UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                  ------------


                                   FORM 10-Q/A
                                (Amendment No. 1)

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                For the quarterly period ended September 30, 2006

                         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, Asheboro, North Carolina 27203
                    (Address of principal executive offices)

                                 (336) 626-8300
              (Registrant's telephone number, including area code)


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 is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]   Accelerated filer [X]   Non-accelerated filer [ ]

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 registrant had 11,228,961 shares of $2.50 par value common stock outstanding
at November 1, 2006.

<PAGE>



Explanatory Note

FNB United Corp is filing  this  amendment  to Form 10-Q for the  quarter  ended
September  30,  2006,  to amend  and  restate  financial  statements  and  other
financial information filed with the Securities and Exchange Commission ("SEC").
This  amendment  is being filed to correct an  overstatement  in the  originally
filed  report on Form 10-Q of an  estimated  loss on  investment  securities  in
connection  with the  restructuring  of FNB United's  investment  portfolio  and
restates  the  Consolidated   Financial   Statements  and  the  other  financial
information for the three and nine months ended  September 30, 2006,  previously
reported on Form 10-Q. This amendment also amends and restates "Item 4. Controls
and  Procedures," of the originally filed report on Form 10-Q as a result of the
items discussed in this Explanatory Note.

During the  quarter  ended  September  30,  2006,  FNB United  restructured  its
investment  portfolio to eliminate certain  under-performing  investments and to
improve the net interest margin. The loss was originally  estimated at $812,500,
net of  income  taxes,  or $.07  per  diluted  share.  This  estimated  loss was
reflected in the results of operations  and  financial  statements of FNB United
for the quarter ended  September 30, 2006. The actual loss was $360,000,  net of
income  taxes,  or $.03 per diluted  share for the quarter  ended  September 30,
2006.  The  difference  between  the  estimated  loss  and the  actual  loss was
attributable to a  miscalculation  associated  with paydowns on  mortgage-backed
securities.

Except as otherwise  specifically noted, all information  contained herein is as
of  September  30,  2006 and does not  reflect  any events or changes  that have
occurred  subsequent to that date. We are not required to update and we have not
updated  any  forward-looking  statements  previously  included in the Form 10-Q
filed on November 1, 2006.

The effect this  restatement  had on  earnings  for the  affected  periods is as
follows:



                                          Three Months     Nine Months
                                              Ended           Ended
                                          September 30,   September 30,
                                              2006            2006
                                           -----------     ---------
                                     (in thousands, except per share data)

Increase to:
Gain (loss) on sale of securities, net      $     701      $    701
Total noninterest income                          701           701

Income before taxes                               701           701
Income tax expense                                248           248

                                           -----------     ---------
Net income                                  $     453      $    453
                                           ===========     =========

Net Income per Share
     Basic                                  $    0.04      $   0.05
     Diluted                                $    0.04      $   0.05


In this amendment,  we have not modified or updated disclosures presented in our
original quarterly report on Form 10-Q except as required to reflect the effects
of the restatement and to amend "Item 4. Controls and  Procedures," as discussed
above. Accordingly,  this amendment does not reflect events or changes that have



                                       2
<PAGE>


occurred  subsequent to September 30, 2006. We are not required to update and we
have not  updated  any  forward-looking  statements  previously  included in the
report on Form 10-Q filed on November 9, 2006.  Information not affected by this
restatement  is unchanged and reflects the  disclosures  made at the time of the
original filing of the report on Form 10-Q on November 9, 2006. For convenience,
the entire report on Form 10-Q has been refiled in this Form 10-Q/A.









                                       3
<PAGE>



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
----------------------------

<TABLE>
<CAPTION>

                        FNB United Corp. and Subsidiaries
                     CONSOLIDATED BALANCE SHEETS (unaudited)

                                                                 September 30,        December 31,
                                                             ----------------------  --------------
                                                                 2006       2005          2005
                                                             -----------  ---------  --------------
                                                         (in thousands, except share and per share data)


ASSETS
<S>                                                                <C>       <C>           <C>
Cash and due from banks                                      $   41,112   $ 24,540    $   22,389
Interest-bearing bank balances                                    5,870        896         2,310
Federal funds sold                                               17,500     14,332        20,180
Investment securities:
     Available for sale, at estimated fair value (amortized
          cost of $88,726, $76,117 and $110,693) (restated)      89,239     76,868       110,918
     Held to maturity (estimated fair value of $41,403,
          $47,682 and $47,508)                                   42,928     48,792        48,888
Loans:
     Loans held for sale                                         20,054     19,239        17,615
     Loans held for investment                                1,276,636    689,323       795,051
     Less allowance for loan losses                             (16,318)    (8,026)       (9,945)
                                                             -----------  ---------  --------------
                    Net loans                                 1,280,372    700,536       802,721
                                                             -----------  ---------  --------------
Premises and equipment, net                                      45,113     19,809        24,670
Goodwill                                                        112,926     16,359        31,381
Core deposit premiums                                             7,583         67         1,326
Other assets (restated)                                         158,403     29,044        37,302
                                                             -----------  ---------  --------------

                    Total Assets (restated)                  $1,801,046   $931,243    $1,102,085
                                                             ===========  =========  ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
     Noninterest-bearing demand deposits                     $  155,526   $ 86,753    $  100,465
     Interest-bearing deposits:
          Demand, savings and money market deposits             464,168    223,282       252,855
          Time deposits of $100,000 or more                     344,489    182,767       229,910
          Other time deposits                                   418,425    228,971       258,379
                                                             -----------  ---------  --------------
                    Total deposits                            1,382,608    721,773       841,609
Retail repurchase agreements                                     24,540     18,594        21,338
Federal Home Loan Bank advances                                  90,311     67,389        86,225
Other borrowed funds                                             77,084     28,152        39,004
Other liabilities (restated)                                     19,041      9,214        11,594
                                                             -----------  ---------  --------------
                    Total Liabilities (restated)              1,593,584    845,122       999,770
                                                             -----------  ---------  --------------
Shareholders' equity:
     Preferred stock - $10.00 par value; authorized
        200,000 shares, none issued
     Common stock - $2.50 par value; authorized
        50,000,000 shares,
        issued shares - 11,228,461, 5,622,060 and 6,370,486      28,071     14,055        15,926
     Surplus                                                    111,502     10,611        23,542
     Retained earnings (restated)                                67,588     60,993        62,711
     Accumulated other comprehensive income                         301        462           136
                                                             -----------  ---------  --------------
                    Total Shareholders' Equity (restated)       207,462     86,121       102,315
                                                             -----------  ---------  --------------

                    Total Liabilities and
                      Shareholders' Equity (restated)        $1,801,046   $931,243    $1,102,085
                                                             ===========  =========  ==============
</TABLE>


 See accompanying notes to consolidated financial statements.



                                       4
<PAGE>

<TABLE>
<CAPTION>

                        FNB United Corp. and Subsidiaries
                  CONSOLIDATED STATEMENTS OF INCOME (unaudited)

                                               Three Months Ended              Nine Months Ended
                                                  September 30,                  September 30,
                                             -----------------------        -----------------------
                                                 2006        2005              2006         2005
                                             -----------  ----------        ----------   ----------
                                                (in thousands, except share and per share data)
Interest Income
          <S>                                     <C>         <C>               <C>         <C>
     Interest and fees on loans                 $26,894     $12,375           $64,931      $34,251
     Interest and dividends on investment
      securities:                                     -                             -
          Taxable income                          2,258         873             5,522        2,539
          Non-taxable income                        537         406             1,545        1,243
     Other interest income                          258          59               881          176
                                             -----------  ----------        -----------------------
                    Total interest income        29,947      13,713            72,879       38,209
                                             -----------  ----------        -----------------------

Interest Expense
     Deposits                                    11,548       3,899            26,298       10,312
     Retail repurchase agreements                   258         135               619          322
     Federal Home Loan Bank advances                873         660             2,670        1,955
     Federal funds purchased                         32           4                40            9
     Other borrowed funds                         1,356         395             2,914          987
                                             -----------  ----------        -----------------------
                    Total interest expense       14,067       5,093            32,541       13,585
                                             -----------  ----------        -----------------------

Net Interest Income                              15,880       8,620            40,338       24,624
     Provision for loan losses                    1,824         446             2,306        1,680
                                             -----------  ----------        -----------------------
Net Interest Income After Provision for Loan
 Losses                                          14,056       8,174            38,032       22,944
                                             -----------  ----------        -----------------------

Noninterest Income
     Service charges on deposit accounts          2,312       1,412             5,828        3,671
     Mortgage loan sales                          1,402       1,595             3,498        4,429
     Cardholder and merchant services income        607         355             1,396          976
     Gain (loss) on sale of securities, net
      (restated)                                   (557)          -              (559)           -
     Trust and investment services                  393         295             1,048          968
     Other service charges, commissions and fees    246         207               743          663
     Bank owned life insurance                      251         148               629          438
     Factoring operations                           141           -               217            -
     Other income (charge)                          624         (46)              733          (57)
                                             -----------  ----------        -----------------------
                    Total noninterest income
                     (restated)                   5,419       3,966            13,533       11,088
                                             -----------  ----------        -----------------------

Noninterest Expense
     Personnel expense                            8,300       5,103            20,337       14,345
     Net occupancy expense                        1,004         474             2,536        1,341
     Furniture and equipment expense              1,002         573             2,781        1,619
     Data processing services                       976         387             1,996        1,057
     Other expense                                4,258       1,782             9,566        5,116
                                             -----------  ----------        -----------------------
                    Total noninterest expense    15,540       8,319            37,216       23,478
                                             -----------  ----------        -----------------------

Income Before Income Taxes (restated)             3,935       3,821            14,349       10,554
Income taxes (restated)                           1,456       1,262             5,160        3,417
                                             -----------  ----------        -----------------------

Net Income (restated)                            $2,479      $2,559            $9,189       $7,137
                                             ===========  ==========        =======================

Net income per common share: (restated)
     Basic                                        $0.22       $0.46             $1.01        $1.27
     Diluted                                       0.22        0.44              1.00         1.24
                                             ===========  ==========        =======================

Weighted average number of shares
 outstanding:
     Basic                                   11,162,228   5,620,339         9,088,421    5,611,814
     Diluted                                 11,263,279   5,768,654         9,185,701    5,757,626
                                             ===========  ==========        ==========   ==========

</TABLE>

See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

<TABLE>
<CAPTION>


                        FNB United Corp. and Subsidiaries

    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

    Nine Months Ended September 30, 2006 and September 30, 2005 (unaudited)



                                                                           Accumulated
                                   Common Stock                              Other
                               --------------------            Retained   Comprehensive
                                 Shares     Amount    Surplus  Earnings   Income (Loss)     Total

                               ----------- --------  --------- ---------   ------------    -------
                                      (in thousands, except share and per share data)

    <S>                            <C>       <C>         <C>      <C>           <C>          <C>
Balance, December 31, 2004      5,605,102  $14,013   $ 10,643  $56,383        $1,108      $82,147
Comprehensive income:
     Net income                         -        -          -    7,137             -        7,137
     Other comprehensive
      income:
          Unrealized
           securities losses,
           net of income tax
           benefit of $407              -        -          -        -          (646)        (646)
                                                                                        ---------
     Total comprehensive
      income                            -        -          -        -             -        6,491
                                                                                        ---------
Cash dividends declared,
 $.45 per share                         -        -          -   (2,527)            -       (2,527)
Stock options:
     Proceeds from options
      exercised                    41,758      104        405        -             -          509
Common stock repurchased          (24,800)     (62)      (437)       -             -         (499)
                               ----------- --------  --------- ---------   ------------ ---------

Balance, September 30, 2005     5,622,060  $14,055   $ 10,611  $60,993          $462      $86,121
                               =========== ========  ========= =========   ============ =========



Balance, December 31, 2005     $6,370,486  $15,926   $ 23,542  $62,711          $136     $102,315
Comprehensive income:
     Net income (restated)              -        -          -    9,189             -        9,189
     Other comprehensive
      income:
          Unrealized
           securities losses,
           net of income tax
           of $100 (restated)           -        -          -        -           165          165
                                                                                        ---------
     Total comprehensive
      income                            -        -          -        -             -        9,354
                                                                                        ---------
Cash dividends declared,
 $.45 per share                         -        -          -   (4,312)            -      (4,312)
Merger acquisition of
 subsidiary company:
     Common stock issued        4,654,504   11,636     83,176        -             -       94,812
     Fair value of stock
      options assumed                   -        -      3,311        -             -        3,311
Stock options:
     Proceeds from options
      exercised                   146,971      367        912        -             -        1,279
     Compensation expense
      recognized                        -        -        377        -             -          377
     Net tax benefit related
      to option exercises               -        -        243        -             -          243
Restricted stock:
     Shares issued, subject
      to restriction               55,875      140       (140)       -             -            -
     Compensation expense
      recognized                        -        -         71        -             -           71
Other compensatory stock
 issued                               625        2         10        -             -           12
                               ----------- --------  --------- ---------   ------------ ---------

Balance, September 30, 2006
 (Restated)                    11,228,461  $28,071   $111,502  $67,588          $301     $207,462
                               =========== ========  ========= =========   ============ =========

</TABLE>

See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

FNB Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

                                                           Nine Months Ended
                                                              September 30,
                                                       -------------------------
                                                            2006        2005
                                                       -----------   -----------
                                                             (in thousands)
Operating Activities:
     Net income (restated)                                 $9,189      $7,137
     Adjustments to reconcile net income to net
          cash provided by (used in) operating activities:
          Depreciation and amortization of premises
           and equipment                                    2,070       1,259
          Provision for loan losses                         2,306       1,680
          Loss on sale of securities, net (restated)          559           -
          Deferred income taxes (benefit)                    (818)       (490)
          Deferred loan fees and costs, net                   301         (73)
          Premium amortization and discount accretion
                 of investment securities, net                262         270
          Amortization of core deposit premiums               399          35
          Stock compensation expense                          460           -
          Income from bank owned life insurance              (629)       (438)
          Net increase in loans held for sale              (1,699)     (7,591)
          Increase in other assets                         (2,216)        (99)
          Increase (decrease) in other
           liabilities (restated)                          (1,216)      1,460
                                                       -----------   -----------
                    Net Cash Provided by
                     Operating Activities                   8,968       3,150
                                                       -----------   -----------

Investing Activities:
     Available-for-sale securities:
          Proceeds from sales                              34,695           -
          Proceeds from maturities and calls               10,817       5,261
          Purchases                                       (26,817)     (9,478)
     Held-to-maturity securities:
          Proceeds from maturities and calls                7,544       4,156
          Purchases                                        (1,730)     (1,779)
     Net increase in loans held for investment             (6,184)    (38,451)
     Purchases of premises and equipment                   (4,842)     (4,052)
     Net cash received in merger acquisition
      of subsidiary company                                10,256           -
     Purchases of SBIC investments                         (1,000)       (150)
     Other, net                                                50         201
                                                       -----------   -----------
                    Net Cash Provided by
                     (Used in) Investing
                     Activities                            22,789     (44,292)
                                                       -----------   -----------

Financing Activities:
     Net increase (decrease) in deposits                  (22,083)     62,229
     Increase (decrese) in retail repurchase agreements      (356)      4,776
     Decrease in Federal Home Loan Bank advances          (14,511)     (1,500)
     Decrease in federal funds purchased                        -      (8,175)
     Increase in other borrowed funds                      26,981       5,586
     Proceeds from exercise of stock options                1,279         509
     Tax benefit from exercise of stock options               243           -
     Common stock repurchased                                   -        (499)
     Cash dividends paid                                   (3,707)     (2,525)
                                                       -----------   -----------
                    Net Cash Provided by
                     (Used in) Financing
                     Activities                           (12,154)     60,401
                                                       -----------   -----------

Net Increase in Cash and Cash Equivalents                  19,603      19,259
Cash and cash equivalents at beginning of period           44,879      20,509
                                                       -----------   -----------

Cash and Cash Equivalents at End of Period                $64,482     $39,768
                                                       ===========   ===========
Supplemental disclosure of cash flow information:
     Cash paid during the period for:
          Interest                                         29,907      13,018
          Income taxes                                      6,032       3,970
     Noncash transactions:
          Foreclosed loans transferred to
           other real estate                                2,971         885
          Unrealized securities gains
           (losses), net of income taxes (restated)           165        (646)
          Merger acquisition of subsidiary company:
               Fair value of assets acquired              728,656           -
               Fair value of common stock
                issued and stock options assumed           98,123           -
               Cash paid                                   27,717           -
                                                       -----------   -----------
                    Liabilities assumed                   602,816           -

See accompanying notes to consolidated financial statements.


