real estate - mortgage                                 |  |      | 48,382  |   |      |   | 24,478  |      |  |   | 9,789   |   |  |      | 414     |   |  |   | 941    |  
|Consumer                                               |  |      | 3,684   |   |      |   | 3,566   |      |  |   | 3,442   |   |  |      | 3,532   |   |  |   | 2,831  |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Total chargeoffs                                       |  |      | 128,424 |   |      |   | 91,250  |      |  |   | 49,385  |   |  |      | 12,425  |   |  |   | 5,493  |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Recoveries:                                            |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Commercial and agricultural                            |  |      | 855     |   |      |   | 585     |      |  |   | 70      |   |  |      | 292     |   |  |   | 415    |  
|Real estate - construction                             |  |      | 2,637   |   |      |   | 52      |      |  |   | 544     |   |  |      |        |   |  |   | 42     |  
|Real estate - mortgage                                 |  |      | 1,722   |   |      |   | 449     |      |  |   | 264     |   |  |      | 197     |   |  |   | 171    |  
|Consumer                                               |  |      | 1,521   |   |      |   | 1,635   |      |  |   | 1,507   |   |  |      | 1,516   |   |  |   | 1,091  |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Total recoveries                                       |  |      | 6,735   |   |      |   | 2,721   |      |  |   | 2,385   |   |  |      | 2,005   |   |  |   | 1,719  |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Net chargeoffs                                         |  |      | 121,689 |   |      |   | 88,529  |      |  |   | 47,000  |   |  |      | 10,420  |   |  |   | 3,774  |  
|Provision charged to operations                        |  |      | 67,362  |   |      |   | 132,755 |      |  |   | 61,509  |   |  |      | 27,759  |   |  |   | 5,514  |  
|Allowance adjustment for loans sold                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | (302   | )
|Discontinued operations                                |  |      |        |   |      |   |        |      |  |   | 232     |   |  |      |        |   |  |   |       |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Balance, end of year                                   |  | $    | 39,360  |   |      | $ | 93,687  |      |  | $ | 49,461  |   |  | $    | 34,720  |   |  | $ | 17,381 |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|                                                       |  |      |         |   |     
|Nonperforming assets:                                  |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Nonaccrual loans                                       |  | $    | 102,973 |   |      | $ | 325,068 |      |  | $ | 167,506 |   |  | $    | 95,173  |   |  | $ | 16,022 |  
|Past due 90 days or more and still accruing interest   |  |      | 3,000   |   |      |   | 4,818   |      |  |   | 6,908   |   |  |      | 853     |   |  |   | 2,686  |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Total nonperforming loans                              |  |      | 105,973 |   |      |   | 329,886 |      |  |   | 174,414 |   |  |      | 96,026  |   |  |   | 18,708 |  
|Other real estate owned                                |  |      | 110,009 |   |      |   | 62,058  |      |  |   | 35,170  |   |  |      | 6,509   |   |  |   | 2,862  |  
|Foreclosed assets                                      |  |      | 377     |   |      |   | 138     |      |  |   | 68      |   |  |      | 92      |   |  |   | 181    |  
|Discontinued operations                                |  |      |        |   |      |   | 168     |      |  |   |        |   |  |      |        |   |  |   |       |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Total nonperforming assets                             |  | $    | 216,359 |   |      | $ | 392,250 |      |  | $ | 209,652 |   |  | $    | 102,627 |   |  | $ | 21,751 |  
|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|                                                       |  |      |         |   |     
|Asset quality ratios:                                  |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Net loan chargeoffs to average loans                   |  |      | 10.75   | % |      |   | 5.92    | %    |  |   | 2.97    | % |  |      | 0.67    | % |  |   | 0.28   | %
|Net loan chargeoffs to allowance for loan losses       |  |      | 309.17  |   |      |   | 94.49   |      |  |   | 95.02   |   |  |      | 30.01   |   |  |   | 21.71  |  
|Allowance for loan losses to loans held for investment |  |      | 3.23    |   |      |   | 7.18    |      |  |   | 3.15    |   |  |      | 2.19    |   |  |   | 1.20   |  
|Total nonperforming loans to loans held for investment |  |      | 8.70    |   |      |   | 25.30   |      |  |   | 11.16   |   |  |      | 6.06    |   |  |   | 1.29   |  

Information about managements allocation of the ALL by loan category is presented in the following table.