                                       7
<PAGE>


                        FNB United Corp. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       Restatement
         FNB United Corp. is restating financial statements and other financial
         information for the quarter and the nine-month period ended September
         30, 2006. These amendments are being filed to correct errors related to
         the Company's overstatement of an estimated loss on investment
         securities.

         This amendment restates the Consolidated Financial Statements and the
         other financial information for the three and nine months ended
         September 30, 2006, previously reported on Form 10-Q.

         During the quarter ended September 30, 2006, FNB United restructured
         its investment portfolio to eliminate certain under-performing
         investments and to improve the net interest margin. The loss was
         originally estimated at $812,500, net of income taxes, or $.07 per
         diluted share. This estimated loss was reflected in the results of
         operations and financial statements of FNB United for the quarter ended
         September 30, 2006. The actual loss was $360,000, net of income taxes,
         or $.03 per diluted share for the quarter ended September 30, 2006. The
         difference between the estimated loss and the actual loss was
         attributable to a miscalculation associated with paydowns on
         mortgage-backed securities.

         The following tables reflect the previously reported amounts and the
         restated results by financial statement line item for the consolidated
         balance sheet as of September 30, 2006, the consolidated statements of
         income for the three and nine-month periods ended September 30, 2006,
         the consolidated statement of cash flows for the nine-month period
         ended September 30, 2006, and the consolidated statement of
         shareholders' equity and comprehensive income for the nine-month period
         ended September 30, 2006.

<TABLE>
<CAPTION>

                                                   Impact on Consolidated Balance Sheets
                                                             September 30, 2006

                                                      As Previously
                                                        Reported        As Restated
                                                    ----------------- ------------------
                                                            (Amounts in thousands)
                      <S>                                 <C>                 <C>
          Investment securities available for sale  $       171,193    $      89,239
          Other assets                                       73,413          158,403
          Total assets                                    1,798,010        1,801,046
          Other liabilities                                  18,793           19,041
          Total liabilities                               1,593,336        1,593,584
          Retained earnings                                  67,135           67,588
          Accumulated other comprehensive
             income (loss)                                  (2,034)              301
          Total shareholders' equity                        204,674          207,462

</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>

                                                                Impact on Consolidated Statements of Income
                                                              Three months ended                 Nine months ended
                                                              September 30, 2006                 September 30, 2006
                                                     ---------------------------------  -----------------------------------
                                                       As Previously                     As Previously
                                                          Reported     As Restated         Reported           As Restated
                                                     ---------------  ----------------  ------------------  ---------------
                                                                           (Amounts in thousands)
                   <S>                                      <C>               <C>                <C>               <C>
          Gain (loss) on sale of securities, net     $      (1,258)    $        (557)     $      (1,260)    $        (559)
          Total noninterest income                            4,718             3,966             12,832            13,533

          Income Before Income Taxes                          3,234             3,935             13,648            14,349
          Income taxes                                        1,208             1,456              4,912             5,160

          Net Income                                          2,026             2,479              8,736             9,189

          Net income per common share:
             Basic                                   $         0.18    $         0.22         $     0.96    $         1.01
             Diluted                                           0.18              0.22               0.95              1.00

</TABLE>


                                   Impact on Consolidated Statements of
                             Shareholders' Equity and Comprehensive Income
                                          September 30, 2006
                                -------------------------------------

                                 As Previously
                                    Reported             As Restated
                                 ---------------        -------------
                                         (Dollars in thousands)
   Net Income                            8,736                9,189
   Unrealized securities losses         (2,170)                  65
   Total comprehensive income            7,019                9,354
   Total Shareholders' Equity          204,674              207,462


                                Impact on Consolidated Statements of Cash Flows
                                             September 30, 2006
                                   -------------------------------------
                                    As Previously
                                      Reported             As Restated
                                    ---------------        -------------
                                          (Dollars in thousands)
  Cash Flows from Operating Activites:
  Net income                           $  8,736             $   9,189
  Loss on sale of securities, net         1,260                   559
  Increase (decrease) in other
    liabilities                          (1,464)               (1,216)



2.       Basis of Presentation
         FNB United Corp.("FNB United"), formerly known as FNB Corp., is a bank
         holding company whose wholly owned subsidiaries are First National Bank
         and Trust Company ("First National Bank") and Dover Mortgage Company
         ("Dover"). First National Bank has two wholly owned subsidiaries, First
         National Investor Services, Inc. and Premier Investment Services, Inc.


                                       9
<PAGE>


         Through its subsidiaries, FNB United offers 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. First National Bank has offices in
         Alamance, Alexander, Ashe, Catawba, Chatham, Gaston, Guilford, Iredell,
         Montgomery, Moore, Orange, Randolph, Richmond, Rowan, Scotland, Watauga
         and Wilkes counties in North Carolina. Dover Mortgage Company operates
         mortgage production offices in North Carolina at Charlotte, Carolina
         Beach, Goldsboro, Greenville, Lake Norman, Leland, Raleigh, Waxhaw,
         Wilmington and Wrightsville Beach and in South Carolina at Columbia.

         The accompanying consolidated financial statements, prepared without
         audit, include the accounts of FNB United and its subsidiaries
         (collectively the "Corporation"). All significant intercompany balances
         and transactions have been eliminated.

         The preparation of the consolidated financial statements in conformity
         with accounting principles generally accepted in the United States of
         America requires management to make estimates and assumptions that
         affect the reported amounts of assets and liabilities and disclosure of
         contingent assets and liabilities at the date of the consolidated
         financial statements and the reported amounts of revenues and expenses
         during the reporting periods. Actual results could differ from those
         estimates. Operating results for the three and nine month periods ended
         September 30, 2006 are not necessarily indicative of the results that
         may be expected for the fiscal year ending December 31, 2006.

         The organization and business of FNB United, accounting policies
         followed by the Corporation and other relevant information are
         contained in the notes to the consolidated financial statements filed
         as part of the Corporation's 2005 annual report on Form 10-K. This
         quarterly report should be read in conjunction with such annual report.

3.       Cash and Cash Equivalents
         For purposes of reporting cash flows, cash and cash equivalents include
         cash on hand, amounts due from banks, and federal funds sold.
         Generally, federal funds are purchased and sold for one-day periods.






                                       10
<PAGE>


4.       Merger Information

         United Financial, Inc.

         On November 4, 2005, the Corporation completed a merger for the
         acquisition of United Financial, Inc. ("United"), holding company for
         Alamance Bank, headquartered in Graham, North Carolina. At he date of
         merger, Alamance Bank operated three offices and, based on estimated
         fair values, had approximately $163.7 million in total assets, $96.6
         million in loans and $113.0 million in deposits. On February 1, 2006,
         Alamance Bank was merged into First National Bank.

         Pursuant to the terms of the merger, each share of United common stock
         was converted, at the election of the shareholder, into either: (1)
         $14.25 in cash, (2) 0.6828 shares of FNB United common stock, or (3)
         $4.99 in cash and 0.4438 shares of FNB United common stock, the overall
         conversion of stock being limited to 65% of United shares. The
         aggregate purchase price was $22.7 million, consisting of $8.2 million
         of cash payments and 728,625 shares of FNB United common stock valued
         at $14.5 million.

         The merger transaction has been accounted for using the purchase method
         of accounting for business combinations, and accordingly, the assets
         and liabilities of United were recorded based on estimated fair values
         as of November 4, 2005, with the estimate of goodwill being subject to
         possible adjustment during the one-year period from that date. The
         consolidated financial statements include the results of operations of
         United since November 4, 2005.

         Integrity Financial Corporation

         On April 28, 2006, the Corporation completed a merger for the
         acquisition of Integrity Financial Corporation ("Integrity"),
         headquartered in Hickory, North Carolina and the holding company for
         First Gaston Bank of North Carolina. At the date of the merger, First
         Gaston Bank operated seventeen offices and, based on estimated fair
         values, had approximately $728.7 million in total assets, $475.3
         million in loans and $563.3 million in deposits. On August 1, 2006,
         First Gaston Bank was merged into First National Bank.

         Pursuant to the terms of the merger, each share of Integrity common
         stock was converted into 0.8743 shares of FNB United common stock and
         $5.20 in cash. The aggregate purchase price was $127.2 million,
         consisting of $27.7 million in cash payments to Integrity shareholders,
         4,654,504 shares of FNB United common stock valued at $94.8 million,
         outstanding Integrity stock options valued at $3.3 million and
         transaction costs of $1.4 million.

         The merger transaction has been accounted for using the purchase method
         of accounting for business combinations, and accordingly, the assets
         and liabilities of Integrity were recorded based on estimated fair
         values as of April 28, 2006, with the estimate of goodwill being
         subject to possible adjustment during the one-year period from that
         date. The consolidated financial statements include the results of
         operations of Integrity since April 28, 2006.




                                       11
<PAGE>





         The estimated fair values of the Integrity assets acquired and
         liabilities assumed at the date of merger were as follows (in
         thousands):
                                                              April 28,
                                                                 2006

         Cash and cash equivalents                            $  37,973
         Investment securities, available for sale               84,373
         Loans, net                                             475,281
         Premises and equipment, net                             17,786
         Goodwill                                                81,537
         Core deposit intangible                                  6,656
         Other assets                                            25,050
         Deposits                                              (563,311)
         Borrowings                                             (32,237)
         Other liabilities                                       (7,268)
                                                             -----------
              Net assets acquired                               125,840
              Transaction costs                                   1,344
                                                             -----------

              Total purchase price                             $127,184
                                                             ===========

         The core deposit intangible will be amortized on the straight-line
         basis over a ten-year life. The amortization method and valuation of
         the core deposit intangible are based upon a historical study of the
         deposits acquired. Goodwill will not be amortized but will be tested
         for impairment in accordance with SFAS No. 142. None of the goodwill is
         expected to be deductible for income tax purposes. Premiums and
         discounts that resulted from recording the Integrity assets and
         liabilities at their respective fair values are being amortized using
         methods that approximate an effective yield over the life of the assets
         and liabilities. The resulting net amortization increased net income
         before income taxes for the three and nine months ended September 30,
         2006 by $0.7 million and $1.1 million, respectively.

         The following unaudited pro forma financial information presents the
         combined results of operations of FNB United and Integrity as if the
         merger had occurred as of the beginning of the period for each period
         presented, after giving effect to certain adjustments, including
         amortization of the core deposit intangible and related income tax
         effects. The pro forma financial information does not necessarily
         reflect the results of operations that would have occurred had FNB
         United and Integrity constituted a single entity during such periods.

<TABLE>
<CAPTION>

                                              Three Months Ended        Nine Months Ended
                                                 September 30,            September 30,
                                          ----------------------   ------------------------
                                             2006         2005         2006         2005
                                          ----------   ---------   -----------    ---------
                                                  (in thousands, except per share data)

               <S>                            <C>         <C>         <C>            <C>
         Net interest income              $15,880       $15,118      $49,047       $43,890
         Noninterest income                 5,419         6,299       15,098        14,732
         Net income (restated)              2,479         3,684       10,747        12,028

         Net income per common share:
              Basic (restated)                .22           .36          .97          1.17
              Diluted (restated)              .22           .35          .96          1.14
</TABLE>


                                       12
<PAGE>


5.       Earnings Per Share (EPS)

         Basic net income per share, or basic EPS, is computed by dividing net
         income by the weighted average number of common shares outstanding for
         the period. Diluted EPS reflects the potential dilution that could
         occur if the Corporation's potential common stock and contingently
         issuable shares, which consist of dilutive stock options and
         restricted stock, were exercised. The numerator of the basic EPS
         computation is the same as the numerator of the diluted EPS
         computation for all periods presented. A reconciliation of the
         denominators of the basic and diluted EPS computations is as follows:

<TABLE>
<CAPTION>


                                                         Three Months Ended                 Nine Months Ended
                                                            September 30,                     September 30,
                                                     ---------------------------        ---------------------------
                                                        2006             2005              2006              2005
                                                     ----------        ---------        ----------        ---------
                      <S>                               <C>                <C>             <C>               <C>
         Basic EPS denominator - Weighted
              average number of common
              shares outstanding                     11,162,228        5,620,339        9,088,421         5,611,814
         Dilutive share effect arising from
              potential common stock issuances          101,051          148,315           97,280          145,812
                                                     -----------       ----------       -----------       ----------

         Diluted EPS denominator                     11,263,279        5,768,654        9,185,701         5,757,626
                                                     ===========       ==========       ===========       ==========
</TABLE>


         For the three months ended September 30, 2006 and 2005 there were
         309,676 and 158,122 stock options, respectively, that were antidilutive
         since the exercise price exceeded the average market price, and for the
         nine months ended September 30, 2006 and 2005, there were 256,293 and
         211,719 stock options, respectively, that were antidilutive. These
         common stock equivalents were omitted from the calculations of diluted
         EPS for their respective periods.

6.       Stock-Based Compensation

         Effective January 1, 2006, the Corporation adopted Statement of
         Financial Accounting Standards No. 123R (revised 2004), "Share-Based
         Payment", ("SFAS 123R") which was issued by the FASB in December 2004.
         SFAS No. 123R revises FASB Statement No. 123, "Accounting for
         Stock-Based Compensation", and supersedes APB Opinion No. 25,
         "Accounting for Stock Issued to Employees", ("APB No. 25") and its
         related interpretations. SFAS No. 123R requires recognition of the cost
         of employee services received in exchange for an award of equity
         instruments in the financial statements over the period the employee is
         required to perform the services in exchange for the award
         (presumptively the vesting period). SFAS No. 123R also requires
         measurement of the cost of employee services received in exchange for
         an award based on the grant-date fair value of the award. SFAS No. 123R
         also amends SFAS No. 95, "Statement of Cash Flows", to require that
         excess tax benefits be reported as financing cash inflows, rather than
         as a reduction of taxes paid, which is included within operating cash
         flows.

         The Corporation adopted SFAS No. 123R using the modified prospective
         application as permitted under SFAS No. 123R. Accordingly, prior period
         amounts have not been restated. Under this application, compensation
         expense is required to be recorded for all awards granted after the
         date of adoption and for the unvested portion of previously granted
         awards that remain outstanding at the date of adoption.


                                       13
<PAGE>


         Prior to the adoption of SFAS No. 123R, the Corporation used the
         intrinsic value method as prescribed by APB No. 25 and thus recognized
         no compensation expense for options granted with exercise prices equal
         to the fair market value of the common stock on the date of grant.

         As of September 30, 2006, the Corporation has six share-based
         compensation plans in effect. The compensation expense charged against
         income for those plans for the three and nine months ended September
         30, 2006 was $0.21 million and $0.46 million, respectively, and the
         related income tax benefit was $0.04 million and $0.05 million,
         respectively.

         The Corporation adopted stock compensation plans in 1993 and 2003 that
         allow for the granting of incentive and nonqualified stock options to
         key employees and directors. The 2003 stock compensation plan also
         allows for the granting of restricted stock. Under terms of both the
         1993 and 2003 plans, options are granted at prices equal to the fair
         market value of the common stock on the date of grant. Options become
         exercisable after one year in equal, cumulative installments over a
         five-year period. No option shall expire later than ten years from the
         date of grant. No further grants can be made under the 1993 stock
         compensation plan after March 10, 2003. Based on the stock options
         outstanding at September 30, 2006, a maximum of 382,655 shares of
         common stock has been reserved for issuance under the 1993 stock
         compensation plan. A maximum of 420,000 shares of common stock has been
         reserved for issuance under the 2003 stock compensation plan. At
         September 30, 2006, there were 38,500 shares available under the 2003
         plan for the granting of additional options or stock awards.

         The Corporation assumed a stock compensation plan in its merger
         acquisition of Carolina Fincorp in 2000. One grant of qualified and
         nonqualified stock options was made under the plan in 1999 to key
         employees and directors at a price equal to fair market value on the
         date of grant. No additional grants will be made under the plan. Based
         on the stock options outstanding at September 30, 2006, a maximum of
         41,008 shares of common stock has been reserved for issuance under the
         stock compensation plan.

         The Corporation assumed three stock compensation plans in its merger
         acquisition of Integrity Financial Corporation on April 28, 2006.
         Qualified and nonqualified stock options are outstanding under these
         plans for grants issued from 1997 to 2004 to key employees and
         directors at a price equal to fair market value on the date of grant.
         No additional grants will be made under these plans. Based on the stock
         options outstanding at September 30, 2006, a maximum of 198,623 shares
         of common stock has been reserved for issuance under these stock
         compensation plans.

         The fair market value of each option award is estimated on the date of
         grant using the Black-Scholes option pricing model. The risk-free
         interest rate is based on a U.S. Treasury instrument with a life that
         is similar to the expected life of the option grant. Expected
         volatility is based on the historical volatility of the Corporation's
         common stock over approximately the previous 6 years. The expected life
         of the options has historically been considered to be approximately 6
         years. The expected dividend yield is based upon the current yield in
         effect at the date of grant. Forfeitures are estimated at a 3.00% rate,
         adjusted to 1.75% for 5-year vesting.



                                       14
<PAGE>


         Options were granted for a total of 13,000 shares during the nine
         months ended September 30, 2006 with a weighted-average fair value per
         share of $4.96. There were no options granted during the nine months
         ended September 30, 2005. Fair values were estimated on the date of
         grant in 2006 using the Black-Scholes option-pricing model with the
         following weighted-average assumptions:

         Risk-free interest rate                                       4.78%
         Dividend yield                                                3.25
         Volatility                                                   31.00
         Expected life                                                6 years

         The following is a summary of stock option activity for the nine months
         ended September 30, 2006:

<TABLE>
<CAPTION>

                                                                                         Weighted         Aggregate
                                                                                         Average          Intrinsic
                                                                                         Exercise           Value
                                                                         Shares           Price         (in thousands)
                                                                       ----------       ----------      --------------
                <S>                                                       <C>               <C>             <C>
         Outstanding at December 31, 2005                               768,963           $16.54
         Granted                                                         13,000            18.36
         Assumed in merger acquisition                                  325,384             9.44
         Exercised                                                     (146,971)            8.71
         Forfeited                                                      (13,090)           15.08
                                                                       --------

         Outstanding at September 30, 2006                              947,286            15.35            $3,107
                                                                       ========

         Options exercisable at September 30, 2006                      655,411            13.55             3,329
                                                                       ========

</TABLE>

         At September 30, 2006, information concerning stock options outstanding
         and exercisable is as follows:

<TABLE>
<CAPTION>

                                                 Options Outstanding                       Options Exercisable
                                    -----------------------------------------------      ------------------------------
                                                          Weighted
                                                          Average          Weighted                           Weighted
                                                         Remaining          Average                            Average
            Range of                                    Contractual        Exercise        Number             Exercise
         Exercise Prices             Shares             Life (Years)        Price        Exercisable           Price
         ---------------            --------            ------------       -------       -----------          ---------
               <S>                    <C>                  <C>              <C>             <C>                 <C>
        $ 5.29 -    9.97            153,661                2.48          $  9.13           153,661            $  9.13
          10.00 -  14.20            320,855                3.97            12.48           293,380              12.35
          15.00 -  19.82            320,270                7.17            18.03           145,470              16.92
          20.00 -  27.00            152,500                7.12            22.03            62,900              22.16
                                    -------                                                -------

                                    947,286                5.31            15.35           655,411              13.55
                                    =======                                                =======

</TABLE>

         For the nine months ended September 30, 2006 and 2005, the intrinsic
         value of options exercised was $1.2 million and $0.3 million,
         respectively, and the grant-date fair value of options vested was $0.1
         million and $0.1 million, respectively.


                                       15
<PAGE>


         The cash proceeds from options exercised for the nine months ended
         September 30, 2006 amounted to $1.3 million and the related tax benefit
         recorded in shareholders' equity for the tax deduction realized from
         these exercised options amounted to $0.2 million.

         The following is a summary of non-vested restricted stock activity for
         the nine months ended September 30, 2006:

                                                                      Weighted
                                                                      Average
                                                                     Grant Date
                                                     Shares          Fair Value
                                                   ----------      -------------

         Non-vested at December 31, 2005                    -      $       -
         Granted                                       55,875          18.30
         Vested                                             -              -
         Forfeited                                          -              -
                                                   ----------

         Non-vested at September 30, 2006              55,875          18.30
                                                   ==========

         Restricted stock was first granted by the Corporation during the three
         months ended September 30, 2006. Accordingly, based on the vesting
         schedule, there is no fair value information to be reported for
         restricted stock that has vested.

         As of September 30, 2006, there was $2.2 million of total unrecognized
         compensation cost related to non-vested share-based compensation
         arrangements granted under all of the Corporation's stock benefit
         plans. That cost is expected to be recognized over a weighted-average
         period of 2.8 years.

         The Corporation funds the option shares and restricted stock from
         authorized but unissued shares. The Corporation does not typically
         purchase shares to fulfill the obligations of the stock benefit plans.
         Corporation policy does allow option holders under certain plans to
         exercise options with seasoned shares.




                                       16
<PAGE>


         The adoption of SFAS No. 123R and its fair value compensation cost
         recognition provisions are different from the non-recognition
         provisions under SFAS No. 123 and the intrinsic value method for
         compensation cost allowed under APB No. 25. The effect
         (increase/(decrease)) of the adoption of SFAS No. 123R for the three
         and nine months ended September 30, 2006 is as follows:

                                                          September 30, 2006
                                                      --------------------------
                                                        Three            Nine
                                                        Months           Months
                                                        Ended            Ended
                                                      -----------       --------
                                                          (in thousands, except
                                                            per share data)

         Income before income taxes                     $(131)           $(377)
         Net income                                      (124)            (356)

         Cash flow from operating activities              (22)            (243)
         Cash flow provided by financing activities        22              243

         Net income per share:
              Basic                                      (.01)            (.04)
              Diluted                                    (.01)            (.04)

         The following illustrates the effect on net income available to common
         stockholders if the Corporation had applied the fair value recognition
         provisions of SFAS No. 123 to the results for the three and nine months
         ended September 30, 2005 (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                                                  September 30, 2005
                                                                              ---------------------------
                                                                                Three            Nine
                                                                                Months           Months
                                                                                Ended            Ended
                                                                              -----------       ---------
                                                                                 (in thousands, except
                                                                                     per share data)

                  <S>                                                            <C>               <C>
         Net income, as reported                                                $2,559           $7,137
         Add:  Stock-based employee compensation expense included in
              reported net income, net of related income tax effects                 -                -
         Less:  Stock-based compensation determined under fair value
              based method of all awards, net of related income taxes              (98)            (293)
                                                                               ---------        --------

         Net income, pro forma                                                  $2,461           $6,844
                                                                               =========        ========

         Net income per share:
              Basic:
                   As reported                                                  $  .46          $  1.27
                   Pro forma                                                       .44             1.22
              Diluted:
                   As reported                                                     .44             1.24
                   Pro forma                                                       .43             1.19

</TABLE>


                                       17
<PAGE>


7.       Loans

         Loans as presented are reduced by net deferred loan fees of $1.4
         million, $1.0 million and $0.9 million at September 30, 2006, September
         30, 2005 and December 31, 2005, respectively.

8.       Allowance for Loan Losses

         Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>

                                                         Three Months Ended                  Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                        2006              2005              2006             2005
                                                     ----------        ---------        -----------       ---------
                                                                               (in thousands)

                <S>                                     <C>                <C>              <C>              <C>
         Balance at beginning of period                $15,814          $  7,732         $  9,945             $  7,293
         Charge-offs                                     2,212               450            4,070                1,594
         Recoveries                                        892               298            2,099                  647
                                                     ----------        ----------        ---------            ---------
             Net loan charge-offs                        1,320               152            1,971                  947
         Provision for loan losses                       1,824               446            2,306                1,680
         Purchase accounting adjustment                      -                 -            6,038                    -
                                                     ----------        ----------        ---------            ---------

         Balance at end of period                      $16,318          $  8,026          $16,318             $  8,026
                                                     ==========        ==========        =========            =========

</TABLE>

9.       Supplementary Income Statement Information

         Significant components of other expense were as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended                  Nine Months Ended
                                                             September 30,                     September 30,
                                                     ---------------------------        ---------------------------
                                                        2006             2005              2006              2005
                                                     ----------        ---------        ----------        ---------
                                                                              (in thousands)
                 <S>                                     <C>             <C>               <C>                <C>
         Professional fees                           $   641          $   207            $1,162           $   462
         Stationery, printing and supplies               440              201             1,035               616
         Advertising and marketing                       279              236               838               710

</TABLE>




                                       18
<PAGE>


10.      Postretirement Employee Benefit Plans

         Information concerning the net periodic cost of the Corporation's
         postretirement benefit plans is as follows:
<TABLE>
<CAPTION>

                                                                Three Months Ended September 30, 2006
                                                                -------------------------------------
                                                                                                 Other
                                                                             Supplemental    Postretirement
                                                                              Executive         Defined
                                                              Pension         Retirement        Benefit
                                                               Plan             Plan             Plans
                                                             -----------      ---------         --------
                                                                            (in thousands)

             <S>                                                 <C>             <C>               <C>
         Service cost                                         $  201           $    25          $    22
         Interest cost                                           163                23               22
         Expected return on plan assets                         (224)                -                -
         Amortization of prior service cost                        7                12                -
         Amortization of transition obligation                     -                 -                5
         Recognized net actuarial loss                            48                 8                3
                                                              --------         ---------        ---------

         Net periodic postretirement benefit cost             $  195           $    68          $    52
                                                              ========         =========        =========
</TABLE>

<TABLE>
<CAPTION>
                                                                Three Months Ended September 30, 2005
                                                                -------------------------------------
                                                                                                 Other
                                                                             Supplemental    Postretirement
                                                                              Executive         Defined
                                                              Pension         Retirement        Benefit
                                                               Plan             Plan             Plans
                                                             -----------      ---------         --------
                                                                            (in thousands)
             <S>                                                 <C>             <C>               <C>
         Service cost                                         $  159           $    17          $    17
         Interest cost                                           156                19               21
         Expected return on plan assets                         (207)                -                -
         Amortization of prior service cost                        7                12                2
         Amortization of transition obligation                     -                 -                5
         Recognized net actuarial loss                            38                 5                3
                                                              --------         ---------        ---------

         Net periodic postretirement benefit cost             $  153           $    53          $    48
                                                              ========         =========        =========
</TABLE>



                                       19
<PAGE>

<TABLE>
<CAPTION>
                                                                 Nine Months Ended September 30, 2006
                                                                -------------------------------------
                                                                                                 Other
                                                                             Supplemental    Postretirement
                                                                              Executive         Defined
                                                              Pension         Retirement        Benefit
                                                               Plan             Plan             Plans
                                                             -----------      ---------         --------
                                                                            (in thousands)

             <S>                                                 <C>             <C>               <C>
         Service cost                                         $  603           $    75          $    66
         Interest cost                                           489                69               66
         Expected return on plan assets                         (672)                -                -
         Amortization of prior service cost                       21                36                -
         Amortization of transition obligation                     -                 -               15
         Recognized net actuarial loss                           144                24                9
                                                              --------          --------        ---------

         Net periodic postretirement benefit cost             $  585            $  204           $  156
                                                              ========          ========        =========

</TABLE>

<TABLE>
<CAPTION>
                                                                Nine Months Ended September 30, 2005
                                                                -------------------------------------
                                                                                                 Other
                                                                             Supplemental    Postretirement
                                                                              Executive         Defined
                                                              Pension         Retirement        Benefit
                                                               Plan             Plan             Plans
                                                             -----------      ---------         --------
                                                                            (in thousands)

             <S>                                                 <C>             <C>               <C>
         Service cost                                         $  477           $    51          $    51
         Interest cost                                           468                57               63
         Expected return on plan assets                         (621)                -                -
         Amortization of prior service cost                       21                36                6
         Amortization of transition obligation                     -                 -               15
         Recognized net actuarial loss                           114                15                9
                                                              --------          --------        ---------

         Net periodic postretirement benefit cost             $  459            $  159           $  144
                                                              ========          ========        =========

</TABLE>


         Due to the significant contributions of $0.5 million and $2.2 million
         made in 2005 and 2004, respectively, the Corporation does not expect to
         contribute any funds to its pension plan in 2006. The other
         postretirement benefit plans are unfunded plans; and consequently,
         there are no plan assets or cash contribution requirements other than
         for the direct payment of benefits.