Table 17

Allocations of
Allowance for Loan Losses



|                                |  |              |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|(dollars in thousands)          |  | December 31, |       
|                                |  | 2011         |        |  | 2010 |   |        | 2009 |  |   | 2008   |  |  | 2007 |       
|Commercial and agricultural     |  | $            | 5,776  |  |      | $ | 11,144 |      |  | $ | 3,543  |  |  | $    | 4,146  |  |  | $ | 2,777  | 
|Real estate - construction      |  |              | 11,995 |  |      |   | 46,792 |      |  |   | 23,932 |  |  |      | 15,238 |  |  |   | 5,254  | 
|Real estate - mortgage          |  |              | 19,948 |  |      |   | 34,593 |      |  |   | 21,040 |  |  |      | 8,853  |  |  |   | 6,599  | 
|Consumer                        |  |              | 1,641  |  |      |   | 1,133  |      |  |   | 627    |  |  |      | 3,474  |  |  |   | 2,751  | 
|Unallocated                     |  |              |       |  |      |   | 25     |      |  |   | 319    |  |  |      | 3,009  |  |  |   |       | 
|                                |  |              |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|Total allowance for loan losses |  | $            | 39,360 |  |      | $ | 93,687 |      |  | $ | 49,461 |  |  | $    | 34,720 |  |  | $ | 17,381 | 
|                                |  |              |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 

Deposits

The level and mix of deposits is affected by various factors, including general economic conditions, the particular circumstances of local markets and the
specific deposit strategies employed. In general, broad interest rate declines tend to encourage customers to consider alternative investments such as mutual funds and tax-deferred annuity products, while interest rate increases tend to have the
opposite effect.



26



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In 2011, deposits increased $432.7 million, or 25.5%, to $2.1 billion from $1.7 billion at December 31,
2010 as a result of the Merger and managements focus on reducing our public funds and higher rate certificates of deposit levels. During 2011, we also improved our mix of deposits. Noninterest-bearing demand deposits increased by $85.7
million, to 11.0% of total deposits, from 8.8% in 2010. There were also net increases in all types of interest-bearing accounts (demand, savings, money-market, and time deposits). Certificates of deposit increased 8.6% to $1.0 billion but fell to
49.1% of total deposits, from $961.6 million, or 56.7% of total deposits in 2010. Other interest-bearing deposits (demand, savings and money markets) increased 45.1% to $849.8 million compared to $585.8 million in 2010. We also reduced through
attrition our reliance on brokered certificates of deposit to $112.1 million, or 5.3% of total deposits, from $140.2 million, or 8.3% of total deposits.

In 2010, deposits decreased by $25.7 million, or 1.5%. Noninterest-bearing demand deposits decreased slightly by 2.4% and interest-bearing accounts (demand, savings, money-market, and time deposits)
decreased by 1.4%. Certificates of deposit decreased 1.4% to $961.6 million, from $975.2 million in 2009. Other interest-bearing deposits decreased 1.4% to $585.8 million compared to $594.4 million in 2009. Brokered certificates of deposit were
$140.2 million, or 8.3% of total deposits.

Table 18 shows the year-end and average deposit balances for the years 2011 and 2010 and the
changes in 2011 and 2010.