         In September 2006, the Board of Directors of FNB United approved a
         modified freeze to the pension plan. Effective December 31, 2006, no
         new employees are eligible to enter the plan. Participants who are at
         least age 40, have earned 10 years of vesting service as an employee of
         FNB United and remain an active employee as of December 31, 2006 will
         qualify for a grandfathering provision. Under the grandfathering
         provision, the participant will continue to accrue benefits under the
         plan through December 31, 2011. Additionally, the plan's definition of
         final average compensation will be improved from a 10-year averaging
         period to a 5-year averaging period as of January 1, 2007. All other
         eligible participants in the plan will have their retirement benefit
         frozen as of December 31, 2006. Effective January 1, 2007, the 401K
         plan will be enhanced and will be the primary retirement benefit plan.


                                       20
<PAGE>


11.      Derivatives and Financial Instruments

         Statement of Financial Accounting Standards No. 133, "Accounting for
         Derivative Instruments and Hedging Activities" ("SFAS No. 133"), as
         amended by SFAS Nos. 137, 138 and 149, establishes accounting and
         reporting standards for derivative and hedging activities. It requires
         an entity to recognize all derivatives as either assets or liabilities
         in the balance sheet, and measure those instruments at fair value.
         Changes in the fair value of those derivatives are reported in current
         earnings or other comprehensive income depending on the purpose for
         which the derivative is held and whether the derivative qualifies for
         hedge accounting.

         In connection with its asset/liability management objectives, the
         Corporation in 2004 entered into an interest rate swap on a $7.0
         million Federal Home Loan Bank (FHLB) advance that converts the fixed
         rate cash flow exposure on the FHLB advance to a variable rate cash
         flow. As structured, the pay-variable, receive-fixed swap is evaluated
         as being a fair value hedge with no ineffectiveness; and, consequently,
         the difference in cash flows in each period between the variable rate
         interest payments that the Corporation makes and the fixed rate
         interest payments received is currently reported in earnings.

         For the three months ended September 30, 2006 and 2005, the interest
         rate swap resulted in net increases of $37,000 and $4,000,
         respectively, in the interest expense that would otherwise have been
         reported for the FHLB advance, and for the nine months ended September
         30, 2006 and 2005, the interest rate swap resulted in a net increase of
         $88,000 and a net reduction of $14,000, respectively, in interest
         expense. The fair value of the swap at September 30, 2006 was recorded
         on the consolidated balance sheet as a liability in the amount of $0.3
         million, offset by a valuation adjustment in the same amount to the
         FHLB advance.

         The Corporation has also identified the following derivative
         instruments which were recorded on the consolidated balance sheet at
         September 30, 2006: commitments to originate fixed rate residential
         mortgage loans and forward sales commitments.

         Dover Mortgage Company originates certain fixed rate residential
         mortgage loans with the intention of selling these loans. Between the
         time that Dover enters into an interest rate lock or a commitment to
         originate a fixed rate residential mortgage loan with a potential
         borrower and the time the closed loan is sold, the Corporation is
         subject to variability in market prices related to these commitments.
         The Corporation believes that it is prudent to limit the variability of
         expected proceeds from the future sales of these loans by entering into
         forward sales commitments and commitments to deliver loans into a
         mortgage-backed security. The commitments to originate fixed rate
         residential mortgage loans and the forward sales commitments are
         freestanding derivative instruments. They do not qualify for hedge
         accounting treatment so their fair value adjustments are recorded
         through the income statement in income from mortgage loan sales. The
         commitments to originate fixed rate residential mortgage loans totaled
         $22.5 million at September 30, 2006, and the related forward sales
         commitments totaled $22.5 million. Loans held for sale by Dover
         Mortgage Company totaled $15.6 million at September 30, 2006, and the
         related forward sales commitments totaled $15.6 million.

         First National Bank had loans held for sale of $4.5 million at
         September 30, 2006. Binding commitments of First National Bank for the
         origination of mortgage loans intended to be held for sale at September
         30, 2006 were not material.



                                       21
<PAGE>


12.      Recently Adopted Accounting Pronouncements

         In November 2003, the Emerging Issues Task Force ("EITF") issued EITF
         Issue No. 03-01, "The Meaning of Other-Than-Temporary Impairment and
         Its Application to Certain Investments ("EITF 03-01"). EITF 03-01
         provided guidance for evaluating whether an investment is
         other-than-temporarily impaired and requires certain disclosures with
         respect to these investments. In September 2004, the Financial
         Accounting Standards Board ("FASB") issued a FASB Staff Position ("FSP
         EITF 03-1-b") to delay the requirement to record impairment losses
         under EITF 03-1. The guidance also included accounting considerations
         subsequent to the recognition of an other-than-temporary impairment and
         requirements for disclosures about unrealized losses that have ot been
         recognized as other-than-temporary impairments. In November 2005, the
         FASB issued FSP FAS 115-1 and FAS 124-1, which addresses the
         determination as to when an investment is considered impaired. This FSP
         nullifies certain requirements of EITF 03-01 and supersedes EITF Topic
         No. D-44, "Recognition of Other-Than-Temporary Impairment upon the
         Planned Sale of a Security Whose Cost Exceeds Fair Value." This FSP is
         to be applied to reporting periods beginning after December 15. 2005.
         The Corporation adopted the provisions of FSP FAS 115-1 on January 1,
         2006 with no effect on its consolidated financial statements.

         In December 2004, the FASB issued Statement of Financial Accounting
         Standards No. 123R ("SFAS No. 123R"), "Share-Based Payment", which is a
         revision of FASB Statement No. 123 "Accounting for Stock-Based
         Compensation" and supersedes APB Opinion No. 25 "Accounting for Stock
         Issued to Employees". SFAS No. 123R requires companies to recognize in
         the income statement the grant-date fair value of stock options and
         other equity-based compensation issued to employees over the period
         during which an employee is required to provide service in exchange for
         the award (presumptively the vesting period). SFAS No. 123R sets
         accounting requirements for "share-based" compensation to employees,
         including employee-stock purchase plans ("ESPPs"). Awards to most
         nonemployee directors will be accounted for as employee awards. This
         Statement was to be effective for public companies that do not file as
         small business issuers as of the beginning of interim or annual
         reporting periods beginning after June 15, 2005. In April 2005, the
         Securities and Exchange Commission ("SEC") issued Release No. 2005-57,
         which defers the effective date of SFAS No. 123R for many registrants.
         Registrants that do not file as small business users must adopt SFAS
         No. 123R as of the beginning of their first annual period beginning
         after June 15, 2005. The Corporation adopted the provisions of SFAS No.
         123R on January 1, 2006 as discussed in Note 5 above.

         In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB
         107"), which contains guidance on applying the requirements in SFAS No.
         123R. SAB 107 provides guidance on valuation techniques, development of
         assumptions used in valuing employee share options and related MD&A
         disclosures. SAB 107 is effective for the period in which SFAS No. 123R
         is adopted. In conjunction with the adoption of SFAS No. 123R on
         January 1, 2006, the Corporation adopted the provisions of SAB 107.

         In May 2005, the FASB issued Statement of Financial Accounting
         Standards No. 154 ("SFAS No. 154"), "Accounting Changes and Error
         Corrections", which replaces APB Opinion No. 20 "Accounting Changes"
         and FASB Statement No. 3 "Reporting Accounting Changes in Interim
         Financial Statements". SFAS No. 154 changes the requirements for the
         accounting for and reporting of a change in an accounting principle.
         SFAS No. 154 requires retrospective application for voluntary changes
         in an accounting principle unless it is impracticable to do so. SFAS
         No. 154 is effective for accounting changes made in fiscal years
         beginning after December 15, 2005. The Corporation adopted the
         provisions of SFAS No. 154 on January 1, 2006 with no effect on its
         consolidated financial statements.


                                       22
<PAGE>


13.      Business Segment Information

         The Corporation is considered to have two principal business segments:
         the full-service subsidiary bank, First National Bank, and the mortgage
         banking subsidiary, Dover Mortgage Company. Dover originates,
         underwrites and closes loans for sale into the secondary market.
         Financial performance for each segment is detailed in the following
         tables. Included in the "Other" column are amounts for other corporate
         activities, including the interest expense recognized on trust
         preferred securities, and eliminations of intersegment transactions.

<TABLE>
<CAPTION>

                                                                     Three Months Ended September 30, 2006
                                                    -------------------------------------------------------------------
                                                         First               Dover
                                                       National             Mortgage
                                                         Bank               Company        Other             Total
                                                    --------------      --------------   -----------     --------------
                                                                                  (in thousands)
               <S>                                         <C>                  <C>         <C>                <C>
         Interest income                             $     29,690        $       256     $     1         $    29,947
         Interest expense                                  12,711                230       1,126              14,067
                                                    --------------      --------------   -----------     --------------
         Net interest income                               16,979                 26      (1,125)             15,880
         Provision for loan losses                          1,824                  -           -               1,824
                                                    --------------      --------------   -----------     --------------
         Net interest income after
              provision for loan losses                    15,155                 26      (1,125)             14,056
         Noninterest income (restated)                      4,328              1,038          53               5,419
         Noninterest expense                               14,529                894         117              15,540
                                                    --------------      --------------   -----------     --------------
         Income (loss) before income
              taxes (restated)                              4,954                170      (1,189)              3,935
         Income taxes (benefit) (restated)                  1,799                 74        (417)              1,456
                                                    --------------      --------------   -----------     --------------

         Net income (loss) (restated)                $      3,155       $         96     $  (772)        $     2,479
                                                    ==============      ==============   ===========     ==============

         Total assets (restated)                     $  1,775,078          $  21,971     $ 3,997         $ 1,801,046
         Net loans                                      1,281,084             15,606           -           1,296,690
         Goodwill                                         109,142              3,784           -             112,926


</TABLE>



                                       23
<PAGE>

<TABLE>
<CAPTION>

                                                                     Three Months Ended September 30, 2005
                                                    -------------------------------------------------------------------
                                                         First               Dover
                                                       National             Mortgage
                                                         Bank               Company        Other             Total
                                                    --------------      --------------   -----------     --------------
                                                                                  (in thousands)

               <S>                                         <C>                  <C>         <C>                <C>
         Interest income                             $     13,412        $       301     $     -         $    13,713
         Interest expense                                   4,697                255         141               5,093
                                                    --------------      --------------   -----------     --------------
         Net interest income                                8,715                 46        (141)              8,620
         Provision for loan losses                            446                  -           -                 446
                                                    --------------      --------------   -----------     --------------
         Net interest income after
              provision for loan losses                     8,269                 46        (141)              8,174
         Noninterest income                                 2,796              1,163           7               3,966
         Noninterest expense                                7,283              1,020          16               8,319
                                                    --------------      --------------   -----------     --------------
         Income (loss) before income taxes                  3,782                189        (150)              3,821
         Income taxes (benefit)                             1,237                 76         (51)              1,262
                                                    --------------      --------------   -----------     --------------

         Net income (loss)                           $      2,545       $        113     $   (99)        $     2,559
                                                    ==============      ==============   ===========     ==============

         Total assets                                $    906,509         $   24,442     $   292         $   931,243
         Net loans                                        682,885             17,651           -             700,536
         Goodwill                                          12,583              3,776           -              16,359

</TABLE>

<TABLE>
<CAPTION>
                                                                      Nine Months Ended September 30, 2006
                                                    -------------------------------------------------------------------
                                                         First               Dover
                                                       National             Mortgage
                                                         Bank               Company        Other             Total
                                                    --------------      --------------   -----------     --------------
                                                                                  (in thousands)
               <S>                                         <C>                  <C>         <C>                <C>
         Interest income                             $     72,201        $       677     $     1         $    72,879
         Interest expense                                  29,663                604       2,274              32,541
                                                    --------------      --------------   -----------     --------------
         Net interest income                               42,538                 73      (2,273)             40,338
         Provision for loan losses                          2,306                  -           -               2,306
                                                    --------------      --------------   -----------     --------------
         Net interest income after
              provision for loan losses                    40,232                 73      (2,273)             38,032
         Noninterest income (restated)                     10,635              2,731         167              13,533
         Noninterest expense                               34,385              2,540         291              37,216
                                                    --------------      --------------   -----------     --------------
         Income (loss) before income
              Taxes (restated)                             16,482                264      (2,397)             14,349
         Income taxes (benefit) (restated)                  5,876                123        (839)              5,160
                                                    --------------      --------------   -----------     --------------

         Net income (loss) (restated)                $     10,606        $       141     $(1,558)        $     9,189
                                                    ==============      ==============   ===========     ==============

         Total assets (restated)                     $  1,775,078          $  21,971     $ 3,997         $ 1,801,046
         Net loans                                      1,281,084             15,606           -           1,296,690
         Goodwill                                         109,142              3,784           -             112,926

</TABLE>


                                       24
<PAGE>

<TABLE>
<CAPTION>

                                                                     Nine Months Ended September 30, 2005
                                                    -------------------------------------------------------------------
                                                         First               Dover
                                                       National             Mortgage
                                                         Bank               Company        Other             Total
                                                    --------------      --------------   -----------     --------------
                                                                                  (in thousands)

               <S>                                         <C>                  <C>         <C>                <C>
         Interest income                             $     37,456        $       753     $     -         $    38,209
         Interest expense                                  12,598                598         389              13,585
                                                    --------------      --------------   -----------     --------------
         Net interest income                               24,858                155        (389)             24,624
         Provision for loan losses                          1,680                  -           -               1,680
                                                    --------------      --------------   -----------     --------------
         Net interest income after
              provision for loan losses                    23,178                155        (389)             22,944
         Noninterest income                                 8,151              2,996         (59)             11,088
         Noninterest expense                               20,367              3,096          15              23,478
                                                    --------------      --------------   -----------     --------------
         Income (loss) before income taxes                 10,962                 55        (463)             10,554
         Income taxes (benefit)                             3,545                 29        (157)              3,417
                                                    --------------      --------------   -----------     --------------

         Net income (loss)                           $      7,417       $         26     $  (306)        $     7,137
                                                    ==============      ==============   ===========     ==============

         Total assets                                $    906,509         $   24,442     $   292         $   931,243
         Net loans                                        682,885             17,651           -             700,536
         Goodwill                                          12,583              3,776           -              16,359

</TABLE>

14.      Comprehensive Income

         For the three months ended September 30, 2006 and 2005, total
         comprehensive income, consisting of net income and unrealized
         securities gains and losses, net of taxes, was $4.1 million (restated)
         and $2.0 million, respectively.

         For the nine months ended September 30, 2006 and 2005, total
         comprehensive income, consisting of net income and unrealized
         securities gains and losses, net of taxes, was $9.4 million (restated)
         and $6.5 million, respectively.


                                       25
<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         FNB United Corp. is filing this amendment to Form 10-Q for the quarter
and nine month periods ended September 30, 2006, to amend and restate financial
statements and other financial information filed with the Securities and
Exchange Commission ("SEC"). These amendments are being filed to correct errors
in the originally filed Form 10-Q related to the Company's overstatement of an
estimated loss on investment securities.

         This amendment restates the Consolidated Financial Statements and the
other financial information for the three and nine month periods ended September
2006.

         During the quarter ended September 30, 2006, FNB United restructured
its investment portfolio to eliminate certain under-performing investments and
to improve the net interest margin. The actual loss was $360,000, net of income
taxes, or $.03 per diluted share for the quarter ended September 30, 2006. The
difference between the estimated loss and the actual loss was attributable to a
miscalculation associated with paydowns on mortgage-backed securities.

         The purpose of this discussion and analysis is to assist in the
understanding and evaluation of the financial condition, changes in financial
condition and results of operations of FNB United Corp. ("FNB United" or the
"Parent Company"), formerly known as FNB Corp. prior to April 28, 2006, and its
wholly owned subsidiaries, First National Bank and Trust Company ("First
National Bank") and Dover Mortgage Company ("Dover"), collectively referred to
as the "Corporation". This discussion should be read in conjunction with the
financial information appearing elsewhere in this report.



Overview

Description of Operations

         FNB United is a bank holding company with a full-service subsidiary
bank, First National Bank, that offers 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. First
National Bank has offices in Alamance, Alexander, Ashe, Catawba, Chatham,
Gaston, Guilford, Iredell, Montgomery, Moore, Orange, Randolph, Richmond, Rowan,
Scotland, Watauga and Wilkes counties in North Carolina.

         Additionally, FNB United has a mortgage banking subsidiary, Dover
Mortgage Company, that originates, underwrites and closes loans for sale into
the secondary market. Dover operates mortgage production offices in North
Carolina at Charlotte, Carolina Beach, Goldsboro, Greenville, Lake Norman,
Leland, Raleigh, Waxhaw, Wilmington and Wrightsville Beach and in South Carolina
at Columbia.

         For business segment information related to the financial performance
of First National Bank and Dover Mortgage Company, see Note 13 to the
Consolidated Financial Statements.



                                       26
<PAGE>


 Merger Acquisition of United Financial, Inc. in 2005

         On November 4, 2005, the Corporation completed a merger for the
acquisition of United Financial, Inc. ("United"), holding company for Alamance
Bank, headquartered in Graham, North Carolina. At the date of merger, Alamance
Bank operated three offices and, based on estimated fair values, had
approximately $163.7 million in total assets, $96.6 million in loans and $113.0
million in deposits. On February 1, 2006, Alamance Bank was merged into First
National Bank. Pursuant to the terms of the merger, each share of United common
stock was converted, at the election of the shareholder, into either: (1) $14.25
in cash, (2) 0.6828 shares of FNB United common stock, or (3) $4.99 in cash and
0.4438 shares of FNB United common stock, the overall conversion of stock being
limited to 65% of United shares. The aggregate purchase price was $22.7 million,
consisting of $8.2 million of cash payments and 728,625 shares of FNB United
common stock valued at $14.5 million. The merger transaction has been accounted
for using the purchase method of accounting for business combinations, and
accordingly, the assets and liabilities of United were recorded based on
estimated fair values as of November 4, 2005, with the estimate of goodwill
being subject to possible adjustment during the one-year period from that date.
The consolidated financial statements include the results of operations of
United since November 4, 2005.


Merger Acquisition of Integrity Financial Corporation in 2006

         On April 28, 2006, the Corporation completed a merger for the
acquisition of Integrity Financial Corporation ("Integrity"), headquartered in
Hickory, North Carolina and the holding company for First Gaston Bank of North
Carolina. At the date of the merger, First Gaston Bank operated seventeen
offices and, based on estimated fair values, had approximately $728.7 million in
total assets, $475.3 million in loans and $563.3 million in deposits. On August
1, 2006, First Gaston Bank was merged into First National Bank. Pursuant to the
terms of the merger, each share of Integrity common stock was converted into
0.8743 shares of FNB United common stock and $5.20 in cash. The aggregate
purchase price was $127.2 million, consisting of $27.7 million in cash payments
to Integrity shareholders, 4,654,504 shares of FNB United common stock valued at
$94.8 million, outstanding Integrity stock options valued at $3.3 million and
transaction costs of $1.4 million. The merger transaction has been accounted for
using the purchase method of accounting for business combinations, and
accordingly, the assets and liabilities of Integrity were recorded based on
estimated fair values as of April 28, 2006, with the estimate of goodwill being
subject to possible adjustment during the one-year period from that date. The
consolidated financial statements include the results of operations of Integrity
since April 28, 2006.

Primary Financial Data for 2006

         The Corporation earned $2.48 million in the third quarter of 2006, a
3.1% decrease from earnings of $2.56 million in the same period of 2005. Basic
earnings per share decreased from $.46 to $.22 and diluted earnings per share
decreased from $.44 to $.22 for percentage decreases of 52% and 50%,
respectively. For the first nine months of 2006, earnings amounted to $9.19
million, which represents a 29% increase from earnings of $7.14 million in the
same period of 2005. Basic earnings per share in comparing nine-month periods
decreased from $1.27 to $1.01 and diluted earnings per share decreased from
$1.24 to $1.00 for percentage decreases of 20% and 19%, respectively. As noted
above, First Gaston Bank and Alamance Bank were acquired through mergers
effective April 28, 2006 and November 4, 2005, respectively, impacting both net
income and the calculation of earnings per share since the acquisition dates and
the comparability of operating results on a year-to-date basis between 2006 and
2005 (see Note 13 to the Consolidated Financial Statements for business segment
information and also below in "Significant Factors Affecting Earnings in 2006
and 2005"). The First Gaston Bank acquisition added $728.7 million or
approximately 66% to total assets at the time of acquisition, while the Alamance
Bank acquisition earlier added $163.7 million or approximately 18% to total
assets at the time of acquisition. Including these acquisitions, total assets


                                       27
<PAGE>


were $1,801.0 million at September 30, 2006, up 93% from September 30, 2005 and
63% from December 31, 2005. Loans amounted to $1,296.7 million at September 30,
2006, increasing 83% from September 30, 2005 and 60% from December 31, 2005.
Total deposits were up 92% from September 30, 2005 and 64% from December 31,
2005, amounting to $1,382.6 million at September 30, 2006.

Significant Factors Affecting Earnings in 2006 and 2005

         The acquisitions of First Gaston Bank and Alamance Bank have affected
the comparability of operating results, as the consolidated financial statements
include the results of operations of First Gaston Bank and Alamance Bank since
April 28, 2006 and November 4, 2005, respectively, and prior period financial
information has not been restated under the purchase method of accounting for
business combinations. Consequently, the results of operations for the first
nine months of 2006 include the results of the former First Gaston Bank
operations for only the last seven months of that period and the results of the
Alamance Bank operations for all of that period, while the results of the first
nine months of 2005 do not include either First Gaston Bank or Alamance Bank. As
noted above, the First Gaston Bank acquisition added approximately 66% to total
assets at the time of acquisition and the Alamance Bank acquisition added
approximately 18%.

         Net interest income has continued to be impacted by the tightening
measures utilized by the Federal Reserve for monetary policy purposes since
mid-2004. These measures have resulted in prime rate increases that have tended
to improve the yield on earning assets while similarly increasing the cost of
funds. Net interest income increased $15.7 million or 64% in the first nine
months of 2006 compared to the same period in 2005, reflecting the effect of a
60% increase in the level of average earning assets coupled with an increase in
the net interest margin, stated on a taxable equivalent basis, from 4.15% in
2005 to 4.21% in 2006. In comparing third quarter periods, net interest income
increased $7.3 million or 84%, reflecting an 88% increase in average earning
asset. However, the cost of funds, as discussed in "Net Interest Income" below,
is beginning to increase at a faster rate than the yield on earning assets, thus
resulting in the decrease in the net interest margin from 4.24% to 4.14% when
comparing the third quarter periods.

         The provision for loan losses in the 2006 third quarter was $1.8
million compared to $0.4 million in the same period of 2005, while the
comparable year-to-date provisions were $2.3 million and $1.7 million,
respectively. The third quarter provision reflects increased charge offs and the
continuing evaluation of the quality of the loan portfolio acquired as part of
the acquisition of First Gaston Bank. As a result, the allowance for loan losses
has increased to 1.28% of loans held for investment from 1.25% at June 30, 2006
and from 1.16% at September 30, 2005.

         The amounts reported for the provision for loan losses and also
noninterest income have been impacted by the adoption in the second quarter of
2005 of new regulatory guidance on the accounting for courtesy overdraft
programs. The initial result from adoption of this guidance was a $0.3 million
increase in the provision for loan losses in the second quarter of 2005, the
effect of which was partially offset by a $0.2 million increase in income from
service charges on deposit accounts. In periods subsequent to the second quarter
of 2005, the regulatory guidance on accounting for courtesy overdraft programs
will have a continuing effect on the results of operations by increasing the
level of both the provision for loan losses and income from service charges on
deposit accounts, although these effects should tend to be offsetting with only
a minor impact on net income. The total increase in the provision for loan
losses in 2005 due to the new regulatory guidance was $0.7 million and for the
first nine months and third quarter of 2006 was $0.5 million and $0.3 million,
respectively.

         Noninterest income was significantly affected in the 2006 third quarter
by the restructuring of the investment portfolio to eliminate certain
underperforming investments and to improve the net interest margin in future
periods. Approximately $123 million of available-for-sale securities, or
approximately 53% of the total carrying value of the investment portfolio, was


                                       28
<PAGE>


sold. Portions of the liquidated investments were obtained in the acquisitions
of First Gaston Bank and Alamance Bank. The pre-tax loss recognized on this
transaction was $0.6 million.

         Noninterest income was additionally impacted in the 2006 third quarter
by the recognition of $0.7 million of income in connection with certain SBIC
investments that qualify as Community Reinvestment Act investments. A loss of
$0.1 million was recorded on SBIC investments in the 2005 third quarter.

         Noninterest expense has been affected in 2006 by the increased size of
the organization following the acquisitions of Alamance Bank and First Gaston
Bank, as discussed above, and by the related restructuring/conversion expenses.
The February 2006 Alamance Bank merger and the August 2006 First Gaston Bank
merger into First National Bank have resulted in restructuring and system
conversion expenses, which are estimated to be approximately $1.1 million and
$1.4 million, respectively, for the three and nine months ended September 30,
2006. These amounts include consulting services, data processing and other
records conversion expense, the buyout of various contracts, and legal and
accounting fees. The resulting bank will continue to operate under the existing
four trade names (First National Bank and Trust Company, First Gaston Bank,
Catawba Valley Bank, and Northwestern Bank) for at least the balance of 2006.
The Corporation is in the process of conducting a branding study to determine
the advisability of adopting a new bank name in 2007. The YES YOU CAN(R) and YES
WE CAN(R) trademarks owned by First National will continue to be utilized.
Accordingly, the Corporation anticipates additional merger related expenditures
during at least the next two quarters, including replacement of signage, office
supplies and some remaining systems conversions. Synergies from the acquisition
of First Gaston Bank are expected to begin to be realized during the fourth
quarter of 2006.

         Noninterest expense has also been affected in 2006 by the recognition
of stock-based compensation. As discussed in Note 5 to the Consolidated
Financial Statements, effective January 1, 2006, the Corporation adopted
Statement of Financial Accounting Standards No. 123R ("SFAS No. 123R"),
"Share-Based Payment", which requires companies to recognize charges to the
income statement for the grant-date fair value of stock options, restricted
stock and other equity-based compensation issued to employees over the period
during which an employee is required to provide service in exchange for the
award (presumptively the vesting period). Stock-based compensation for all types
of compensation arrangements amounted to $0.21 million and $0.46 million,
respectively, for the three and nine months ended September 30, 2006, and the
related income tax benefit was $0.04 million and $0.05 million, respectively.
Stock-based compensation related only to stock options amounted to $0.13 million
and $0.38 million, respectively, for the three and nine months ended September
30, 2006, and the related income tax benefit was $0.01 million and $0.02
million, respectively. Prior to the adoption of SFAS No. 123R, the Corporation
used the intrinsic value method as prescribed by APB No. 25 and thus recognized
no compensation expense for stock options granted with exercise prices equal to
the fair market value of the common stock on the date of grant.

Critical Accounting Policies

         The Corporation's significant accounting policies are set forth in Note
1 to the Consolidated Financial Statements contained in the Form 10-K Annual
Report for the fiscal year ended December 31, 2005. Of these significant
accounting policies, the Corporation considers its policy regarding the
allowance for loan losses to be its most critical accounting policy, because it
requires management's most subjective and complex judgments. In addition,
changes in economic conditions can have a significant impact on the allowance
for loan losses and therefore the provision for loan losses and results of
operations. The Corporation has developed appropriate policies and procedures
for assessing the adequacy of the allowance for loan losses, recognizing that
this process requires a number of assumptions and estimates with respect to its
loan portfolio. The Corporation's assessments may be impacted in future periods
by changes in economic conditions, the results of regulatory examinations, and
the discovery of information with respect to borrowers that is not known to


                                       29
<PAGE>


management at the time of the issuance of the consolidated financial statements.
For additional discussion concerning the Corporation's allowance for loan losses
and related matters, see "Asset Quality".

Earnings Review

         The Corporation's net income decreased $0.08 million or 3% in the third
quarter of 2006 compared to the same period of 2005 and increased $2.05 million
or 29% in comparing nine-month periods. In general, earnings were impacted most
significantly in the third quarter of 2006 by increases of $7.26 million or 84%
in net interest income and $1.45 million in noninterest income, which gains were
more than offset by increases of $7.22 million in noninterest expense and $1.38
million in the provision for loan losses. Earnings for the first nine months of
2006 were similarly impacted by increases of $15.7 million or 63% in net
interest income and $2.4 million in noninterest income, which gains were
significantly offset by increases of $13.7 million in noninterest expense and
$0.6 million in the provision for loan losses. Certain factors specifically
affecting the elements of income and expense and the comparability of operating
results for the first nine months and third quarter periods of 2006 and 2005
were discussed in the "Overview - Significant Factors Affecting Earnings in 2006
and 2005".

         On an annualized basis, return on average assets decreased from 1.06%
in the first nine months of 2005 to 0.82% in the first nine months of 2006.
Return on average shareholders' equity decreased from 11.17% to 7.58% in
comparing the same periods. In comparing third quarter periods, return on
average assets decreased from 1.12% to 0.55% and return on average shareholders'
equity decreased from 11.79% to 4.74%. Return on tangible assets and equity
(calculated by deducting average goodwill and core deposit premiums from average
assets and from average equity) for the first nine months of 2006 amounted to
0.86% and 15.37%, respectively, compared to 1.08% and 13.82% in the same periods
of 2005; and for the 2006 third quarter amounted to 0.59% and 11.25%,
respectively, compared to 1.14% and 14.53% in 2005 third quarter.

Net Interest Income

         Net interest income is the difference between interest income,
principally from loans and investments, and interest expense, principally on
customer deposits. Changes in net interest income result from changes in
interest rates and in the volume, or average dollar level, and mix of earning
assets and interest-bearing liabilities.