Table 18

Analysis of Deposits



|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|----------------------------------- |  | ------- | --------- |  | --------------------- | - | ------- | - |  |  | --------------------- | - |  | ------ | --------- |  | - | - | ------- | - |  |  | ---- | -
|                                    |  | 2011    |           |  | 2010                  |  
|(dollars in thousands)              |  |         |           |  | Change from PriorYear |   |         |   |  |  | Change from PriorYear |  
|                                    |  | Balance |           |  | Amount                |   |         | % |  |  | Balance               |   |  | Amount |           |  | % |  
|Year End Balances                   |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Interest-bearing deposits:          |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Demand deposits                     |  | $       | 349,802   |  |                       | $ | 119,718 |   |  |  | 52.0                  |   |  | $      | 230,084   |  |   | $ | 3,388   |   |  |  | 1.5  |  
|Savings deposits                    |  |         | 68,236    |  |                       |   | 24,512  |   |  |  | 56.1                  |   |  |        | 43,724    |  |   |   | 3,001   |   |  |  | 7.4  |  
|Money market deposits               |  |         | 431,790   |  |                       |   | 119,783 |   |  |  | 38.4                  |   |  |        | 312,007   |  |   |   | (14,951 | ) |  |  | (4.6 | )
|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Total                               |  |         | 849,828   |  |                       |   | 264,013 |   |  |  | 45.1                  |   |  |        | 585,815   |  |   |   | (8,562  | ) |  |  | (1.4 | )
|Time deposits                       |  |         | 1,044,610 |  |                       |   | 82,968  |   |  |  | 8.6                   |   |  |        | 961,642   |  |   |   | (13,587 | ) |  |  | (1.4 | )
|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Total interest-bearing deposits     |  |         | 1,894,438 |  |                       |   | 346,981 |   |  |  | 22.4                  |   |  |        | 1,547,457 |  |   |   | (22,149 | ) |  |  | (1.4 | )
|Noninterest-bearing demand deposits |  |         | 234,673   |  |                       |   | 85,740  |   |  |  | 57.6                  |   |  |        | 148,933   |  |   |   | (3,589  | ) |  |  | (2.4 | )
|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Total deposits                      |  | $       | 2,129,111 |  |                       | $ | 432,721 |   |  |  | 25.5                  |   |  | $      | 1,696,390 |  |   | $ | (25,738 | ) |  |  | (1.5 | )
|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|                                    |  |         |           |  |                       |  
|Average Balances                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Interest-bearing deposits:          |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Demand deposits                     |  | $       | 246,989   |  |                       | $ | 18,935  |   |  |  | 8.3                   |   |  | $      | 228,054   |  |   | $ | 29,711  |   |  |  | 15.0 |  
|Savings deposits                    |  |         | 49,628    |  |                       |   | 6,404   |   |  |  | 14.8                  |   |  |        | 43,224    |  |   |   | 2,923   |   |  |  | 7.3  |  
|Money market deposits               |  |         | 315,203   |  |                       |   | (5,977  | ) |  |  | (1.9                  | ) |  |        | 321,180   |  |   |   | 12,490  |   |  |  | 4.0  |  
|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Total                               |  |         | 611,820   |  |                       |   | 19,362  |   |  |  | 3.3                   |   |  |        | 592,458   |  |   |   | 45,124  |   |  |  | 8.2  |  
|Time deposits                       |  |         | 942,259   |  |                       |   | (31,933 | ) |  |  | (3.3                  | ) |  |        | 974,192   |  |   |   | 34,054  |   |  |  | 3.6  |  
|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Total interest-bearing deposits     |  |         | 1,554,079 |  |                       |   | (12,571 | ) |  |  | (0.8                  | ) |  |        | 1,566,650 |  |   |   | 79,178  |   |  |  | 5.3  |  
|Noninterest-bearing demand deposits |  |         | 171,433   |  |                       |   | 13,064  |   |  |  | 8.2                   |   |  |        | 158,369   |  |   |   | 6,011   |   |  |  | 3.9  |  
|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  
|Total deposits                      |  | $       | 1,725,512 |  |                       | $ | 493     |   |  |  | 0.0                   |   |  | $      | 1,725,019 |  |   | $ | 85,189  |   |  |  | 5.2  |  
|                                    |  |         |           |  |                       |   |         |   |  |  |                       |   |  |        |           |  |   |   |         |   |  |  |      |  

Table 19 shows short-term borrowings for the years ended 2011 and 2010.