         Net interest income was $40.3 million in the first nine months of 2006
compared to $24.6 million in the same period of 2005. This increase of $15.7
million or 64% resulted primarily from a 60% increase in the level of average
earning assets coupled with an improvement in the net yield on earning assets,
or net interest margin, from 4.15% in the first nine months of 2005 to 4.21% in
the same period of 2006. In comparing third quarter periods, net interest income
increased $7.3 million or 84% reflecting an 88% increase in average earning
assets, the effect of which was partially offset by a decrease in the net
interest margin from 4.24% to 4.14%. On a taxable equivalent basis, the
increases in net interest income in the first nine months and third quarter of
2006 were $16.0 million and $7.4 million, respectively, reflecting changes in
the relative mix of taxable and non-taxable earning assets in each period.

         Table 1 on page 39 and Table 2 on page 40 set forth for the periods
indicated information with respect to the Corporation'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. Changes in net interest income on a taxable


                                       30
<PAGE>


equivalent basis, as measured by volume and rate variances, are also analyzed in
Tables 1 and 2. Volume refers to the average dollar level of earning assets and
interest-bearing liabilities.

         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.

         Following a generally low-rate environment for interest rates both
earned and paid by the Corporation, the Federal Reserve took action to raise the
level of interest rates by 25 basis points at the end of June 2004, due to
concern about increasing inflationary pressures, causing the prime rate to
increase to 4.25% in July 2004. Four additional rate increases of 25 basis
points each during the second six months of 2004, eight more such rate increases
in 2005 and four more in 2006 have raised the prime rate to the 8.25% level at
September 30, 2006. The prime rate averaged 4.12% in 2003, rising to 4.33% in
2004 and 6.15% in 2005.

         The prime rate averaged 7.84% in the first nine months of 2006 compared
to 5.88% in the first nine months of 2005. The prime rate averaged 8.25% in the
third quarter of 2006 compared to 6.43% in the third quarter of 2005. The net
interest spread, in comparing nine-month periods, was unchanged at 3.84% in both
2005 and 2006. The yield on earning assets increased by 115 basis points from
6.36% in 2005 to 7.51% in 2006, while the cost of funds also increased by 115
basis points from 2.52% to 3.67%. In comparing third quarter periods, the net
interest spread decreased by 16 basis points from 3.91% to 3.75%, as the yield
on earning assets increased by 103 basis points while the cost of funds
increased by 119 basis points.

Provision for Loan Losses

         The provision for loan losses is a charge against earnings to provide
an allowance or reserve for probable losses inherent in the loan portfolio. The
amount of each period'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"), actual loan loss experience and loan
portfolio growth. Earnings were negatively impacted in the first nine months and
third quarter of 2006, compared to the same periods of 2005, by increases in the
provision of $0.6 million and $1.4 million, respectively. As noted in the
"Overview - Significant Factors Affecting Earnings in 2006 and 2005", the 2006
third quarter provision reflects increased charge offs and the continuing
evaluation of the quality of the loan portfolio acquired as part of the
acquisition of First Gaston Bank. As further discussed in the "Overview", the
provision for loan losses has been affected by the adoption in the second
quarter of 2005 of new regulatory guidance on the accounting for courtesy
overdraft programs, resulting in an increase in the provision in the first nine
months and third quarter of 2006 of $0.5 million and $0.3 million, respectively.
Further effects from adoption of the new regulatory guidance are discussed in
the "Overview".

         The allowance for loan losses, as a percentage of loans held for
investment, amounted to 1.28% at September 30, 2006, 1.16% at September 30, 2005
and 1.25% at December 31, 2005. The allowance percentage has increased based on
the results from application of the allowance model that assigns reserves to
various components of the loan portfolio in order to provide for probable
inherent losses and also from the continuing evaluation of the quality of the
loan portfolio acquired as part of the acquisition of First Gaston Bank, as
discussed in the "Overview".

Noninterest Income

         Noninterest income for the first nine months and third quarter of 2006
increased $2.4 million or 22% and $1.5 million or 37%, respectively, compared to
the same periods in 2005, due primarily to the effects of the acquisition of
First Gaston Bank on April 28, 2006, the loss of $0.6 million on the


                                       31
<PAGE>


restructuring of the investment portfolio and income of $0.7 million in the 2006
third quarter recognized in connection with certain SBIC investments, all as
discussed in the "Overview - Significant Factors Affecting Earnings in 2006 and
2005". The increase in service charges on deposit accounts also reflected the
adoption in the second quarter of 2005 of new regulatory guidance on the
accounting for courtesy overdraft programs as discussed in the "Overview".

Noninterest Expense

         Noninterest expense was $13.7 million or 59% higher in the first nine
months of 2006 compared to the same period of 2005 and for the third quarter was
$7.2 million or 87% higher, due largely to the acquisitions of Alamance Bank on
November 4, 2005 and First Gaston Bank on April 28, 2006 and the costs
associated with their mergers with and into First National bank in February 2006
and August 2006, respectively, as discussed in the "Overview - Significant
Factors Affecting Earnings in 2006 and 2005". Similarly, the opening of two new
branch offices in January 2006 and August 2006 increased noninterest expense in
the first nine months of 2006 compared to the same period of 2005. Personnel
expense was also impacted in 2006 by the adoption of SFAR No. 123R, which
requires the recognition of stock-based compensation as discussed in the
"Overview".

Income Taxes

         The effective income tax rate increased from 32.4% in the first nine
months of 2005 to 36.0% in the same period of 2006 due principally to higher
levels of taxable income. Additionally, the Corporation's federal income tax
rate increased from 34% in 2005 to 35% in 2006.

Liquidity

         Liquidity for First National Bank refers to its continuing ability to
meet deposit withdrawals, fund loan commitments and capital expenditures,
maintain reserve requirements, pay operating expenses and provide funds to the
Parent Company for payment of dividends, debt service and other operational
requirements. Liquidity is immediately available from five major sources: (a)
cash on hand and on deposit at other banks, (b) the outstanding balance of
federal funds sold, (c) lines for the purchase of federal funds from other
banks, (d) the line of credit established at the Federal Home Loan Bank, less
charges against that line for existing advances and letters of credit used to
secure public funds on deposit, and (e) the investment securities portfolio. All
debt securities are of investment grade quality and, if the need arises, can be
liquidated on the open market or pledged as collateral for short-term borrowing.

         Consistent with the general approach to liquidity, loans and other
assets of First National Bank are based primarily on a core of local deposits
and First National Bank's capital position. To date, the steady increase in
deposits, retail repurchase agreements and capital, supplemented by Federal Home
Loan Bank advances and a modest amount of brokered deposits, has been adequate
to fund loan demand in First National Bank's market area, while maintaining the
desired level of immediate liquidity and a substantial investment securities
portfolio available for both immediate and secondary liquidity purposes.

         Liquidity for Dover Mortgage Company refers to its continuing ability
to fund mortgage loan commitments, pay operating expenses and provide funds to
the Parent Company for payment of dividends, debt service and other operational
requirements. Liquidity is principally available from a line of credit with
another financial institution.


                                       32
<PAGE>


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 September 30, 2006 are discussed below.

         Commitments by First National Bank 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
September 30, 2006, total commitments to extend credit and undisbursed advances
on customer lines of credit amounted to $346.7 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. The
Corporation 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.

         First National Bank issues standby letters of credit whereby it
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 $9.1 million at September 30,
2006 and $6.2 million at September 30, 2005. Due to insignificance, the
Corporation has recorded no liability at September 30, 2006 for the current
carrying amount of the obligation to perform as a guarantor.

         Dover Mortgage Company originates certain fixed rate residential
mortgage loans with the intention of selling these loans. Between the time that
Dover enters into an interest rate lock or a commitment to originate a fixed
rate residential mortgage loan with a potential borrower and the time the closed
loan is sold, the Corporation is subject to variability in market prices related
to these commitments. The Corporation believes that it is prudent to limit the
variability of expected proceeds from the future sales of these loans by
entering into forward sales commitments and commitments to deliver loans into a
mortgage-backed security. The commitments to originate fixed rate residential
mortgage loans and the forward sales commitments are freestanding derivative
instruments. They do not qualify for hedge accounting treatment so their fair
value adjustments are recorded through the income statement in income from
mortgage loan sales. The commitments to originate fixed rate residential
mortgage loans totaled $22.5 million at September 30, 2006, and the related
forward sales commitments totaled $22.5 million. Loans held for sale by Dover
Mortgage Company totaled $15.6 million at September 30, 2006, and the related
forward sales commitments totaled $15.6 million.

         First National Bank had loans held for sale of $4.5 million at
September 30, 2006. Binding commitments of First National Bank for the
origination of mortgage loans intended to be held for sale at September 30, 2006
were not material.

         The Corporation does not have any special purpose entities or other
similar forms of off-balance sheet financing.

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 regular


                                       33
<PAGE>


basis, earnings projections based on a range of interest rate scenarios in order
to more accurately measure interest rate risk.

         The Corporation's balance sheet was asset-sensitive at September 30,
2006. An asset-sensitive position means that, for cumulative gap measurement
periods of one year or less, there are more assets than liabilities subject to
immediate repricing as market rates change. Because immediately rate sensitive
assets exceed rate sensitive interest-bearing liabilities, the earnings position
could improve in a rising rate environment and could deteriorate in a declining
rate environment, depending on the correlation of rate changes in these two
categories. Included in interest-bearing liabilities subject to rate changes
within 90 days is a portion of the 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.

Capital Adequacy

         Under guidelines established by the Board of Governors of the Federal
Reserve System, capital adequacy is currently measured for regulatory purposes
by certain risk-based capital ratios, supplemented by a leverage capital ratio.
The risk-based capital ratios are determined by expressing allowable capital
amounts, defined in terms of Tier 1, Tier 2 and Tier 3, as a percentage of
risk-weighted assets, which are computed by measuring the relative credit risk
of both the asset categories on the balance sheet and various off-balance sheet
exposures. Tier 1 capital consists primarily of common shareholders' equity and
qualifying amounts of perpetual preferred stock and trust preferred securities,
net of goodwill and other disallowed intangible assets. Tier 2 capital, which is
limited to the total of Tier 1 capital, includes allowable amounts of
subordinated debt, mandatory convertible debt, preferred stock, trust preferred
securities and the allowance for loan losses. Tier 3 capital, applicable only to
financial institutions subject to certain market risk capital guidelines, is
capital allocated to support the market risk related to a financial
institution's ongoing trading activities. At September 30, 2006, FNB United and
First National Bank were not subject to the market risk capital guidelines and,
accordingly, had no Tier 3 capital allocation. Total capital, for risk-based
purposes, consists of the sum of Tier 1, Tier 2 and Tier 3 capital. Under
current requirements, the minimum total capital ratio is 8.00% and the minimum
Tier 1 capital ratio is 4.00%. At September 30, 2006, FNB United and First
National Bank had total capital ratios of 10.36% and 10.14%, respectively, and
Tier 1 capital ratios of 7.33% and 9.09% .

         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. As currently
required, the minimum leverage capital ratio is 4.00%. At September 30, 2006,
FNB United and First National Bank had leverage capital ratios of 6.79% and
8.46%, respectively.

         First National Bank is also required to comply with prompt corrective
action provisions established by the Federal Deposit Insurance Corporation
Improvement Act. To be categorized as well-capitalized, a bank must have a
minimum ratio for total capital of 10.00%, for Tier 1 capital of 6.00% and for
leverage capital of 5.00%. As noted above, First National Bank met all of those
ratio requirements at September 30, 2006 and, accordingly, is well-capitalized
under the regulatory framework for prompt corrective action.



                                       34
<PAGE>


Balance Sheet Review

         The growth in total assets at September 30, 2006 compared to September
30, 2005 and December 31, 2005 largely reflected the acquisitions of First
Gaston Bank and Alamance Bank on April 28, 2006 and November 4, 2005,
respectively, as discussed in the "Overview". Significant estimated fair values
initially recorded for First Gaston Bank included total assets of $728.7
million, investment securities of $84.4 million, loans of $481.3 million,
deposits of $563.3 million and Federal Home Loan Bank advances of $18.6 million.
Significant estimated fair values initially recorded for Alamance Bank included
total assets of $163.7 million, investment securities of $34.7 million, loans of
$96.6 million, deposits of $113.0 million and Federal Home Loan Bank advances of
$21.9 million. Total assets at September 30, 2006 were $867.5 million or 93%
higher than at September 30, 2005, reflecting the effect of both the First
Gaston Bank and Alamance Bank acquisitions, and were $696.6 million or 63%
higher than at December 31, 2005, reflecting the First Gaston Bank acquisition.
By similar comparison, deposits increased $660.8 million or 92% and $541.0
million or 64%. Average assets increased 67% in the first nine months of 2006
compared to the same period of 2005, while average deposits increased 68%, the
third quarter increases being 99% and 101%, respectively.

Investment Securities

         Additions to the investment securities portfolio depend to a large
extent on the availability of investable funds that are not otherwise needed to
satisfy loan demand. During the period ended September 30, 2006, there was a net
decrease of $27.6 million or 17% in the level of investment securities from
year-end 2005. The additions of $84.4 million and $34.7 million, respectively,
in investment securities from the First Gaston Bank acquisition on April 28,
2006 and the Alamance Bank acquisition on November 4, 2005, as discussed in the
"Balance Sheet Review" were offset by approximately $123 million of investment
securities sold in the 2006 third quarter, as noted in the "Overview -
Significant Factors Affecting Earnings in 2006". Due to the timing of these
securities sales late in the third quarter, a significant portion were to settle
subsequent to September 30, 2006, although the estimated gains or losses on all
such sales were recognized in the third quarter. Of sales that did settle in the
third quarter, those funds were temporarily invested as federal funds sold or
interest-bearing bank balances, pending reinvestment into loans or securities.

Loans

         The Corporation's primary source of revenue and largest component of
earning assets is the loan portfolio. During the twelve-month period ended
September 30, 2006, loans increased $588.1 million or 83%, due primarily to the
additions of $481.3 million and $96.6 million, respectively, in loans from the
First Gaston Bank acquisition on April 28, 2006 and the Alamance Bank
acquisition on November 4, 2005, as discussed in the "Balance Sheet Review". The
net loan increase during the first nine months of 2006 was $484.0 million or 60%
due primarily to the First Gaston Bank acquisition. Average loans were $395.8
million or 57% higher in the first nine months of 2006 than in the same period
of 2005 and were $602.5 million or 86% higher in the third quarter comparison.
The ratio of average loans to average deposits, in comparing nine-month periods,
decreased from 100.3% in 2005 to 94.0% in 2006. The ratio of loans to deposits
at September 30, 2006 was 93.8%.
         Loan growth during the twelve-month period ended September 30, 2006,
including the loans added by the First Gaston Bank and Alamance Bank
acquisitions, was significant in all types of loans, with the largest percentage
increase being related to the portfolio of construction loans. During the first
nine months of 2006, loan growth, including the loans added by the First Gaston
Bank acquisition, was also significant in all types of loans, with the largest
percentage increase being related to the portfolio of commercial and
agricultural loans.


                                       35
<PAGE>


Asset Quality

         Management considers the asset quality of First National Bank 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, a third party assessment group is employed to review the
underwriting documentation and risk grading analysis.