Table 19

Short-term Borrowings



|                                |  |                            |        |   |                       |   |   |                            |  |   |                       |   |  |                            |        |   |                       |   |        |   |  |   |        |  
|------------------------------- |  | -------------------------- | ------ | - | --------------------- | - | - | -------------------------- |  | - | --------------------- | - |  | -------------------------- | ------ | - | --------------------- | - | ------ | - |  | - | ------ | -
|(dollars in thousands)          |  | 2011                       |        |   | 2010                  |   |   | 2009                       | 
|                                |  | RetailRepurchaseAgreements |        |   | FederalFundsPurchased |   |   | RetailRepurchaseAgreements |  |   | FederalFundsPurchased |   |  | RetailRepurchaseAgreements |        |   | FederalFundsPurchased |  
|Balance at December 31          |  | $                          | 8,838  |   |                       | $ |  |                            |  | $ | 9,628                 |   |  | $                          |       |   |                       | $ | 13,592 |   |  | $ | 10,000 |  
|Average balance during the year |  |                            | 8,973  |   |                       |   |  |                            |  |   | 13,355                |   |  |                            | 1,537  |   |                       |   | 18,737 |   |  |   | 58,609 |  
|Maximum month end balance       |  |                            | 10,917 |   |                       |   |  |                            |  |   | 16,424                |   |  |                            | 15,000 |   |                       |   | 22,693 |   |  |   | 90,000 |  
|Weighted average interest rate: |  |                            |        |   |                       |   |   |                            |  |   |                       |   |  |                            |        |   |                       |   |        |   |  |   |        |  
|At December 31                  |  |                            | 0.42   | % |                       |   |  | %                          |  |   | 0.78                  | % |  |                            |       | % |                       |   | 0.70   | % |  |   | 0.25   | %
|During the year                 |  |                            | 0.58   |   |                       |   |  |                            |  |   | 0.73                  |   |  |                            | 0.26   |   |                       |   | 0.68   |   |  |   | 0.27   |  



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Recent Accounting and Reporting Developments

See Note 1 of the Consolidated Financial Statements for a discussion of recently issued or proposed accounting pronouncements.

Effects of Inflation

Inflation affects financial institutions in ways that are different
from most commercial and industrial companies, which have significant investments in fixed assets and inventories. Since the banks are asset sensitive, inflation should have a positive impact on net interest margin. Noninterest expense, such as
salaries and wages, occupancy and equipment cost, are negatively affected by inflation.

Non-GAAP Measures

This Annual Report on Form 10-K contains financial information determined by methods other than in accordance with GAAP. We use these non-GAAP measures in
our analysis of FNBs performance. Some of these non-GAAP measures exclude goodwill and core deposit premiums from the calculations of return on average assets and return on average equity. We believe presentations of financial measures
excluding the impact of goodwill and core deposit premiums provide useful supplemental information that is essential to a proper understanding of the operating results of our core businesses. In addition, certain designated net interest income
amounts are presented on a taxable equivalent basis. We believe that the presentation of net interest income on a taxable equivalent basis aids in the comparability of net interest income arising from taxable and tax-exempt sources. Further, we use
other non-GAAP measures that exclude the preferred stock and the common stock warrant to report equity available to holders of our common stock. We believe that measures that exclude these items provide useful supplemental information that enhances
an understanding of the equity that is available to holders of different classes of the Companys stock.

These disclosures should not be
viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

These non-GAAP financial measures are common shareholders equity, tangible common shareholders equity, tangible equity, tangible assets and
tangible book value. FNBs management, the entire financial services sector, bank stock analysts, and bank regulators use these non-GAAP measures in their analysis of our performance.