         In determining the allowance for loan losses 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, and economic conditions in First National Bank's 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, various regulatory agencies, as
an integral part of their examination process, periodically review First
National Bank's allowance for loan losses. Such agencies may require First
National Bank to recognize changes to the allowance based on their judgments
about information available to them at the time of their 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.

         At September 30, 2006 and December 31, 2005, the Corporation had no
loans that were considered to be impaired. At September 30, 2005, the
Corporation had impaired loans which totaled $0.2 million and were also on
nonaccrual status. The related allowance for loan losses on these loans amounted
to $0.2 million.

         At September 30, 2006, nonperforming loans were $14.6 million in total,
nonaccrual loans and accruing loans past due 90 days or more amounting to $12.3
million and $2.3 million, respectively. At September 30, 2005, nonperforming
loans were $5.1 million in total, nonaccrual loans and accruing loans past due
90 days or more amounting to $4.5 million and $0.6 million, respectively. At
December 31, 2005, nonperforming loans were $6.0 million in total, nonaccrual
loans and accruing loans past due 90 days or more amounting to $5.4 million and
$0.6 million, respectively.

         The adequacy of the allowance for loan losses is measured on a
quarterly basis against an allocation model that assigns reserves to various
components of the loan portfolio in order to provide for probable inherent
losses. Homogeneous pools of loans are segregated, and classifications of
individual loans within certain of these pools are identified using risk grades
derived from regulatory risk guidelines and additional internal parameters.
Utilizing the trailing four-year historical loss experience of First National
Bank and the assessment of portfolio quality and diversification trends and
economic factors, a range of appropriate reserves is calculated for each
classification and pool of loans. Allocated to each pool is a reserve amount
within the calculated range, as supported by the historical loss ratios.
Additional reserves are estimated and assigned to the most adversely classified
loans based upon an individual analysis of present-value repayment and/or
liquidation projections of each loan. A portion of the total reserve may be
unallocated to any specific segment of the loan portfolio, but will not exceed
the upper limit of the total calculated reserve range when aggregated with
allocated portions. The determination within the allowance model of allocated
and unallocated components is not necessarily indicative of future losses or
allocations. The entire balance of the allowance for loan losses is available to
absorb losses in any segment of the loan portfolio.

         Earnings were negatively impacted in the first nine months and third
quarter of 2006, compared to the same periods of 2005, by increases in the
provision of $0.6 million and $1.4 million, respectively. As noted in the
"Overview - Significant Factors Affecting Earnings in 2006 and 2005", the 2006
third quarter provision reflects increased charge offs and the continuing
evaluation of the quality of the loan portfolio acquired as part of the


                                       36
<PAGE>


acquisition of First Gaston Bank. As further discussed in the "Overview", the
provision for loan losses has been affected by the adoption in the second
quarter of 2005 of new regulatory guidance on the accounting for courtesy
overdraft programs, resulting in an increase in the provision in the first nine
months and third quarter of 2006 of $0.5 million and $0.3 million, respectively.
Further effects from adoption of the new regulatory guidance are discussed in
the "Overview".

         The allowance for loan losses, as a percentage of loans held for
investment, amounted to 1.28% at September 30, 2006, 1.16% at September 30, 2005
and 1.25% at December 31, 2005. The allowance percentage has increased based on
the results from application of the allowance model that assigns reserves to
various components of the loan portfolio in order to provide for probable
inherent losses and also from the continuing evaluation of the quality of the
loan portfolio acquired as part of the acquisition of First Gaston Bank, as
discussed in the "Overview".

         Management believes the allowance for loan losses of $16.3 million at
September 30, 2006 is adequate to cover probable losses in the loan portfolio;
however, assessing the adequacy of the allowance is a process that requires
continuous evaluation and considerable judgment.

         Management's judgments are based on numerous assumptions about current
events which 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 the Corporation.

         The following table presents an analysis of the changes in the
allowance for loan losses. As noted above and in the "Overview", new regulatory
guidance adopted in the second quarter of 2005 on the accounting for courtesy
overdraft programs has tended to increase the provision for loan losses. This
same regulatory guidance has also increased the level of both loan charge-offs
and loan recoveries as noted in the comparison below for the nine months ended
September 30, 2006 to the same period of 2005, although the effect of these
increases is largely offsetting.

<TABLE>
<CAPTION>

                                                        Three Months Ended                   Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                        2006              2005              2006             2005
                                                     ----------        ---------        -----------       ---------
                                                                               (in thousands)
                   <S>                                  <C>               <C>               <C>              <C>
         Balance at beginning of period              $ 15,814           $  7,732         $  9,945         $   7,293
         Charge-offs                                    2,212                450            4,070             1,594
         Recoveries                                       892                298            2,099               647
                                                     ----------        ----------        ---------        ----------
             Net loan charge-offs                       1,320                152            1,971               947
         Provision for loan losses                      1,824                446            2,306             1,680
         Purchase accounting adjustment                     -                  -            6,038                 -
                                                     ----------        ----------        ---------        ----------

         Balance at end of period                    $ 16,318           $  8,026         $16,318          $   8,026
                                                     ==========        ==========        =========        ==========
</TABLE>



                                       37
<PAGE>


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.

         The level and mix of deposits has been specifically affected by the
additions of $563.3 million and $113.0 million, respectively, in deposits from
the First Gaston Bank acquisition on April 28, 2006 and the Alamance Bank
acquisition on November 4, 2005, as discussed in the "Balance Sheet Review".
Total deposits increased $660.8 million or 92% during the twelve-month period
ended September 30, 2006, reflecting the effect of both the First Gaston Bank
and Alamance Bank acquisitions, and $541.0 million or 64% during the first nine
months of 2006, reflecting the First Gaston Bank acquisition. Significant
increases by deposit category for the twelve-month period ended September 30,
2006 were as follows: $38.8 million for noninterest-bearing demand deposits,
$80.7 million for interest-bearing demand deposits, $156.4 million for money
market deposits and $351.2 million for time deposits. During the first nine
months of 2006, the significant increases by deposit category were as follows:
$55.1 million for noninterest-bearing demand deposits, $63.9 million for
interest-bearing demand deposits, $145.1 million for money market deposits and
$274.6 million for time deposits.

Business Development Matters

         As discussed in the "Overview" and in Note 3 to the Consolidated
Financial Statements, on November 4, 2005, the Corporation completed a merger
for the acquisition of United Financial, Inc., holding company for Alamance
Bank, headquartered in Graham, North Carolina, in a transaction accounted for
using the purchase method of accounting for business combinations. On February
1, 2006, Alamance Bank was merged with and into First National Bank.

         As discussed in the "Overview" and in Note 3 to the Consolidated
Financial Statements, on April 28, 2006, the Corporation completed a merger for
the acquisition of Integrity Financial Corporation ("Integrity"), headquartered
in Hickory, North Carolina and the holding company for First Gaston Bank, in a
transaction accounted for using the purchase method of accounting for business
combinations. On August 1, 2006, First Gaston Bank was merged with and into
First National Bank.

         In conjunction with the completion of the Integrity merger, FNB
United's wholly owned and newly formed subsidiary, FNB United Statutory Trust
II, issued $30,000,000 of trust preferred securities on April 27, 2006. The
proceeds of the trust preferred securities, along with the proceeds of $928,000
received by the trust from the issuance of its common securities to FNB United,
were used to purchase $30,928,000 of FNB United's junior subordinated debt
securities. The proceeds of FNB United's junior subordinated debt securities
were primarily used to fund the cash portion of the merger consideration to the
former Integrity shareholders. The trust preferred securities bear interest at a
variable rate based on the three-month LIBOR rate plus 1.32% and mature on June
30, 2036, but may be redeemed at the option of FNB United beginning on June 30,
2011.

         In August 2003, First National Bank received regulatory approval for
relocation of its existing branch office in Randleman, North Carolina. The new
office, which opened for business in August 2005, represents a move from an
owned facility that is expected to be sold.


                                       38
<PAGE>


         In January 2004, First National Bank received regulatory approval for
establishment of its first branch office in Greensboro, North Carolina,
resulting in the opening of a loan production office in February 2004. A
full-service banking office in a leased facility replaced the loan production
office in May 2005.

         In November 2004, First National Bank received regulatory approval for
the establishment of a second branch office in Greensboro, North Carolina. The
new office opened for business in January 2006.

         In June 2005, First National Bank received regulatory approval for the
establishment of a second branch office in Salisbury, North Carolina. The new
office, which is a leased facility, opened for business in September 2006.

         In 2006, Dover Mortgage Company opened new mortgage production offices
in Wrightsville Beach, North Carolina in May and in Columbia, South Carolina in
July and closed the office in Greensboro, North Carolina in May.

Accounting Pronouncement Matters

         In February 2006, the FASB issued Statement of Financial Accounting
Standards No. 155 ("SFAS No. 155), "Accounting for Certain Hybrid Financial
Instruments - an amendment of FASB Statements No. 133 and 140", which is
effective for all financial instruments acquired or issued after the beginning
of fiscal years beginning after September 15, 2006. SFAS No. 155 was issued to
clarify the application of SFAS No. 133 to beneficial interests in securitized
financial assets and to improve the consistency of accounting for similar
financial instruments, regardless of the form of the instruments. SFAS No. 155
provides relief from the requirement to separately determine the fair value of
an embedded derivative that would otherwise be bifurcated from the host contract
under SFAS No. 133 and allows an irrevocable election on an
instrument-by-instrument basis to measure such a hybrid financial instrument at
fair value. The Corporation is currently evaluating SFAS No.155 to determine the
potential impact, if any, on its consolidated financial statements.

         In March 2006, the FASB issued Statement of Financial Accounting
Standards No. 156 ("SFAS No. 156"), "Accounting for Servicing of Financial
Assets - an amendment of FASB Statement No. 140", which is effective for fiscal
years beginning after September 15, 2006. SFAS No. 156 was issued to simplify
the accounting for servicing rights and to reduce the volatility that results
from using different measurement attributes. SFAS No. 156 requires that all
separately recognized servicing assets and liabilities be initially measured at
fair value and permits (but does not require) subsequent measurement of
servicing assets and liabilities at fair value. The Corporation is currently
evaluating SFAS No. 156 to determine the potential impact, if any, on its
consolidated financial statements.

            In July 2006, the FASB issued Financial Interpretation No. 48 ("FIN
48"), "Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109", which is a change in accounting for income taxes. FIN 48
specifies how tax benefits for uncertain tax positions are to be recognized,
measured, and derecognized in financial statements; requires certain disclosures
of uncertain tax matters; specifies how reserves for uncertain tax positions
should be classified on the balance sheet; and provides transition and interim
period guidance, among other provisions. FIN 48 is effective for fiscal years
beginning after December 15, 2006. The Corporation is currently evaluating the
impact of FIN 48 on its consolidated financial statements.

         In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157 ("SFAS No. 157"), "Fair Value Measurements", which is
effective for fiscal years beginning after November 15, 2007. SFAS No. 157
enhances existing guidance for measuring assets and liabilities using fair
value. Prior to the issuance of SFAS No. 157, guidance for applying fair value
was incorporated in several accounting pronouncements. SFAS No. 157 provides a
single definition of fair value, together with a framework for measuring it, and


                                       39
<PAGE>


requires additional disclosure about the use of fair value to measure assets and
liabilities. SFAS No. 157 also emphasizes that fair value is a market-based
measurement, not an entity-specific measurement, and sets out a fair value
hierarchy with the highest priority being quoted prices in active markets. Under
FAS No. 157, fair value measurements are disclosed by level within that
hierarchy. While SFAS No. 157 does not add any new fair value measurements, it
does change current practice. Changes to practice include: (1) a requirement for
an entity to include its own credit standing in the measurement of its
liabilities; (2) a modification of the transaction price presumption; (3) a
prohibition on the use of block discounts when valuing large blocks of
securities for broker-dealers and investment companies; and (4) a requirement to
adjust the value of restricted stock for the effect of the restriction even if
the restriction lapses within one year. The Corporation has not determined the
impact of adopting SFAS No. 157 on its financial statements.

         In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 158 ("SFAS No. 158"), "Employers' Accounting for Defined Benefit
Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87,
88, 106, and 132R)". SFAS No. 158 requires an employer to: (a) recognize in its
statement of financial position an asset for a plan's overfunded status or a
liability for a plan's underfunded status; (b) measure a plan's assets and its
obligations that determine its funded status as of the end of the employer's
fiscal year (with limited exceptions); and (c) recognize changes in the funded
status of a defined benefit postretirement plan in the year in which the changes
occur. Those changes will be reported in comprehensive income of a business
entity and in changes in net assets of a not-for-profit organization. The
requirement by SFAS No. 158 to recognize the funded status of a benefit plan and
the disclosure requirements of SFAS No. 158 are effective as of the end of the
fiscal year ending after December 15, 2006 for entities with publicly traded
equity securities. The requirement to measure plan assets and benefit
obligations as of the date of the employer's fiscal year-end statement of
financial position is effective for fiscal years ending after December 15, 2008.
The Corporation is currently evaluating SFAS No. 158 to determine the potential
impact, if any, on its consolidated financial statements.

         In September 2006, the SEC staff issued Staff Accounting Bulletin No.
108 ("SAB No. 108"), "Considering the Effects of Prior Year Misstatements When
Quantifying Misstatements in the Current Year Financial Statements". SAB No. 108
addresses the diversity in practice by registrants when quantifying the effect
of an error on the financial statements. SAB No. 108 provides guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements and is effective for annual periods ending after November 15,
2006. The Corporation will be required to adopt the provisions of SAB No. 108
effective December 31, 2006. The Corporation currently believes that the
adoption of SAB No. 108 will not have a material financial impact on its
consolidated financial statements.

         From time to time, the FASB issues exposure drafts for proposed
statements of financial accounting standards. Such exposure drafts are subject
to comment from the public, to revisions by the FASB and to final issuance by
the FASB as statements of financial accounting standards. Management considers
the effect of the proposed statements on the consolidated financial statements
of the Corporation and monitors the status of changes to and proposed effective
dates of exposure drafts.

Non-GAAP Measures

         This Quarterly Report on Form 10-Q/A contains financial information
determined by methods other than in accordance with generally accepted
accounting principles ("GAAP"). The Corporation's management uses these non-GAAP
measures in their analysis of the Corporation's performance. These non-GAAP
measures exclude average goodwill and core deposit premiums from the
calculations of return on average assets and return on average equity.
Management believes 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 the
Corporation's core businesses. In addition, certain designated net interest


                                       40
<PAGE>


income amounts are presented on a taxable equivalent basis. Management believes
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. 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.

Cautionary Statement for Purpose of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995

         The statements contained in this Quarterly Report on Form 10-Q/A that
are not historical facts are forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995), which can be
identified by the use of forward-looking terminology such as "believes",
"expects", "plans", "projects", "goals", "estimates", "may", "could", "should",
or "anticipates" or the negative thereof or other variations thereon of
comparable terminology, or by discussions of strategy that involve risks and
uncertainties. In addition, from time to time, the Corporation or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in, but are not limited
to, various filings made by the Corporation with the Securities and Exchange
Commission, or press releases or oral statements made by or with the approval of
an authorized executive officer of the Corporation. Forward-looking statements
are based on management's current views and assumptions and involve risks and
uncertainties that could significantly affect expected results. The Corporation
wishes to caution the reader that factors, such as those listed below, in some
cases have affected and could affect the Corporation's actual results, causing
actual results to differ materially from those in any forward-looking statement.
These factors include: (i) expected cost savings from the mergers described in
the Overview may not materialize within the expected time frame, (ii) revenues
following the mergers may not meet expectations, (iii) costs or difficulties
related to the integration of the businesses of FNB United, United and Integrity
may be greater than anticipated, (iv) competitive pressure in the banking
industry or in the Corporation's markets may increase significantly, (v) changes
in the interest rate environment may reduce margins, (vi) general economic
conditions, either nationally or regionally, may be less favorable than
expected, resulting in, among other things, credit quality deterioration, (vii)
changes may occur in banking legislation and regulation, (viii) changes may
occur in general business conditions and (ix) changes may occur in the
securities markets. Readers should also consider information on risks and
uncertainties contained in the discussions of competition, supervision and
regulation, and effect of governmental policies contained in the Corporation's
most recent Annual Report on Form 10-K.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

         Market risk reflects the risk of economic loss resulting from adverse
changes in market price and interest rates. This risk of loss can be reflected
in diminished current market values and/or reduced potential net interest income
in future periods.

         The Corporation's market risk arises primarily from interest rate risk
inherent in its lending and deposit-taking activities. The structure of the
Corporation's loan and deposit portfolios is such that a significant decline in
interest rates may adversely impact net market values and net interest income.
The Corporation does not maintain a trading account nor is the Corporation
subject to currency exchange risk or commodity price risk. Interest rate risk is
monitored as part of the Corporation's asset/liability management function,
which is discussed above in Item 2 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" under the heading
"Asset/Liability Management and Interest Rate Sensitivity".

         Management does not believe there has been any significant change in
the overall analysis of financial instruments considered market risk sensitive,
as measured by the factors of contractual maturities, average interest rates and


                                       41
<PAGE>


estimated fair values, since the analysis prepared and presented in conjunction
with the Form 10-K Annual Report for the fiscal year ended December 31, 2005.


Item 4.  Controls and Procedures

         As of September 30, 2006, the end of the period covered by this report,
FNB United carried out an evaluation under the supervision and with the
participation of the Corporation's management, including FNB United's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of FNB United's disclosure controls and procedures. In
designing and evaluating the Corporation's disclosure controls and procedures,
FNB United and its management recognize that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and FNB United's management
necessarily was required to apply its judgment in evaluating and implementing
possible controls and procedures. Based upon the evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Corporation's disclosure
controls and procedures are effective to provide reasonable assurance that
information required to be disclosed by FNB United in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange Commission's
rules and forms.
         As a result of the events necessitating the restatement described in
the Explanatory Note and in Note 1 to the financial statements set forth in Part
I, Item 1 of this report, however, the Corporation's management has reevaluated
the design and operation of the Corporation's disclosure controls and procedures
and has now concluded that, as of September 30, 2006, the Corporation did not
maintain effective controls to ensure that gains and losses on the sales of
investment securities were properly calculated. Specifically, the Corporation
failed to reconcile correctly to investment subsidiary ledgers and take properly
into account the sale of investment securities with a trade date in September
2006 and a settlement date in October 2006, which sale straddled the period end.
Because of this control deficiency, which is considered to be a material
weakness and resulted in the restatement of the Corporation's financial
statements as of and for the three- and nine-month periods ended September 30,
2006, management has restated its assessment for the period and concluded that
the Corporation's disclosure controls and procedures were not effective as of
September 30, 2006.

         FNB United reviews its disclosure controls and procedures, which may
include its internal controls over financial reporting, on an ongoing basis and
may from time to time make changes aimed at enhancing their effectiveness. As
previously reported, no such control enhancements occurred during the quarterly
period ended September 30, 2006 that have materially affected, or are reasonably
likely to materially affect, FNB United's internal control over financial
reporting. Subsequently, the Corporation has taken action to implement a
centralized investment account reconciliation area within the finance division
and to formalize the review of investment account reconciliations






                                       42
<PAGE>


                           PART II. OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

<TABLE>
<CAPTION>

                                    Issuer Purchases of Equity Securities
------------------------------------------------------------------------------------------------------
                                                                             Total           Maximum
                                                                             Number           Number
                                                                           of Shares        of Shares
                                                                           Purchased         That May
                                                                           as Part of         Yet Be
                                               Total           Average      Publicly         Purchased
                                              Number            Price      Announced         Under the
                                             of Shares         Paid per     Plans or         Plans or
Three Months Ended September 30, 2006        Purchased          Share      Programs          Programs
-------------------------------------        ---------         --------    --------         ----------
          <S>                                   <C>              <C>          <C>              <C>
Balance of shares that may be purchased,
     June 30, 2006                                                                            298,800

July 1 to July 31                                   -         $       -          -                  -

May 1 to May 31                                     -                 -          -                  -

June 1 to June 30                                   -                 -          -                  -
                                             ---------                     --------

Total                                               -                 -          -                  -
                                             =========                     ========

</TABLE>


         On July 21, 2005, the Corporation announced that the Board of Directors
had authorized a program for the repurchase of up to 300,000 shares of common
stock during the period commencing August 1, 2005 and ending July 31, 2006. This
program has not been reauthorized subsequent to its termination on July 31,
2006.


Item 6.  Exhibits

Exhibits to this report are listed in the index to exhibits on pages 45, 46, 47
and 48 of this report.



                                       43
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                      FNB United Corp.
                                      (Registrant)


Date:    January ___, 2007            By:     /s/ Jerry A. Little
                                              ----------------------------------
                                                  Jerry A. Little
                                                  Treasurer and Secretary
                                                  (Principal Financial and
                                                  Accounting Officer)

















                                       44
<PAGE>


                                INDEX TO EXHIBITS

Exhibit No.                            Description of Exhibit
-----------                            ----------------------

  3.10              Articles of Incorporation of the Registrant, incorporated
                    herein by reference to Exhibit 3.1 to the Registrant's Form
                    S-14 Registration Statement (No. 2-96498) filed March 16,
                    1985.

  3.11              Articles of Amendment to Articles of Incorporation of the
                    Registrant, adopted May 10, 1988, incorporated herein by
                    reference to Exhibit 19.10 to the Registrant's Form 10-Q
                    Quarterly Report for the quarter ended June 30, 1988.

  3.12              Articles of Amendment to Articles of Incorporation of the
                    Registrant, adopted May 12, 1998, incorporated herein by
                    reference to Exhibit 3.12 to the Registrant's Form 10-Q
                    Quarterly Report for the quarter ended June 30, 1998.

  3.13              Articles of Amendment to Articles of Incorporation of the
                    Registrant, adopted May 23, 2003, incorporated herein by
                    reference to Exhibit 3.13 to the Registrant's Form 10-Q
                    Quarterly Report for the quarter ended June 30, 2003.

  3.14              Articles of Amendment to Articles of Incorporation of the
                    Registrant, adopted March 15, 2006, incorporated herein by
                    reference to Exhibit 3.14 to the Registrant's Form 10-Q
                    Quarterly Report for the quarter ended March 31, 2006.

  3.15              Articles of Merger, setting forth amendment to Articles of
                    Incorporation of the Registrant, effective April 28, 2006,
                    incorporated herein by reference to Exhibit 3.15 to the
                    Registrant's Form 10-Q Quarterly Report for the quarter
                    ended March 31, 2006.

  3.20              Amended and Restated Bylaws of the Registrant, adopted July
                    21, 2005, incorporated herein by reference to Exhibit 3.20
                    to the Registrant's Form 10-Q Quarterly Report for the
                    quarter ended June 30, 2005.

  4.10              Specimen of Registrant's Common Stock Certificate,
                    incorporated herein by reference to Exhibit 4 to Amendment
                    No. 1 to the Registrant's Form S-14 Registration Statement
                    (No. 2-96498) filed April 19, 1985.

  4.20              Indenture dated as of November 4, 2005, between FNB Corp.
                    and U.S. Bank, National Association, as trustee,
                    incorporated herein by reference to Exhibit 4.1 to the
                    Registrant's Form 8-K Current Report dated November 4, 2005.




                                       45
<PAGE>


Exhibit No.                            Description of Exhibit
-----------                            ----------------------

  4.21              Amended and Restated Declaration of Trust of FNB United
                    Statutory Trust I dated as of November 4, 2005, among FNB
                    Corp., as sponsor, U.S. Bank, National Association, as
                    institutional trustee, and Michael C. Miller and Jerry A.
                    Little, as administrators, incorporated herein by reference
                    to Exhibit 4.2 to the Registrant's Form 8-K Current Report
                    dated November 4, 2005.

  4.30              Junior Subordinated Indenture dated as of April 27, 2006,
                    between FNB Corp. and Wilmington Trust Company, as trustee,
                    incorporated herein by reference to Exhibit 4.1 to the
                    Registrant's Form 8-K Current Report dated April 27, 2006
                    and filed April 28, 2006.

  4.31              Amended and Restated Trust Agreement of FNB United Statutory
                    Trust II dated as of April 27, 2006, among FNB Corp., as
                    sponsor, Wilmington Trust Company, as institutional trustee,
                    and Michael C. Miller and Jerry A. Little, as
                    administrators, incorporated herein by reference to Exhibit
                    4.2 to the Registrant's Form 8-K Current Report dated April
                    27, 2006 and filed April 28, 2006.

 10.10*             Form of Split Dollar Insurance Agreement dated as of
                    November 1, 1987 between First National Bank and Trust
                    Company and certain of its key employees and directors,
                    incorporated herein by reference to Exhibit 19.20 to the
                    Registrant's Form 10-Q/A Quarterly Report for the quarter
                    ended June 30, 1988.

 10.11*             Form of Amendment to Split Dollar Insurance Agreement dated
                    as of November 1, 1994 between First National Bank and Trust
                    Company and certain of its key employees and directors,
                    incorporated herein by reference to Exhibit 10.11 to the
                    Registrant's Form 10-KSB Annual Report for the fiscal year
                    ended December 31, 1994.

 10.20*             Stock Compensation Plan as amended effective May 12, 1998,
                    incorporated herein by reference to Exhibit 10.30 to the
                    Registrant's Form 10-Q Quarterly Report for the quarter
                    ended June 30, 1998.

 10.21*             Form of Incentive Stock Option Agreement between FNB Corp.
                    and certain of its key employees, pursuant to the
                    Registrant's Stock Compensation Plan, incorporated herein by
                    reference to Exhibit 10.31 to the Registrant's Form 10-KSB
                    Annual Report for the fiscal year ended December 31, 1994.

 10.22*             Form of Nonqualified Stock Option Agreement between FNB
                    Corp. and certain of its directors, pursuant to the
                    Registrant's Stock Compensation Plan, incorporated herein by
                    reference to Exhibit 10.32 to the Registrant's Form 10-KSB
                    Annual Report for the fiscal year ended December 31, 1994.

 10.23*             FNB Corp. 2003 Stock Incentive Plan, incorporated herein by
                    reference to Exhibit 99.1 to the Registrant's Registration
                    Statement on Form S-8 (File No. 333-105442).





                                       46
<PAGE>


Exhibit No.                            Description of Exhibit
-----------                            ----------------------

 10.24*             Form of Incentive Stock Option Agreement between FNB Corp.
                    and certain of its key employees, pursuant to the
                    Registrant's 2003 Stock Incentive Plan, incorporated herein
                    by reference to Exhibit 10.24 to the Registrant's Form 10-Q
                    Quarterly Report for the quarter ended September 30, 2003.

 10.25*             Form of Nonqualified Stock Option Agreement between FNB
                    Corp. and certain of its directors, pursuant to the
                    Registrant's 2003 Stock Incentive Plan, incorporated herein
                    by reference to Exhibit 10.25 to the Registrant's Form 10-K
                    Annual Report for the fiscal year ended December 31, 2003.

 10.26*             Form of Restricted Stock Agreement between FNB United Corp.
                    and certain of its key employees and non-employee directors,
                    pursuant to the Registrant's 2003 Stock Incentive Plan,
                    incorporated herein by reference to Exhibit 10.26 to the
                    Registrant's Form 10-Q Quarterly Report for the quarter
                    ended June 30, 2006.

 10.30*             Employment Agreement dated as of January 1, 2006 among FNB
                    Corp., First National Bank and Trust Company and Michael C.
                    Miller, incorporated herein by reference to Exhibit 10 to
                    the Registrant's Current Report on Form 8-K filed on January
                    6, 2006.

 10.31*             Carolina Fincorp, Inc. Stock Option Plan (assumed by the
                    Registrant on April10, 2000), incorporated herein by
                    reference to Exhibit 99.1 to the Registrant's Registration
                    Statement on Form S-8 (File No. 333-54702).

 10.32*             Employment Agreement dated as of April 10, 2000 between
                    First National Bank and Trust Company and R. Larry Campbell,
                    incorporated herein by reference to Exhibit 10.32 to the
                    Registrant's Form 10-K Annual Report for the fiscal year
                    ended December 31, 2000.

 10.33*             First Amendment to Employment Agreement dated as of June 30,
                    2006 between First National Bank and Trust Company and R.
                    Larry Campbell, incorporated herein by reference to Exhibit
                    10 to the Registrant's Form 8-K Current Report dated June
                    30, 2006 and filed July 7, 2006.

 10.34*             Nonqualified Supplemental Retirement Plan with R. Larry
                    Campbell, incorporated herein by reference to Exhibit 10(c)
                    to the Annual Report on Form 10-KSB of Carolina Fincorp,
                    Inc. for the fiscal year ended June 30, 1997.

 10.35*             Form of Change of Control Agreement between FNB United Corp.
                    and certain of its key employees and officers, incorporated
                    herein by reference to Exhibit 10.35 to the Registrant's
                    Form 10-Q Quarterly Report for the quarter ended June 30,
                    2006.




                                       47
<PAGE>


Exhibit No.                            Description of Exhibit
-----------                            ----------------------

 10.40              Guarantee Agreement dated as of November 4, 2006, by FNB
                    Corp. for the benefit of the holders of trust preferred
                    securities, incorporated herein by reference to Exhibit 10.1
                    to the Registrant's Form 8-K Current Report dated November
                    4, 2005 and filed November 8, 2005.

 10.41              Guarantee Agreement dated as of April 27, 2006, between FNB
                    Corp. and Wilmington Trust Company, as guarantee trustee,
                    for the benefit of the holders of trust preferred
                    securities, incorporated herein by reference to Exhibit 10.1
                    to the Registrant's Form 8-K Current Report dated April 27,
                    2006 and filed April 28, 2006.

 31.10              Certification of Chief Executive Officer Pursuant to Section
                    302 of the Sarbanes-Oxley Act of 2002.

 31.11              Certification of Chief Financial Officer Pursuant to Section
                    302 of the Sarbanes-Oxley Act of 2002.

 32                 Certification Pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002.

--------------

* Management contract, or compensatory plan or arrangement.













                                       48