| |  |  | Common shareholders equity is shareholders equity reduced by preferred stock and the common stock warrant.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Tangible common shareholders equity is shareholders equity reduced by preferred stock, the common stock warrant, goodwill and
other intangible assets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tangible shareholders equity is shareholders equity reduced by recorded goodwill, other intangible assets and preferred stock.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tangible assets are total assets reduced by recorded goodwill, other intangible assets and preferred stock.
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | Tangible book value is defined as total equity reduced by recorded goodwill, other intangible assets and preferred stock divided by total
common shares outstanding. This measure discloses changes from period-to-period in book value per share exclusive of changes in intangible assets and preferred stock. Goodwill, an intangible asset that is recorded in a purchase business combination,
has the effect of increasing total book value while not increasing the tangible assets of a company. Companies utilizing purchase accounting in a business combination, as required by GAAP, must record goodwill related to such transactions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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These disclosures should not be viewed as a substitute for results determined in accordance with GAAP, nor
are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. The following reconciliation table provides a more detailed analysis of these non-GAAP measures:

Table 20

Non-GAAP



|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|--------------------------------------------- |  | -------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - |  | - | --------- | -
|(dollars in thousands, except per share data) |  | At and for the Year Ended December 31, |          
|                                              |  | 2011                                   |           |   | 2010 |   |           | 2009 |  |   | 2008      |   |  | 2007 |          
|Total shareholders equity                    |  | $                                      | 129,015   |   |      | $ | (28,837   | )    |  | $ | 98,359    |   |  | $    | 147,917   |   |  | $ | 216,256   |  
|Less: Preferred stock                         |  |                                        |          |   |      |   | (56,424   | )    |  |   | (48,205   | ) |  |      |          |   |  |   |          |  
|Less: Common stock warrant                    |  |                                        |          |   |      |   | (3,891    | )    |  |   | (3,891    | ) |  |      |          |   |  |   |          |  
|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Common shareholders equity                   |  | $                                      | 129,015   |   |      | $ | (89,152   | )    |  | $ | 46,263    |   |  | $    | 147,917   |   |  | $ | 216,256   |  
|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|                                              |  |                                        |           |   |     
|Total shareholders equity                    |  | $                                      | 129,015   |   |      | $ | (28,837   | )    |  | $ | 98,359    |   |  | $    | 147,917   |   |  | $ | 216,256   |  
|Less:                                         |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Goodwill                                      |  |                                        | (3,905    | ) |      |   |          |      |  |   |          |   |  |      | (52,395   | ) |  |   | (108,395  | )
|Core deposit and other intangibles            |  |                                        | (8,177    | ) |      |   | (4,173    | )    |  |   | (4,968    | ) |  |      | (5,762    | ) |  |   | (6,564    | )
|Preferred stock                               |  |                                        |          |   |      |   | (56,424   | )    |  |   | (48,205   | ) |  |      |          |   |  |   |          |  
|Common stock warrant                          |  |                                        |          |   |      |   | (3,891    | )    |  |   | (3,891    | ) |  |      |          |   |  |   |          |  
|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Tangible common shareholders equity          |  | $                                      | 116,933   |   |      | $ | (93,325   | )    |  | $ | 41,295    |   |  | $    | 89,760    |   |  | $ | 101,297   |  
|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|                                              |  |                                        |           |   |     
|Total shareholders equity                    |  | $                                      | 129,015   |   |      | $ | (28,837   | )    |  | $ | 98,359    |   |  | $    | 147,917   |   |  | $ | 216,256   |  
|Less:                                         |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Goodwill                                      |  |                                        | (3,905    | ) |      |   |          |      |  |   |          |   |  |      | (52,395   | ) |  |   | (108,395  | )
|Core deposit and other intangibles            |  |                                        | (8,177    | ) |      |   | (4,173    | )    |  |   | (4,968    | ) |  |      | (5,762    | ) |  |   | (6,564    | )
|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Tangible shareholders equity                 |  | $                                      | 116,933   |   |      | $ | (33,010   | )    |  | $ | 93,391    |   |  | $    | 89,760    |   |  | $ | 101,297   |  
|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|                                              |  |                                        |           |   |     
|Total assets                                  |  | $                                      | 2,409,108 |   |      | $ | 1,902,369 |      |  | $ | 2,101,296 |   |  | $    | 2,044,434 |   |  | $ | 1,906,506 |  
|Less:                                         |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Goodwill                                      |  |                                        | (3,905    | ) |      |   |          |      |  |   |          |   |  |      | (52,395   | ) |  |   | (108,395  | )
|Core deposit and other intangibles            |  |                                        | (8,177    | ) |      |   | (4,173    | )    |  |   | (4,968    | ) |  |      | (5,762    | ) |  |   | (6,564    | )
|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Tangible assets                               |  | $                                      | 2,397,026 |   |      | $ | 1,898,196 |      |  | $ | 2,096,328 |   |  | $    | 1,986,277 |   |  | $ | 1,791,547 |  
|                                              |  |                                        |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|                                              |  |                                        |           |   |     
|Book value per common share                   |  | $                                      | 6.11      |   |      | $ | (714.72   | )    |  | $ | 404.95    |   |  | $    | 1,294.34  |   |  | $ | 1,892.52  |  
|Effect of intangible assets                   |  |                                        | (0.57     | ) |      |   | (36.52    | )    |  |   | (43.49    | ) |  |      | (508.90   | ) |  |   | (1,006.04 | )
|Tangible book value per common share          |  |                                        | 5.54      |   |      |   | (751.24   | )    |  |   | 361.46    |   |  |      | 785.44    |   |  |   | 886.48    |  

Application of Critical Accounting Policies

FNBs accounting policies are in accordance with GAAP and with general practice within the banking industry and are fundamental to understanding managements discussion and analysis of results
of operations and financial condition. Our significant accounting policies are discussed in detail in Note 1 of the consolidated financial statements.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the ALL, valuation of OREO, investment securities, business combinations and
deferred tax assets. Actual results could differ from those estimates.

Allowance for Loan Losses

The ALL, which is utilized to absorb actual losses in the loan portfolio, is maintained at a level consistent with managements best estimate of
probable loan losses incurred as of the balance sheet date. FNBs ALL is also assessed quarterly by management. This assessment includes a methodology that separates the total loan portfolio into homogeneous loan classifications for purposes of
evaluating risk. The required allowance is calculated by applying a risk adjusted reserve requirement to the dollar volume of loans within a homogenous group. FNB has grouped its loans into pools according to the loan segmentation regime employed on
schedule RC-C of the FFIECs Consolidated Report of Condition and Income. Major loan portfolio subgroups include: risk graded commercial loans, mortgage loans, home equity loans, retail loans and retail credit lines. Management also analyzes
the loan portfolio on an ongoing basis to evaluate current risk levels, and risk grades are adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be necessary, if economic or other
conditions differ substantially from the assumptions used. See additional discussion under Asset Quality.



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Valuation of Other Real Estate Owned

Other real estate owned represents properties acquired through foreclosure or deed in lieu thereof. The property is classified as held for sale. The property is initially carried at fair value based on
recent appraisals, less estimated costs to sell. Declines in the fair value of properties included in other real estate below carrying value are recognized by a charge to income.

Carrying Value of Securities

Securities designated as available-for-sale are carried at
fair value. However, the unrealized difference between amortized cost and fair value of securities available-for-sale is excluded from net income unless there is an other than temporary impairment and is reported, net of deferred taxes, as a
component of stockholders equity as accumulated other comprehensive income (loss). Securities held-to-maturity are carried at amortized cost, as the banks have the ability, and management has the positive intent, to hold these securities to
maturity. Premiums and discounts on securities are amortized and accreted according to the interest method.

Business Combinations

Business combinations are accounted for under the acquisition method of accounting in accordance with ASC 805, Business
Combinations. Under the acquisition method the acquiring entity in a business combination recognizes 100% of the acquired assets and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of
acquisition. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as goodwill. To the extent the fair value of net assets acquired, including other identifiable assets,
exceed the purchase price, a bargain purchase gain is recognized. Assets acquired and liabilities assumed from contingencies must also be recognized at fair value, if the fair value can be determined during the measurement period. PCI loans are
recorded at fair value at acquisition date. Therefore, amounts deemed uncollectible at acquisition date become part of the fair value determination and are excluded from the allowance for loan and lease losses. Following acquisition, we routinely
review PCI loans to determine if changes in estimated cash flows have occurred. Subsequent decreases in the amount expected to be collected result in a provision for loan losses with a corresponding increase in the allowance for loan losses.
Subsequent increases in the amount expected to be collected result in a reversal of any previously recorded provision for loan losses and related allowance for loan losses, if any, or prospective adjustment to the accretable yield if no provision
for loan losses had been recorded. Results of operations of an acquired business are included in the statement of earnings from the date of acquisition. Acquisition-related costs, including conversion and restructuring charges, are expensed as
incurred.

Treatment of Deferred Tax Assets

Managements determination of the realization of deferred tax assets is based upon its judgment of various future events and uncertainties, including the timing and amount of future income earned by
certain subsidiaries and the implementation of various tax plans to maximize realization of the deferred tax assets. In evaluating the positive and negative evidence to support the realization of the asset under current guidance, given the current
credit crisis and economic conditions, there is insufficient positive evidence to support a conclusion that it is more likely than not this asset will be realized in the foreseeable future. Examinations of the income tax returns or changes in tax
law may impact FNBs tax liabilities and resulting provisions for income taxes.

A valuation allowance is recognized for a deferred tax
asset if, based on the weight of available evidence, it is more-likely-than-not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. In making such judgments, significant weight is given to evidence that can be objectively verified. As a result of the increased credit losses, the FNB
continues to be in a three-year cumulative pre-tax loss position as of December 31, 2011. A cumulative loss position is considered significant negative evidence in assessing the realizability of a deferred tax asset, which is difficult to
overcome. FNBs estimate of the realization of its deferred tax assets was based on the scheduled reversal of deferred tax liabilities and taxable income available in prior carry back years and estimated unrealized losses in the
available-for-sale investment portfolio. FNB did not consider future taxable income in determining the realizability of its deferred tax assets. FNB expects its income tax expense (benefit) will be negligible for the next several quarters until
profitability has been restored for a reasonable time and such profitability is considered sustainable. At that time, the valuation allowance would be reversed. Reversal of the valuation allowance requires a great deal of judgment and will be based
on the circumstances that exist as of that future date. If future events differ significantly from our current forecasts, we may need to increase this valuation allowance, which could have a material adverse effect on the results of operations and
financial condition.



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The Merger was considered a change in control for Granite Corp under Internal Revenue Code Section 382
and the Regulations, thereunder. Accordingly, we are required to evaluate potential limitation or deferral of its ability to carryforward pre-acquisition net operating losses and to determine the amount of net unrealized built-in losses
(NUBIL), which may be subject to similar limitation or deferral. Under the Internal Revenue Code and Regulations, NUBIL realized within 5 years of the change in control are subject to potential limitation, which for us is
October 20, 2016. Through that date, we will continue to analyze our ability to utilize such losses to offset anticipated future taxable income, however, this estimate will not be known until the five-year recognition period expires. Losses
limited under these provisions are generally limited to a carryforward period of 20 years, subject to the annual limitation and expire if not used by the end of that period. As of December 31, 2011, total deferred tax assets attributable to
Granite Corp. and subsidiaries were approximately $40.8 million which is offset by a valuation allowance of $39.0 million. We anticipate that some of these benefits from the net operating losses and built-in losses will not ultimately be realized;
however, that amount is subject to continuing analysis and has not yet been determined.

Summary

Management believes the accounting estimates related to the ALL, the valuation of OREO, the carrying value of securities, business combination accounting,
and the valuation allowance for deferred tax assets are critical accounting estimates because: (1) the estimates are highly susceptible to change from period to period as they require management to make assumptions concerning the
changes in the types and volumes of the portfolios and anticipated economic conditions, and (2) the impact of recognizing an impairment or loan loss could have a material effect on the FNBs assets reported on the balance sheet as well as
its net earnings.



|Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

The following exhibits are filed as part of this Amendment No. 1.



|           |  |                                                                                                    
|---------- |  | ---------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description of Exhibit                                                                             
|31.01      |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|           | 
|31.02      |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, as of April 11, 2012.



FNB United Corp.(Registrant)By:

/s/ David L. NielsenDavid L. NielsenChief Financial Officer




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